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Thanks to a combination of inflation and interest rate hikes, the world of buy-to-rent has been upended over the last year. This has made it much more difficult to finance a property purchase – but it’s also presented an opportunity for those willing to buy in upfront cash. Let’s take a look at the state of the market, and why it might still appeal, even now.
The story of the past two decades has been one of steady growth in the buy-to-let sector. This has come despite successive chancellors looking to raise taxes on the sector. George Osbourne progressively abolished tax relief for landlords, limiting the rate to 20% for most landlords. Then came a 3% surcharge on stamp duty. Then came environmental regulations, which in 2018 required rental properties to achieve an EPC rating of E, at the very least.
All this, combined with the more recent inflation, has made it progressively more difficult for landlords to turn a profit – but for some, buy-to-let is still worthwhile.
If you’re set on investing in property, then there are a few more niche options you might consider. You might look to build your portfolio with bonds, which are considered stable and low-risk, generally. You might look to pool your investment with other people, through a real estate investment fund. This will allow you to get money tied up in the property market, without having to worry about the duties that come with being a landlord.
You might also invest in a lodge as a potential holiday home. This way, you’ll have a property you can use during your downtime, but still be able to rent out for an income when you aren’t using it. There are plenty of great lodges for sale in some of the more picturesque parts of the country. They’re worth considering!
Given all of the new risks and costs involved in property investment, you might wonder whether it’s worth the bother. So, what are the upsides?
First, property investment will allow you to diversify. If you already have money tied up elsewhere, property might allow you to spread the risk over multiple industries. Second, you’ll be able to earn an income by renting out the property, as well as by seeing its value appreciate over time.
While your tax bill might be higher, the returns can still be substantial – and the risks are minimal, especially if you’ve insured your property with the help of a specialised product that’s targeted toward landlords. If you’re willing to outsource the running of the property to an agency, then your involvement can be minimal. All you’ll need to do is collect the money at the end of each month!
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.