Is Investing In Property Still A Good Option Today?

Is Investing in Property Still a Good Option Today?

You may have noticed that buy to let landlords haven’t been having a great time of it lately. Determined to curb the proliferation of such landlords in the UK and encourage more families and individuals to buy homes, the government has come up with a raft of measures aimed at pruning landlords’ profits.

And yes, many of these measures will cause pain to a lot of landlords. But they don’t have to. A little tweak of the strategy here and there and a chat with an accountant who specialises in property can do wonders for your bricks and mortar investments. What do we mean? Well read on…

Section 24 doesn’t have to be Draconian

Introduced this year Section 24 will cut back on how much residential landlords can claim on mortgage interest relief. Done on a sliding scale until it’s done away with completely in 2020, it means many landlords paying a higher rate of tax (40 per cent) will see their tax bills rocket (since they’ll be taxed on gross rather than net income).

One of the ways to mitigate this is to consider becoming a limited company, where you’ll be charged corporation tax and will be eligible to claim the mortgage relief expenses. Another is to consider dividing your profits between a spouse or business partner who pays tax in a lower bracket. Then again, remortgage and find a better deal now before the full tax implications kick in.

Why other (reluctant/accidental) landlords are leaving

Other grumbles about changes to the market include the introduction of a minimum EPC rating of E for new lets and renewals from April 1, 2018 (existing tenancies have until 2020) or a £4000 fine. This means landlords will have to invest thousands in making their rental properties compliant.

Other landlords have wondered about how their finances would look were mortgage interest rates to increase (although we don’t see this happening in the foreseeable future). Meanwhile the hike in Stamp Duty in 2015, resulting in a 3 per cent cost for all new buy to let properties didn’t help either.

Granted these are all viable concerns and for some landlords the excuse they needed to get out of the market (being a buy to let landlord comes with certain responsibilities, after all).

Why buy to let still reaps huge rewards

New investors though can be assured buy to let is still a viable investment opportunity. And here’s why:

  • Rental yields (typically between three and ten per cent) are far higher than any interest on savings you’ll receive
  • Property is a fixed asset, so you’ll still be accruing long-term capital appreciation, while picking up a monthly short-term profit at the same time
  • Property prices can fall as well as increase but this is unusual and in fact, prices continue to increase on an annual basis. Certainly, the property market is a far more stable investment than stocks and shares or hedge funds.
  • Thanks to the current UK housing crisis (which doesn’t look like ending any time soon) tenant demand for properties still very much outstrips supply ie there are more people looking to rent than there are properties on the market.
  • Rents typically rise in line with inflation, proving both a predictable and persistent income over the years (with void periods very unlikely because of high demand)
  • Mortgage interest rates are currently lower than they’ve been in years (yes, lender’s conditions are more stringent but if you pass them it could feel like you’ve struck gold).


Robins Estates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.