Investment
Why choose property investment in the UK
- Property investment is considered more reliable and stable than other investment opportunities
- Property is seen as a tangible asset
- Increased rental demand which is forecasted to continue rising
- Average rents have spiked and are set to continue growth
- House prices are forecasted for growth beyond 2020
- Property can be refurbished to increase yield and growth
- You can benefit from a range of leading options to raise your investment value
- Equity can be released from your existing property to increase your portfolio
Pros of investing in a buy-to-let
Long term investment and growth
Although house prices have fluctuated in recent years, the property is still a relatively safe long term investment.
Property prices will go up and down, but over the long term, they should increase. This means you could make a healthy profit when you come to sell the property.
Generate an income and meet mortgage repayments
Renting out your property to tenants who will pay your mortgage for you and also provide some extra income is the key to a successful buy to let investment.
You can offset costs against tax
How you set up your Property Enterprise will determine the amount of tax you pay. If as a private investor, each tax year you will need to fill in a Self-Assessment Tax Return for HMRC and pay a tax bill, but you can offset some of the cost against tax, including:
- Interest on your buy to let mortgage repayments
- Fees paid to letting agents
- Council tax and bills (if you pay them for the property)
- Cost of advertising your rental property
- Paying for repairs
You can also get tax relief to cover renovations to furnishings, carpets and sofas as well as maintenance repairs, although home improvements are deducted from your Capital Gain.
Cons of investing in a buy-to-let
The costs of an empty property
There is no guarantee that your property will be occupied all the time, and when it is empty you will need to make the mortgage payments from your own pocket.
Increased Stamp Duty Land Tax (SDLT)
From 1st April 2016 you will need to pay 3% more Stamp Duty Land Tax (LBTT) when you purchase a buy to let property:
Updated 31 March 2021
Tax Band | Standard Rate | Additional Dwelling * |
less than £145k | 0% | 4%** |
£145k to £250k | 2% | 6% |
£250k to £325k | 5% | 9% |
£325k to £750k | 10% | 14% |
rest over £750k | 12% | 16% |
* Percentage figures show LBTT and ADS rates combined. ADS is calculated in addition to LBTT and is applied at 4% to the total purchase price above £40k.
** An additional dwelling purchased for less than £40k will attract 0% tax. For purchases from £40k to £145k the rate will be 4% on the full purchase price.
The additional rates will only apply if you own more than one residential property (including your own home) at the end of the day of the house purchase.
You are responsible for maintaining the property
This means you will need to be on hand 24/7 in case your tenants have a problem. If the boiler or washing machine breaks it will be your job to get it sorted, and these things can be very costly to repair or replace.
You will need to find tenants
If you are able to find tenants quickly and easily it will save you money and potential headaches. However, you will need to:
- Advertise your property
- Check references when you find potential tenants
- Arrange the deposit and ensure it is held in an appropriate scheme
Alternatively you can get an agency to manage your property for you. They can: - Find your tenants
- Fully vet them
- Sort out the paperwork
They can also take care of issues during the tenancy, although all of this will come at a cost, which could reduce your profits.
Lilac Lets don’t want to over-promise what we can deliver but we aims to help you navigate these property investment issues and take the hassle out of the process.
DISCLAIMER
The information available through Lilac Lets Ltd is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by Lilac Lets Ltd and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.
Appropriate independent advice should be obtained before making any such decision. Any arrangement made between you and any third party (whether named in the site or otherwise) is at your sole risk and responsibility.
For your information we would like to draw your attention to the following investment warnings:
The price of investments and the income derived from them can go down as well as up, and investors may not get back the amount they invested. The valuation of properties can change significantly in volatile market conditions, especially for smaller investments. Realisation of small investments may be relatively costly.
Past performance is not necessarily a guide to future performance.
Where the information consists of pricing or performance data, the data contained therein has been obtained from financial reporting services, periodicals, and other sources believed reliable.
The site operates a policy of independence in relation to matters where the operator may have a material interest or conflict of interest. Contributors employed or contracted by the company to provide site material are required to disregard any material interest or conflict of interest when giving advice through the site.
Journalistic comment included on this site is made to the best of the knowledge and belief of the writer, but no responsibility is accepted for actions based on such comment.
Lilac Lets Ltd is an accredited Company regulated by the Council of Letting Agents. Lilac Lets is NOT authorised to provide investment of financial Advice.