Buy-To-Let Property Investment
Buy-to-let property investment is one of the most popular investment choices among both new and experienced investors. This is due to the strong performance of buy-to-let properties in the UK since the early 2010’s. This strategy offers buyers the chance to benefit from growth in both property and rental values, whilst paying out strong yields each month.
Read on to learn more, or use the form opposite to contact our team and discuss your investment objectives.
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A buy-to-let property is bought with the intention of renting out the property to a tenant. The monthly rental income creates a new source of revenue for the buyer.
Investing in buy-to-let property is a popular and relatively safe long-term investment strategy. This is because the property market is resilient and, historically, it has shown consistent growth. Of course, past results cannot guarantee future performance, but even in times of adversity (such as global recessions), the property market has always recovered and exceeded previous levels.
Unlike short-term property strategies, such as the classic “buy low, renovate, sell for profit”, buy-to-let property investment focuses on the long-term value of rental income in addition to natural capital growth. Generally, it is much more hands-off and the buyer only needs to front the money, then allow a management company to handle the day-to-day. This makes buy-to-let ideal for investors looking for a passive income stream.
Why Invest In Traditional Residential Property?
There are multiple reasons why residential (also known as ‘buy-to-let’) property is the preferred route to market for many investors, we’ve detailed some of the most common below.
Considering the various investment classes available to investors in the UK, such as residential, commercial, hotels, student accommodation and healthcare, residential buy-to-lets are by far the most appealing. For example, JLL forecasts that Manchester will increase by 17.1% on average in terms of property values from 2020 to 2025. This is simply not seen in other sectors.
This natural increase in property value can deliver huge profits for buyers when they’re ready to sell.
If priced correctly, the rental income from a buy-to-let property should cover all costs (mortgage payments, ground rent, etc) and still deliver a profit for the owner.
Property management companies can handle all aspects of managing the property on the buyer’s behalf, such as finding tenants, organising repairs (if needed), collecting rent, and more.
It is a common misconception that having no debt is the ideal scenario. Having debt which is calculated and managed sensibly allows people to invest in additional properties they would not otherwise be able to.
By smartly and carefully utilising finance, particularly in combination with low interest rates, investors can potentially buy two properties and benefit from two times the capital growth. As equity builds, investors then have the option to grow their portfolio more aggressively.
Other investment classes are a lot more restrictive in terms of lending, yet residential property still offers plenty of mortgage products at 75% loan-to-value (LTV) for buy-to-let investors, if buying as individuals or through a company.
The UK property market is certainly a top tier investment location that attracts significant capital from around the globe. As a developed country with a transparent legal system, strong economy, world-class educational institutions, global employers and limited capacity with an undersupply of housing, the UK has and continues to see property values rise.
This has been the case since records began. According to official HM Land Registry data the average property price in the UK in January 2000 was £84,620, but as of 2020 the average price is £233,027 – showing a consistent, steady rise which provides an ideal investment environment. You can use this tool to search house price statistics.
The UK has had a fundamental undersupply of property for years. Developers cannot build properties fast enough and typically all well-built property sells, mostly in advance of completion during the construction period.
The government has set a target of 300,000 new homes to be built per year, yet in 2019 there were only 161,022 new homes registered according to the National House-Building Council (NHBC), more here.
We will likely see incentives from the government in the future and more relaxed planning constraints to encourage development. It’s not the demand the UK struggles with, it’s the supply – this is the core factor having a positive impact on values.
It’s worth noting that residential properties in Manchester, Liverpool and London are in particularly high demand from investors at the moment due to attractive rental returns and substantial growth potential over the medium to long term.
The other benefit of the residential market is the level of variety in your choice. Investing in most cities in the UK will generate a positive return on investment over the long-term, but going into cities with the highest forecast growth makes a huge difference. For those with the budgets then London and Birmingham are great choices. For those with slightly lower budgets, we have the fast-growing Manchester and Liverpool. These are closely followed by great entry-level investment cities such as Leeds and Sheffield. There is plenty to choose from catered to all budgets.
Speak to us about the forecasts and performance of property values and rental returns across the different cities mentioned above, we can provide postcode specific data to enable informed investment decisions.
Top performing buy-to-let properties will always attract interest from other investors, in addition to those looking to buy as their own home.
This provides buyers with a simple exit plan for the investment.
Where Should I Invest In Buy-To-Let Property?
We always encourage investors to purchase in the city-centre rather than the outskirts of town. Even if you may save money in the short term, capital growth (i.e. rising property value) typically hits the city-centres first and then ripples out.
Plus, global employers are setting up shop in cities such as London, Manchester, Liverpool, Birmingham, Leeds and Sheffield, to name a few. This means professionals of all ages simply need to be in or very close to their workplaces, which are typically based in city-centres. When we combine this talent pool with the students who want to stay in the cities after they graduate, it means there is significant demand for modern, convenient residential property in the UK’s city-centres. This makes for ideal rental conditions, hence the ongoing rise in buy-to-let projects.
Expert Industry Analysis
We like to rely on data from official government sources, property portals and major global research consultancies when assessing market conditions and past performance.
There are a few residential market reports below which are a great indication of future performance. Whilst market estimates and forecasts can never be 100% accurate, you will see repeat patterns and this will help you form an opinion. Do bear in mind most of these were produced prior to COVID-19 emerging.
- Knight Frank – UK Housing Market Forecast – 2020 – see here
- CBRE – Five Year Forecasts – see here
- Savills – Residential Property Forecasts – see here
- Office for Budget Responsibility – The Economy Forecast – Housing Market – see here
- JLL – UK Residential Forecasts – see here
Most importantly, it’s crucial not to base forecasts or base expectations on media headlines as these often cherry pick data points to suit a particular narrative. We recommend using the reports above to start your own research.
Buy-to-Let Property For Sale
Frequently Asked Questions
Below you can find a range of common questions from previous investors. If you require specific details and advice please do not hesitate to contact us today on +44(0)203 627 3987 or via [email protected]
Yes, you will have to pay a deposit on exchange of contracts and will receive an agreement in principle for your chosen property. When the property gets closer to completion your offer will be formalised.
There are plenty of income focused investment strategies available. HMO’s, short-term lets, student accommodation and care homes can offer very high yields, for example.
However, the security and capital growth seen in residential buy-to-let property is unmatched, so if you want to see the property value increase aggressively over time it’s the best choice.
Considering your overall return on investment, when comparing like for like, residential buy-to-lets are typically superior.
However, if you are just focused on the income, we can show you how to safely invest in other asset classes to achieve a fixed income of 8-10% net, one example being student accommodation.
This will vary greatly depending on your purchase value and circumstances, take a look at further information here.
We spend a great deal of time conducting market research, looking at the latest data and forecasts, and combining this with our experience and knowledge of the market. As such, we are able to form a solid opinion of the best investment locations based on your personal circumstances.
Two popular choices are Manchester and Liverpool. Both are seeing strong demand from investors currently but we will work with you to advise appropriately.
On some schemes there are payment plans provided throughout the construction period. In most cases a minimum of a 30% deposit will be due at the exchange of contracts stage.
In most cases when purchasing property for investment it is more tax-efficient to purchase through a limited company. There are various further benefits too.
We can assist with the full set up and ongoing management of your company and accounts for a low monthly fee – get in touch with the team for further information.
We can look after all aspects of the investment process – sourcing, consultation, due diligence, company formation, mortgage brokers, site visits, construction updates and property management.
What does Nick, our Founder and Director, think of residential buy-to-lets?
“The residential market is typically the go-to for new investors and it is a fundamental at institutional level. As an investment class it offers the most attractive capital growth prospects and when looking at the track record of the UK property market, it’s clearly a stable medium to long-term hold providing the security that investors look for. This resilience has been evident throughout the ongoing COVID-19 pandemic, especially in comparison to the volatility seen in the stock markets.
We know there is a significant undersupply in the UK property market and demand in city-centre locations is substantial, meaning a quality development attracts young professionals who are willing to pay a premium rental price for convenience in terms of location, quality in terms of a modern finish and the positive lifestyle experience seen in developments with onsite facilities”.
Nick Hyland, Director
Our role is to advise, educate and present the most suitable buy-to-let property investment opportunities. If you would like to discuss your options with the team you can call us on +44(0)203 627 3987, email us on [email protected] or send us a message below.