Buy-To-Let is exactly that. You buy a property with a plan to let it out in order to generate an income. It’s one of the only asset classes where you can put down as little as 20-25% of the value of the asset and ask the bank to pay for the rest!

UK Cities House Price Index

Key Facts – December 2018

UK city house price inflation 2.7%, half the average annual rate over the last 5 years.

Price growth ranges from +7% in Edinburgh to -6% in Aberdeen.

Ten cities have recorded double digit price growth of up to 16% since the Brexit vote in June 2016, led by Birmingham and Manchester.

Source : https://www.hometrack.com/uk/insight/uk-cities-house-price-index/december-2018-cities-index/

Top 10 UK Cities House Price Comparison % YoY

  • December 2017
  • December 2018

Example Price Growth and Rental Yield

Buy-to-Let Comparison

Market Value Statistics

Birmingham City Centre

Property – B1
Developer Partner – Prosperity Wealth.

Five storey new build development consisting of high specification one and two bedroom apartments.

  • Q3 2015
  • Q3 2018

Current Buy-to-let Investment Opportunities

Starting from£138,000

Regent Plaza Manchester

Regent Rd, Salford M5 3GY, UK
Starting from£138,000
  • 1Bedroom
  • 1Bathroom
  • 42
Featured
Sherwood Square Nottingham Exterior CGI
Starting from£104,995

Sherwood Square, Nottingham

Cavendish Rd, Carlton, Nottingham, UK
Starting from£104,995
  • 1Bedroom
  • 1Bathroom
  • 42
One Regent Residential Buy to Let Investment Manchester Living Room
Starting from£237,000

One Regent Manchester

One Regent Apartment, Regent Rd, Manchester M3 4AY, UK
Starting from£237,000
  • 2 - 3Bedrooms
  • 2Bathrooms
  • 61
Featured
Excelsior Works Castlefield Manchester Feature Image
Starting from£232,995

Excelsior Works Castlefield Manchester

Excelsior Works, 10 Hulme Hall Rd, Manchester M15, UK
Starting from£232,995
  • 1 - 2Bedroom
  • 1 - 2Bathroom
  • 51
Featured
Summer Hill One BHM Birmingham Development Feature Image
Starting from£183,000

ONE BHM Birmingham Residential Property Investment

90-99 Summer Hill Rd, Birmingham B1 3RH, UK
Starting from£183,000
  • 1 - 3Bedroom
  • 1 - 2Bathroom
  • 40
Tameway Tower Kitchen Example
Starting from£99,995
Starting from£99,995
  • 1 - 2Bedroom
  • 1Bathroom
  • 38

Investing in UK Buy-to-Let Accommodation

Stocks and shares, gold, bonds…none of these can you ask the bank to lend you the money for it, and you don’t even need to pay down the balance of the loan. The bank will let you repay it in the future, providing you pay them the interest on the loan each month.

The way buy-to-let works is that you purchase a property on a freehold or leasehold basis, meaning as far as the land registry are concerned you are the legal owner of the property. Once you own it, you have a responsibility to maintain the property, service any loan repayments, and pay for utilities. However, once you own the property you can then rent it to a tenant for a period of time, usually a minimum of 6 months on an AST (Assured Shorthold Tenancy agreement), for a pre-agreed fixed rental figure. The income you receive should cover your loan repayments, cover any maintenance costs, cover any utility bills (usually the tenant is responsible for these), and give you some money left over at the end of each month.

Execlsior Works Living Room

SHOULD I BUY WITH A MORTGAGE OR CASH?

As an example, if a property was £100,000 and rented for £5,000 per year your yield would be 5%. If you invested purely with cash, your return on investment would be 5%.

However, if you purchased with a mortgage, the figures might look something like this:

Purchase Price: £100,000
Deposit: £25,000
Mortgage: £75,000
Annual Income: £5,000
Annual Mortgage Payments @ 2.5% Interest: £1,875
Net Annual Income: £3,125
Return on Investment: 12.5%

For the purposes of the above example we haven’t factored in any stamp duty or legal/broker fees, or taxes, however you can see the difference in return.

Property Development Construction site

With mortgage finance, you can also refinance the property every 2-5 years depending on your mortgage product, and providing the property has gone up in value, you should be able to release some funds for a second, third, fourth etc investment. This is how to build a portfolio using just one initial pot of cash.

Other things to factor when investing in buy-to-let are your stamp duty payments, as investors are now required to pay an additional 3% surcharge on buy-to-let properties. Click here for an online Stamp Duty Calculator – be sure to click Additional Property to get the most accurate figure.

Taxes on buy-to-let properties are also currently changing. Previously investors could deduct their mortgage interest payments as a tax-deductible expense, however from 2020 investors will be taxed on the full rental income. The way to counteract this is to invest through a limited company SPV (Special Purpose Vehicle) purely set up for investing in property. The investor becomes the owner and director of the company, and still has to carry out the same checks when applying for the mortgage (affordability, credit check etc). It is essentially a tax wrapper for the investment. Check out our blog on investing through a limited company, or contact a specialist tax advisor to discuss your personal situation.

Tameway Plaza Walsall Buy to let

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