Why Buy to Let Remains a Viable Investment

Buy to let investors continue to be well-positioned for significant investment returns over the medium to long-term.

The UK property market has been making the headlines for some time now. Depending on whom you believe, the UK is in the midst of a slowdown or it’s turning the corner and is on its way to a remarkable improvement. Despite all the confusion, buy to let investors are considered to be well placed for high investment returns over the medium to long term.

Buy-to-let yields

Buy to let returns remain appealing and demand is giving landlords more reasons to hold on to their property, while giving them more opportunity to continue looking for purchases. Paragon Mortgages, provider of residential buy to let mortgages to landlords, said the private rented sector gives people a practical alternative to owner occupation while buy to let provides housing for people who find it difficult to climb the property ladder.

The latest Buy-to-Let Index from Paragon Mortgages showed resiliency despite the negative news surrounding the industry. The index showed that buy to let yields have remained stable and that average UK rents, though they have stabilised, are higher than they were a year ago. Due to these factors, many consider the buy to let market still a crucial source of stability.

Buy to let investments

According to the Association of Residential Letting Agents, landlords collectively have more than £500 billion invested in buy to let properties – more than the value of all privately owned commercial property put together.

The ARLA report estimated that properties in the private rental sector were worth up to £530 billion. This is in comparison to privately owned commercial property worth £503.88 billion. Even with the stabilisation of the current market, the value of rental property is expected to remain surpassing commercial properties as house prices are anticipated to increase quicker than commercial establishments over the long-term.

Rents are also expected to head for a significant increase in the short-term, with increases pegged to be between 10% and 15% both this year and the next, the report said. The number of people renting is likewise predicted to rise by an estimated 3% a year going forward.

Why buy to let investments are preferred

A survey from a mortgage specialist showed that more people view property as a superior alternative to other investment properties. According to Mortgage Trust, 75% of landlords preferred buy to let investments over other investment vehicles because of significant returns from a tangible asset. Meanwhile, 28% are in the buy to let industry due to a perception that yields can be more easily managed than other types of investments.

These prove that there is an increasing number of people who are beginning to have more faith in the value of bricks and mortar. And with increasing short-term returns and a growing number of people fuelling tenant demand and rental returns, investing in buy to let properties remains a practical move.

Buy to let advice

If you’re interested in jumping on the buy to let bandwagon, it’s recommended that you buy below market value – especially properties from distressed sellers who are looking for quick deals and are prepared to take prices much lower than the market value. Buying BMV allows you savings from 15 to 40% below market value.

If you’re a property investor who wants to expand your portfolio, make sure to avoid certain types of property. In some locations, there is an oversupply of new-builds that haven't been achieving the rents they’ve promised. You might want to consider existing terraced homes as they are easier to rent out, according to investor magazine Landlordzone.

Even with all the doom and gloom stories in the market, the buy to let sector still presents ways for you to make money. As long as you're extremely selective about where you purchase your buy to let properties and you're getting the right advice, you will find that buy to let market is still a profitable way of earning returns.