Buy-to-let investments have become increasingly popular in recent years, but some industry analysts have warned that the market could be about to change for the worse.
Recent times have been seen as a ‘golden period’ for buy to let property investors, largely due to a boom in UK house prices.
But, with five interest rate increases since November, the time when you could purchase almost any property and turn a profit on it may be about to end.
People looking to buy-to-let will have to be in it for the long term to succeed.
Buying a property off-plan (buying before the property is actually built) has been seen as a simple way to get into buy-to-let in recent years. One of the reasons for the popularity of buying off-plan is the fact that owners can make a healthy paper profit as soon as the property has been built due to house price inflation. Buying off-plan also gives the property a structural guarantee.
However, new developments can be flooded with buy-to-let investors and when these properties come onto the market at the same time the rental yields can be forced down as a result.
Many off-plan developers now offer special discounts to try and tempt purchasers to invest, but it is important to stand firm and not fall for such developer incentives as some firms inflate the initial price so that they can spotlight grabbing discounts.
The decision to enter the market depends largely on two important factors:
- your likely rental income
- the amount of capital you are willing to have tied up in the property