• #15: Is buy to let still worth it for landlords?

  • Jul 1 2024
  • Duración: 18 m
  • Podcast

#15: Is buy to let still worth it for landlords? Por arte de portada

#15: Is buy to let still worth it for landlords?

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  • In this episode of Good Landlording recorded in the week of the General Election on 4 July 2024, Richard Jackson and Suzanne Smith discuss whether buy to let properties in England are still good investments in 2024. They analyse what make buy to lets so popular, what has changed, and what makes a successful buy to let in 2024. After going through the pros and cons of other investment strategies, they close with reasons to be positive about the future of the private rented sector. This episode isn't investment advice, but is their thoughts on how the proposition of investing in buy to lets has changed over the last few years, and where it leaves landlords now. What we cover in this episodeWhat did buy to lets become so popular?Why have buy to lets become less attractive?What about other investment strategies?Reasons to be positive about the private rented sector >> Ask a question: Click here for question form What did buy to lets become so popular? Newer landlords might not realise that buy to lets didn’t really become an established strategy until the early 2000s. In fact the first buy to let mortgages weren’t even launched until 1996. The PRS has seen phenomenal growth in the past three decades. In 1988, the PRS in England was only around 9% of all households. It peaked at 20% or 4.7 million households in 2017, falling back slightly to just under 19% in 2023. The trigger for this phenomenal growth was the deregulation of the PRS initiated by Margaret Thatcher's government with the Housing Act 1988, which abolished rent controls, and the Housing Act 1996 which made assured shorthold tenancies the default tenancy. The decrease in interest rates in the 2000s, and ready access to buy to let mortgages, helped accelerate the growth of the PRS. Base rates remained below 1% from 2009 to May 2022, and "property gurus" promoting "free buy to lets" using cheap money and the BRRR (buy, refurbish, rent, refinance) strategy, encouraged this growth further. Why have buy to lets become less attractive? Higher interest rates over the last two years have caused particular problems for unincorporated landlords, who have been unable to set off their full financing costs against their profits after George Osborne introduced Section 24 in the Finance Act 2015. Many landlords are highly leveraged, which makes them more vulnerable when interest rates increase. Those searching for "passive income" have discovered that outsourcing property management means they have high fixed costs, which impacts profitability. The increase in interest rates mean that investors can get a good tax-free return in a cash ISA, without risk. >> Blog post: Can landlords make passive income from rental property? What about other investment strategies? Short term lets have their own challenges, and are due to have increased regulation. HMOs require a lot of management time. Investing in the stock market can be unpredictable, and seems less tangible than investing in bricks and mortar with a positive net cash flow. It's important not to put all one's eggs in one basket when it comes to investments, and not invest everything in buy to lets. Sometimes landlords will also use their pension to invest in property, by using a SSAS, a small self-administered scheme which can invest in commercial property. Suzanne says she has not done this as she doesn't want all her investments in property. >> Useful resource: Financial Times - What are the tax benefits of investing in property via SSAS? Reasons to be positive about the private rented sector It isn't all doom and gloom for the private rented sector, and there are the following reasons to be positive about the future of the private rented sector: Gross yields have increased over the past few years, improving returns for investors. Rents are keeping pace with inflation. Alternative investments such as the stock market come with their own set of risk...
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