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Buy to Let – Investing in Property

‘BUY TO LET’ – THE ALTERNATIVE PENSION

Buy to Let is the investment in residential freehold or leasehold property, usually with the aid of a mortgage, renting it out for regular income, and enjoying future capital growth in value over the long term.

The 1988 Housing Act made investment in residential property more attractive to landlords when it introduced a new type of tenancy giving more control to landlords over their properties: there has been a steady growth in the private rental sector ever since.

Other factors stimulating the Buy to Let market have been: -

  • The erratic and uncertain performance of the Stock Market as a traditional investment;
  • Poor performance of Pension Plans leading to uncertainty for future retirement income;
  • The historic trends in improving value of residential property – ‘safe as houses’;
  • The increased availability of Buy to Let mortgages at attractive rates of interest.

In acquiring a property to let (or moving home and retaining your existing property for investment – ‘Let to Buy’), you are effectively starting a small business. There are therefore a number of issues that you should consider before entering into the residential lettings market for the first time. Although not an exhaustive list, the following should provide a basic framework to understand the various aspects of embarking on this new business.

YOUR INVESTMENT

  • Do you have sufficient capital to invest in a property?
  • Are you prepared to tie up this capital for the long term?
  • Are you primarily investing to generate an income or hoping to realise capital growth in the longer term?
  • Will you have sufficient savings and other forms of capital remaining for your needs after you have committed funds to this property investment?
  • Have you taken the necessary specialist advice about the implications of buying, renting and selling rental properties, and the tax treatment of all income and expenditure from renting?
  • If you normally reside outside of the UK, do you understand the Inland Revenue policies relating to Non-Resident Landlords?
  • Remain aware that your property could decrease as well as increase in value.
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