Landlords have taken more hits than they care to account for over the last few years. At times, it must have felt like they were in a heavyweight boxing match, receiving blow after blow for 12 rounds with little let-up.
The first jab came with the end of the Wear and Tear allowance in 2016, as landlords were no longer able to claim up to 10 per cent of their net rental income for maintenance upkeep. This was followed shortly by an uppercut in the form of new stamp duty rules, with buyers forced to cough up an extra three per cent on second-home properties over £40,000.
The knockout blow? Changes to tax breaks on mortgage repayments, which sees the phasing out of claiming interest on buy-to-let mortgages by 2020/21. But, like most epic boxing matches, there is always a comeback story.
The redemption arc
Many countries would view the changes as a good reason for potential investors to look elsewhere for places to put their money. Not in the UK, though, where owning a property is still seen as the holy grail. The British Dream, if you will.
Despite uncertainty around Brexit and changes to landlord regulations, many buy-to-let investors remain committed to the cause – especially as there are still areas in the UK which are proving to be buoyant investment spots with high yields.
With a quarter of UK households (5.8m) expected to rent privately by 2021, and demand outstripping supply, the buy-to-let market doesn’t look like it’s slowing in pace. What was once a London-centric market has now become nationwide, there are more tenant-finding options than ever before, and getting a buy-to-let mortgage is becoming easier.
Here are some tips and details about the market for potential investors to take into account before getting on the buy-to-let ladder.
Location, location, location
The location needs to be high on the agenda, but property searches should be driven by yields and not proximity to where you live. Currently, the north of England is a buy-to-let hotspot, with Manchester, in particular, proving to be an appealing option.
Liverpool and the entire North East region are also prospering. Yorkshire and the Midlands have seen cities such as Leeds, Nottingham and Sheffield enjoy a buy-to-let spike as lower property prices create higher yields.
Give London some love
That’s not to say that London is a no-go zone for investment, with budgets always playing a central role. Money will likely go a little further outside of the capital, but it’s important to research every region before deciding on an area of investment, taking into account the demand for tenants in cities and towns across the UK.
Investors looking at the capital could still source a good deal, using market uncertainties to their advantage.
Tech leads the way
Once upon a time, using a letting agent was the only one way to find a tenant for a rental property. In the digital-led world of 2019, options have expanded to give landlords more food for thought. For those who want to stick to traditional methods, the services of high-street agents is still a popular choice. But the emergence of the PropTech industry has added another dynamic to the market.
Online letting agents such as Openrent have armed landlords with the freedom to list a property themselves and get it on the market within minutes after signing up. Social media has also played an increasing role, with some landlords relying on word of mouth (or likes and retweets) to find them a tenant.
PropTech options are helping to bring the lettings industry in line with instant gratification services like online banking and streaming services such as Netflix. Landlords have more choice now than ever before when it comes to finding a tenant.
They can navigate between high street and online options, or even try a mixture of both to see which yields the best results.
The financial aspect
While tenant-finding options are all well and good, how about the financial side of things? Most investors get a buy-to-let mortgage to finance their purchase, but it’s well known that the process of acquiring funds from a lender can be somewhat laborious.
The average wait time for a mortgage is anywhere between 18 and 40 days, with most people getting an answer closer to the 40-day mark. However, the mortgage industry is starting to catch up with PropTech and other digital markets by offering instant gratification options online.
The last five years have seen a step change, with brands across a variety of industries looking at how to revolutionise the customer experience and bring mortgages up to speed. Getting a mortgage needn’t be tedious, especially if your a first-time investor, where funding will be just one of many layers in the process.
Investing for the first time is likely to result in a cautionary approach, and would-be landlords will make sure they have every angle covered before committing. Finding the right property, securing financing and getting a tenant is just the start of the journey to becoming a fully-functional landlord.
Technology is changing people’s expectations when it comes to services, and it’s no different for buy-to-let landlords. Whether they are trying to get a mortgage, find a property or secure a tenant, the current sea change is helping them do everything with minimal fuss, better guidance and improved user experience.
21st Century mortgages
At Molo, we aim to make the financing aspect as straightforward and easy to navigate as possible by offering end-to-end mortgages for buy-to-let investors. It’s a mortgage service that takes place online and provides a decision in minutes, with customer service available at the click of a button if needed.