Investing In Buy To Let Properties

This is the form of property investment that most people think of when talking about investing in property. You buy a place that is not your main home in order to make money by renting it out or, alternatively, you bank on the property making a huge capital gain in a few years and rent it out to make it pay for itself in the meantime. These days, most investors look at the total yield, that is, rental return plus potential capital gain, when deciding whether to buy.

Pros: Buy-to-let, in all its various guises, has become by far the most popular method of investing in property in recent years, and is the main way used of making money - or turning you into a 'property millionaire' - at property clubs and investment seminars. The idea is that you get regular income through rental yield which offsets the many costs involved in buying and maintaining a property, and in the process you become a landlord.

Although you incur capital gains tax on resale, there are very many costs you can set against this tax, such as refurbishment and improvement, utility bills, council tax, service charges, accountancy fees, purchase costs and legal fees. Plus, the process of indexation on capital gains tax means that the longer you own the property, the less of this tax you pay on resale.

A further benefit is that buy-to-let mortgages are easily available and constitute cheap borrowing. The idea is that you make a killing by selling at a profit when you have bought with cheaply borrowed money. Mortgages are still the cheapest kind of long-term loan available, and a prime reason for so many people investing in buy-to-let.

Cons: There can never be any guarantee that your place will successfully rent out. Although many property developers are now offering a 'guaranteed rental' for a period of time, you as the owner do not know whether this is a genuine rent, or whether the property will rent out at that amount when the guarantee period ends. Or, indeed, that it will rent out at all.

In many areas, landlords struggle to find tenants as the buy-to-let phenomenon has caused serious oversupply of properties, with many developers now building apartment blocks specifically aimed at this sector, and canny tenants negotiating rents ever downwards. Rents also do not always cover mortgages, as Tony and Cherie Blair found to their cost when they had to keep lowering the rent on their West London house.

More recently in the UK there is now the requirements for home information packs, where a landlord must supply his potential tenants with a home information pack or energy performance certificate to state that the property has been certified as energy efficient.

Being a landlord is hard work and requires input from you. Renting out a property is emphatically not the same as hiring out a car, for instance, as the complicated rules of tenure always apply. Tenants are human beings, and being a landlord involves very human transactions - it is emphatically not simply a matter of moving money around.

There are very many regulations governing renting out properties and also many ongoing costs associated with buy-to-let. Figures have to be worked out very carefully indeed, to make sure the expected rental will adequately cover your costs - and not merely the mortgage.

Tenants nowadays expect smart, modern, clean properties, and this means constant work maintaining and renovating your property to a high standard. The unexpected - such as no tenants, the boiler breaking down, the roof coming off in a high wind - can always happen.

The other major factor here is that if buying mainly for capital gain, you are taking a big gamble as you can never know for sure that the capital gain on resale will be worth it. You are looking into the future, a place where nobody has a reliable crystal ball.

Although many property professionals are in the business of prediction, as with all financial predictions, they can actually only go on past performance. Anybody who could genuinely and accurately predict future trends would indeed soon be a billionaire, but that person has never yet come forward.

Property investment can be very lucrative if you know what you are doing. Get the facts about investing in buy to let properties, including your obligations as a landlord in areas such as home information packs and energy performance certificates from a certified Lincoln EPC agent.