With more and more government-imposed restrictions affecting the average Buy to Let (BTL) property investor, many are asking if you can still make good money through BTL investment and if it’s even worth the hassle. If done correctly, the answer is of course yes!
In today’s article, I will explain how and why you can still make highly profitable investments despite the current climate surrounding the BTL markets.
Consider more cost-effective investments
It’s no secret that stamp duty charges are one of the banes affecting landlords’ wallets at the moment. Investors who previously looked at new build residential property in London for example are not getting as much bang for their buck because of the growing rates of stamp duty plus the stagnation of capital growth in the capital right now.
|Property Value ||Stamp duty rate|
|Up to £125,000||Zero|
|The next £125,000 (the portion from £125,001 to £250,000)||2%|
|The next £675,000 (the portion from £250,001 to £925,000)||5%|
|The next £575,000 (the portion from £925,001 to £1.5m)||10%|
Residential property in more affordable UK cities, student investments and commercial opportunities are providing investors with high returns for a much lower entry cost. These types of investments circumvent stamp duty and allow landlords to maintain a positive cashflow.
Research the best areas according to each investment type
The best area for a student investment (near a university, bars, restaurants and nightlife etc) may not be the best area for a commercial investment i.e. office suites, shop space or hotel rooms. In this sense, you need to research the best location that is ideally suited for the type of investment that you want to make.
For buy to let investments specifically, you should weigh up each area’s credentials in terms of its demographics, regeneration projects, vicinity to large cities (or whether the development is in a large city itself), transport links, employment options and comparable developments in the area.
We at Tarquin Jones factor all of this into our due diligence to deliver investment opportunities that generate wealth for our clients, but we always encourage them to do their own research to validate this for themselves.
Know what yield you can obtain
If your goal in property investment is to obtain a sustainable income over the long-term, then you will want to achieve a high yield on any property you buy. Buying more affordable property in UK cities outside of London is currently an excellent way to achieve a decent yield upwards of 6-7%. This is all a balancing act though, as if you choose to buy a property at a rock-bottom price you may find that there is very little demand for the property, or that the rent generated from the property’s occupancy is disappointing.
Tarquin Jones have earmarked Liverpool, Manchester, Birmingham, Newcastle and Leeds amongst other cities as locations to get a good rental yield without sacrificing the demand for your prospective property. This leads me onto my next point…
Invest in areas undergoing major regeneration
The cities I’ve mentioned have undergone/undergoing massive levels of regeneration that is leading to improved infrastructure, more jobs, enhanced transport links and other amenities that generally improve the quality of living space. The Northern Powerhouse is a well-known government led initiative that has pumped millions of pounds into each of these cities which has led and will further lead to capital growth on property where all this is taking place.
For example, Liverpool has had £5.5 billion put into it’s city centre which has led to huge construction projects aimed to improve the economy and quality of life in the city itself. There are plenty of examples of this happening elsewhere as well- London boroughs that have been particularly appealing to young professionalism, like Hackney and Haringey, have experienced the highest growth in terms of house prices at 749% and 544% respectively. They have all experienced regeneration and gentrification too, due to young professionals being priced out of the more expensive Shoreditch area.
By taking these points into consideration before any potential property purchase, you should be able to make an informed decision on your investments and still make money despite government regulations.
For more information on our latest investment opportunities, click on the Investments tab on our homepage. Alternatively, give us a call on 0208 445 6542 or email us at email@example.com for more details.