The pros and cons of a Buy-to-Let Mortgage

There are some things to consider before committing to a Buy-to-Let Mortgage. Making a decision like this in life can be made easier when you weigh out the pros and the cons; and because we like to make your life easier we’ve highlighted and listed them for you.

Advantages

Thousands of investors see property as a viable means of increasing their returns. As with any investment there are the pros and the cons to take into consider however here are a few of the positive aspects of Buy-to-Let Ownership.

• Capital gain: Although the value of your property can go down as well as up; historically property in the long term has served investors well with a significant increase in value.
• Generate an Income: Hopefully the property will service you well during the ownership with the rent providing you an additional income. However, make sure that you factor in any ongoing costs of the property and check the rental yield for the rate of return.
• Demand: The rental market is currently very strong with demand at a high; with a lack of ‘affordable housing’ and stricter mortgage underwriting criteria people commonly to look to rent as an alternative.

Disadvantages

Owning a Buy-to-Let Property has the potential to offer a great return; which is why thousands of people opt to invest in property in the UK.  However, as with most things in life, owning a Buy-to-Let Property can have its negative points. Here’s a few points to consider below.

• Increased Stamp duty: For many investing in a Buy-to-Let, the property in question will be a second property or even more if part of a portfolio. In April 2016 the Government introduced a 3% surcharge for any additional property purchase.
• Rental voids: Whilst the general plan is to have a tenant in the property during the ownership; it is likely that any landlord will experience a period of rental void during their time. Make sure that you factor any possible periods of this into your budget.
• Non-payment of rent: Having a rental void due to non-occupancy is a budgeting cost many will make allowances for; however, arguably more difficult is the ability to deal with a problematic tenant. This can also be added to with any legal costs that may be incurred.
• Drop in property value: Yes, there is the sad reality for some property investors that the value of a property can also go down as well as up. The value may even fall below what you originally purchased it for at any point.
• Legislation:  Landlords have a legal duty and legislation which can be a minefield to many and can be difficult to stay on top of. However, ignoring these, is no excuse and hefty fines can be imposed if you do not fulfil your legal responsibilities.