The idea of becoming a landlord can be daunting, and many different points need to be considered before taking the plunge. Do you have enough funding, not only to buy the house but to maintain it? Do you have enough time to help your tenants with any issues, or will you use a letting agent?
Costs to consider
Understanding the costs of owning a buy-to-let property is crucial. According to Which?, you may need to budget for roughly £2,000 over 5 years for refurbishment costs, and £250 a year for maintenance costs.
If you choose a letting agent to find tenants, collect rent, and deal with any tenants’ problems, it is likely to set you back around 15-20% of the monthly rent.
Fluctuating rental prices
The figure you can set for a tenant to rent your property will likely vary with the market. The Office for National Statistics documented in their latest index of private housing rental prices (August 2019) that rental prices in England rose by 1.3%, and in Wales increased by 1.2%, in the 12 months to August 2019.
Between 2016 and 2019, growth rates of rental prices have always stayed positive, but have slowed down.
Impacts of Brexit
There’s still lots of uncertainty around how Brexit will impact house prices and renting. It’s known that since the referendum in 2016 house prices have dropped. Generally speaking, a drop-in house prices is a good time to invest either for yourself or for buy-to-let, however no-one yet knows how Brexit will affect house prices — they could drop further or could increase.
The Residential Landlords Association recently found that 66% of EU nationals live in private rented housing in the UK. This is over half and really highlights just how Brexit could cause a drop in demand for rental properties. They also found that some landlords were reluctant to sign new contracts with EU tenants in case there were complications further down the line with Brexit.
Long-term investment
Buying a property, whether it’s to rent out or to live in yourself, is a long-term commitment. If you do buy-to-rent, you can’t suddenly decide one day to sell up if it has become too much hassle.
You would need to inform your tenants that you’re selling what is essentially their home, which can be met with resistance. In most cases they would need a month’s notice to find somewhere else to live and move out.
Then you would have the costs for putting your property on the market and the average timescale to sell in the UK is 2-3 months, but this hugely varies from a few days to years, unless you go with a less traditional method such as a sell house fast company or auction, but then you can typically expect to get below market value in return.
The factors mentioned above, plus many more, show how buying-to-let is a big decision not to be taken upon lightly. You need financial stability, and the time to put into your investment. The uncertainty around Brexit has already affected house prices; unfortunately no-one knows what the future holds for landlords.
