Is Buy-to-Let still attractive?

With little movement of interest rates and continuing drops in house prices

will buy-to-let now be an investment vehicle of the past?

With buy-to-let lenders tightening up their lending criteria, house prices continuing to fall and the general lack of confidence caused by the Northern Rock crisis I believe that experienced investors will still continue to buy rental stock, banking on long term capital gains.  However first time landlords or landlords with smaller portfolios are finding it harder to fund new rental stock.  For the well placed landlord that has the correct gearing on their portfolio it is still a time to hunt for the next opportunity!

There will always be risks involved in any business or investment. For example your investment can rise or fall in value and property is clearly no different. You therefore just need to ensure that you minimise potential risks.

In the past I’ve used several methods to minimise risk to my own investment portfolio.  These include:

Ensure the mortgage is between 80% - 85% of the property’s value. Every time your mortgage is due for renewal try to release equity.  This ensures that your rent covers your operating payments and expenses. Start building a fund by putting this money to one side. Therefore if you have sudden repair bills or a vacant property you have money to fall back on.

Always keep your property well maintained.  If the rental market in your area suddenly changes pace the up together properties will rent much quicker.Widen the range of tenants you agree to let your property to. You may find that council tenants are able to top up rent monies by their own means, giving you the rent you have always achieved. Areas which attracts students also attracts higher rents. Wear and tear may be slightly higher, but at least the monthly repayments are being met.

When increasing your portfolio look for properties that can add to the overall yield of your whole portfolio, ensuring your investments stay balanced. For example try to buy property in disrepair. Once renovated your equity should have increased, which in turn would increase your property portfolio’s yield.

More recently overseas property investment has become a trend with investors searching for the next property hotspot to invest in. Things to consider when looking for your next investment whether here or abroad include:

How easy is it to get to the property?
Can you keep an eye on the property if it remains empty for a period of time?
Will the property be let for the whole year or is the property’s location Summer or Winter orientated?
Can you easily maintain the property yourself saving you the cost of employing trades people or does the rental income provide enough cash to pay for unforeseen repairs?
Will the property’s location ever fall out of fashion with your intended tenants? Remember holiday hotspots change very quickly! Always ensure your investment has a steady stream of visitors.

Even if the U.K buy-to-let is not as buoyant as it has been over the past decade the vehicle for investment is still sound. Ensure you put time into researching your potential investment and prepare yourself for long term capital gains. The online-lettings portal will soon allow for holiday lettings to be uploaded ensuring where ever you or your property is located tenants can always be found.