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With new legislation making its way through Parliament, many landlords worry that their days of making a living from their properties are numbered. In this article, we’re tackling the question; is buy-to-let still a sustainable investment in 2024?
As naysayers warn of the end of the British buy-to-let boom, buy-to-let conveyancing solicitors continue to receive a high number of enquiries. In this article, we’ll be looking at the pros and cons of the UK buy-to-let industry for 2024.
What is buy-to-let?
In the UK, buy-to-let is the term used for the act of buying a flat or house for the sole purpose of renting the property out to make a profit. While buy-to-let mortgages are not governed by the FCA (Financial Conduct Authority), these are subject to some specific rules, including:
- Higher fees
- Higher rates
- A minimum deposit of 25%
- Most BTL mortgages are interest only
- In most cases, lenders will require the rental income to be up to 30% higher than the mortgage repayments
Will buy-to-let be a sustainable investment in 2024?
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For many landlords, the proposed UK Renters Reform Bill is a source of concern as it aims to impose new obligations and constraints on landlords which may impact their income from their buy-to-let properties. In this section, we’ll be looking at some of the pros and cons of buy-to-let investment for 2024.
The Pros of Buying-to-Let
In 2024, there are still reasons for landlords to be optimistic and we’re looking at some of these here:
- A growing audience: 2023 has seen more and more people choosing to rent accommodation; partly due to the cost-of-living crisis but also because renting offers more freedom and flexibility. For landlords, this potentially means less chance of buy-to-let properties sitting empty.
- A steady income: provided that the property is occupied, landlords can expect to earn a steady rental income which can be used as a regular income or savings toward retirement.
- Capital growth: savvy landlords who buy in up-and-coming areas and keep their properties well maintained will be able to increase the value of the property year on year.
- New legislation: as the Government clamps down on below standard rental properties (often known as beds in sheds), this presents more opportunities for legitimate landlords in the UK.
The Cons of Buying-to-Let
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As any landlord knows, there are, unfortunately, no guarantees and, in this section, we’ll look at some of the downsides of buy-to-let in 2024:
- Mortgage costs: over the past few years, mortgage companies have become increasingly wary as the UK was buffeted with one crisis after another. As a result, less mortgages are granted, and usually with higher rates. In addition, landlords who own a buy-to-let as a second home are subject to an extra 3% of stamp duty.
- Admin and responsibility: in 2024, landlords will face more obligations than ever before in ensuring that the properties that they let are safe and fit for purpose. In addition, it is a landlord’s responsibility to verify that a tenant has the right to live in the United Kingdom. Even if the property is rented through an estate agent, the buck ultimately stops with the owner of the property. For landlords, this means a significant amount of work and admin, as well as cost, to ensure that their property and their tenants meet government guidelines.
- Down with the tech: these days, tenants are a demanding a lot, and many expect their rental property to include free wifi and, in some cases, free access to streaming sites such as Netflix - all of which can add more financial pressure to a landlord’s outgoings.
The key to a great buy-to-let purchase
While we have included some downsides to getting onboard with buy-to-let in 2024, the outlook still looks sunny for landlords. Recent reports show that the number of new renters out there - including older people - has increased to a point where properties become subject to bidding wars.
To ensure success there are a few things to look out for when choosing a buy-to-let property, including:
- Location: needless to say, the location of the property and the availability of nearby amenities is key for a successful landlord. Do your research thoroughly to ensure that your potential tenants will have access to shops, schools, and transport.
- Type of property: while flats tend to be cheaper, houses are generally considered a better investment as these can be rented to a single family or as rooms to individuals, for example, students.
- Layout: when choosing a property, it's important to think about the type of tenant you’ll be looking for, i.e. a family, a professional couple, or students. Each of these groups will be on the hunt for different kinds of layout. By identifying your ideal tenant, you’ll be better able to ensure that the property you buy ticks all the right boxes to bring you the maximum amount of income.
Looking to buy-to-let in 2024?
As we’ve shown in this article, decent and honest landlords generally have nothing to fear from new legislation - and there are some great reasons for making buy-to-let one of your new year’s resolutions. As with any property purchase, always make sure that you do your research - and don’t be tempted to cut corners - to make sure that your career as a landlord is a long and lucrative one.
Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained property professional. Be sure to consult a property or legal professional if you’re looking to invest in a buy-to-let. We are not liable for risks or issues associated with using or acting upon the information on this site.