After the topsy-turvy life of last year due to cruel coronavirus, we are all certain about how uncertain life can be now and then. Countless redundancies, furloughed income, spoiled finances, and health risks made the team fill us with insecurities. People all over the world are just desperate to revive and find calm in their lives. Yes, life is getting back on track, but still, the factor or normalcy is far and to get it as fast as possible, the investment options are showing hope to us. Not to mention that real estate always gets a promising place in our favourite investment choices.
Buy-to-Let investment is a ray of hope.
Despite the down market, the buy-to-let property investment is always supported by investors. However, you don’t always need to get good news here, but it is one of the most reliable aspects of real estate that started taking shape again. Of course, there are many miles to cover to reach the old condition when things were normal, but you have something to start.
A quick glance at the Buy-to-let industry in 2021
Due to past changes, some alternations were evident in the industry because the circumstances are not similar. The rental properties interact with unprecedented challenges, and it is very thirsty after getting out from the long hibernation period.
Key points at which the buy-to-let investors should pay attention before investment –
- The rental yield – Of course, this is what the rental properties do. If you are planning to put your money in it, understand the statistics of return on investment. According to a survey, the market was down after the pandemic conditions. However, conditions in the BTL industry have revived. People are getting back to work, and they want to have rental houses. Of course, you cannot ask for the same amount of rent as it was before the pandemic conditions. However, still, there is no considerable downfall.
- The property prices are already quite low – Yes, this benefit is quite visible all over the industry, and you can take big advantage of this opportunity. If the rental income is low, the prices are also low, which means you will be able to compensate for the low rental with the lower property prices. Before you buy, do not forget to check the profit margin on the property. The more you calculate, the safer you can play in the property market.
- Existing investors need to worry about the existing mortgage debts – Yes, the professional buy-to-let buyers should always be aware of their repaying capacity on the new mortgage. The BTL mortgage deals are not very easy to obtain due to their high-interest rate, and if the old ones are not being paid off and a significant part is pending, you should think twice. The 75% LTV is again available in the market, but the LTV may still get as low as 65% for those with poor financial conditions.
Are you an investor with the first BTL property?
Do not depend on it completely.
There is no doubt that BTL properties are benefits but not for the individuals who buy one house or property to get rental income. Many people who have lost their jobs are looking forward to property investment. They are investing their hard-earned money in the BTL properties hoping that they can get a passive income to save their future.
But it is imperative to realise the fact that you cannot just invest money because the BTL properties give rental income. It is necessary to consider some points.
- Those who are jobless and have no other income source should not put their savings right away in the rental properties. Do the due research and put money only when things sound safe.
- The people who are already living on external financial support from friends and family or with the help of loans for unemployed people. In such circumstances, it will be only foolish to depend entirely on the property buying decision.
- The rental income may not start immediately after the purchase of the property. It may cause a significant loss later because the market is down, and the tenants may come gradually. They may not choose every house, and in that case, the buyers will have to pay mortgage instalments. It is like taking the double burden.
Location-specific demand is a key factor.
The BTL industry has different shades to show because it gives return based on location. Some locations are quite strong and prevalent even after the corona pandemic. You need to be very specific before buying the property, scrutinise the location.
- Visit the location more than one time to understand the location from all aspects. Once the deal is final, it can be challenging to change the decision. Advance preparation is always the best method to do things adequately.
- Talk to the people living in the area. They can explain the actual conditions better. There are certain things that only people living there can tell: the electricity conditions, the water supply, the condition of the building in various seasons etc.
- Find the prime locations that are good to invest in after pandemic conditions. The location preference keeps changing with time. The spot that gives good returns today may not be good tomorrow.
- The job market affects return on the BTL properties because when people get a job, they search for the rental properties to shift to a place convenient for the daily commute. In this way, the property market flourishes. This is how the location preference works because some particular locations have more job opportunities than others.
The best places to invest in Buy-to-let properties are –
- Leeds etc.
Rest depends on the research and the other factors such as market conditions, preference of the tenants, basic facilities, proximity to the health services etc.
A higher deposit is the first and the last smart thing to do
As the market is still struggling hard to understand the world after the big loss in the past year, the investors have to work on the deposit part. The BTL mortgages are already higher in interest rate, and saving a higher deposit is the best way to escape the stress of hefty repayments.
- Save big and reduce the obligation because an investment that suffocates finances is never a worthy investment. It is essential to work effectively on the factors that make a deal light. 2021 is still under the shadow of the coronavirus, and lockdown is still a common topic of discussion. There is no reason to act carelessly.
- The BTL investors, especially the existing ones with commercial purposes, have less support from the side of Government. The individual residential property buyers have options such as help-to-buy, but one may not have complete support as a BTL investor.
The above aspects give a balanced picture of the Buy-to-let industry and explain the points on which the investors should pay ample heed. The market is changing, and that change is for good reasons, but the need is to work safely on the investment plans. The time is still unpredictable, and the only caution can make you get the proper return on the money you put in a property. Expert advice is necessary for making the right choice and making wise decisions.