Buy to let is back in fashion!...... read more to find out why......

When thinking of entering the BTL market, newcomer landlords quite rightly wonder whether the timing is right and whether the risk/reward ratio is still worth it. - check out this really useful article from the property tribes website

Buy to let is back in fashion!...... read more to find out why......
Combine Covid19 lock down economic fall out with increasingly onerous taxation and legislation and this question becomes even more vital.

The short answer is "Yes" (with caveats!).

Here are 14 reasons why BTL is still viable for newbies:

1. BTL allows you to leverage

Leverage is an investment strategy of using borrowed money, specifically, the use of various financial instruments such as BTL mortgage, to increase / amplify the potential return of an investment.

At the same time, leverage will also multiply the potential downside risk in case the investment does not pan out.

It is widely believed that the ability to leverage is the no. 1 way of building wealth through property.

Whether you choose to take advantage of this, and to what extent, will depend on many factors including your attitude to risk.




2. Passive(ish) Cash flow

Get your deal to stack up correctly and you can ensure that you will be achieving net cash flow month on month.

If you use a lettings agent to fully manage your property, BTL can be a relatively passive investment although it's important to remember that the buck stops with you.

Use the FREE PT partner Deal Analyser from Lendlord to check the viability of your deals and make sure they are net cash flow positive.


3. Capital growth - organic and forced

It's important to focus on net cash flow month on month to ensure that you can survive long enough to enjoy capital appreciation.

Property is a long term investment, and, over extended time, it is likely that your property will appreciate in value.

Additionally, you can force the appreciation of a property through improvements, refurbishment, and development, even if there is no organic capital growth.

Over the long term, inflation is eroding your debt and/or if you have a repayment mortgage or you elect to over-pay your mortgage, you can create a good equity cushion that protects you against any market shocks.

4. Safe store of wealth

Property is regarded as a safe store of wealth. It's tangible. You can see it and touch it. Many people create wealth through business, and then "store" that wealth in property.


Property being fairly illiquid also stops landlords from rash spending decisions, unlike other investments where you can quickly liquidate the investment to re-invest. It encourages a long term view.

5. Hedge against inflation

Inflation is a natural occurrence in an economy, and a disciplined investor can plan for it by cultivating asset classes that outperform the market during inflationary climates.

Just as the value of the property rises with inflation, the amount tenants pay in rent can increase over time.

These increases let the owner generate income through an investment property and helps them keep pace with the general rise in prices across the economy, acting as an inflation hedge.

Property performs well during inflationary climates and inflation also erodes debt over time.

Oxford Economics expects a peak of 2.5% in the euro-zone towards the end of the year, and a peak of 2.3% in the middle of 2022 in the UK. Thereafter, inflation is expected to fall back below central-bank targets.


6. Benefit from increasing tenant demand

The agents’ trade body ARLA Propertymark says more records have been set in the lettings market in terms of tenant demand.
It says that the average number of new prospective tenants registered per branch jumped in May to 97, from April’s figure of 82.
Year-on-year this is the highest figure on record for the month of May, with the previous May high being 70 prospective tenants registered per branch last year.

Regionally, the West Midlands had the highest number of new tenants registered per branch with an average of 132.

Propertymark’s chief policy adviser Mark Hayward says: 

“Yet again we continue to see incredible demand from tenants with a record-breaking number of new prospective tenants registered per branch for the month of May, showcasing the continuation of a booming rental market".


7. Benefit from low interest rates and a competitive mortgage market

The Times reported today that "lenders are awash with cash and interest rates remain low".

Banks and building societies have been adding to their ranges since the autumn and there are now 4,243 deals available — 50 per cent more than the 2,810 this time last year, according to the data company Moneyfacts.


We continually hear of specialist BTL lenders offering rate reductions and more products being launched.

The Lendlord Finance Hub will help you access the very latest mortgage rates that suit your profile.

8. Benefit from compounding.

Einstein described compounding as the "eighth wonder of the world".

The money that money makes makes more money, and the money that that money makes, makes even more money.

Einstein reportedly said. “He who understands it, earns it. He who doesn't, pays it.”


If a property of £100K goes up by 10% per annum, it will be worth £110K at the end of year one. You will then start to earn interest on £110K instead of £100K, meaning that your property in year two will be worth £121,000 and so on.

If you have leveraged by putting down just a 25% deposit, you are getting compounding on the total value of the property, not just the amount of your deposit!

9. Lack of coherent housing policy by successive Governments means lack of housing supply

Successive Governments have failed to address the U.K.'s housing crisis and the current Conservative Government is not addressing the issue with any coherent policy.

If anything, their landlord tax changes will cause some landlords to exit the sector, reducing the rental stock in the PRS and potentially increasing rents!

There has not been a coherent social house building plan for years and this has created a huge back log of housing demand that could take decades to address and resolve.

Government statistics showing that between March and June almost 40,000 fewer homes were built in England and Wales as a result of Covid-19, is the most stark indication yet of the impact the pandemic has had on the housing sector.

HBF Executive Chairman Stewart Baseley, said:

“Coronavirus resulted in the closure of house building sites and so inevitably output this year will fall. As well as undermining progress made in recent years to reduce our housing shortfall, this will reduce the huge contribution development makes to community infrastructure and local economies".

10. Benefit from debt recycling

When circumstances permit, and it is prudent to do so, you can use equity release to increase your assets.


11. Take advantage of insurance and guarantees

If, like me, you have a low risk threshold, there are some helpful products to mitigate your risk such as rent guarantee insurance and guaranteed rent.

RGI can be obtained through PT insurance partner, Alan Boswell Group, by calling 01603 649736.

For 12 months' rent paid in advance, you can opt for Choices Advanced Rent Option.

12. Diminished threat of unemployment

Unemployment is likely to peak at between 5% and 6% later this year, but that’s considerably lower than the forecasts produced this time last year.

13. New landlords can future-proof their acquisitions by understanding changing tenant priorities

Pandemic-induced changes include high demand for properties with outside space, properties with an area to work from home, and other factors.

Buying with new tenant desires in mind gives newbies an edge over old timer landlords whose properties may not meet the changing demands of renters.


14. Take advantage of free tools to help mitigate risk

PT partner Lendlord is a free property portfolio management system which helps you track, optimise and grow your portfolio smartly.

When I started out in property in 2004, such tools did not exist! 

Landlords starting out today have a distinct advantage having these tools at their fingertips. They assist with mitigating risk, while giving landlords important data insights that will result in wiser investment decisions.


ARE YOU A NEW POTENTIAL LANDLORD...? ARE YOU LOOKING TO BUY YOUR FIRST OR YOUR NEXT RENTAL PROPERTY?

IF SO, THEN CONTACT JAMES ALLEN DIRECTLY FOR ADVICE ON WHAT TO BUY, WHERE TO BUY & BECOME A SUBSCRIBER TO OUR PRIVATE LANDLORDS MAILING LIST FOR UNIQUE BUY TO LET OPPORTUNITIES

CONTACT JAMES AS FOLLOWS :-

Mobile 07773 412300
Email james@allen-residential.co.uk





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Meet Our Founding Director James

Meet Our Founding Director James

James Allen is the founding director and owner of Allen Residential. James started in estate agency back in 1997 and after working for a couple of strong independent estate agencies he established Allen Residential in 2005 Keen to invest back into his team, James is dedicated to ensuring that each team member at Allen Residential is a key part of the business, emphasizing the importance of their contributions. His leadership style highlights the significance of a cohesive and dedicated team, fostering a supportive and growth-oriented environment. The business has flourished in recent years, thanks to the staff's commitment to excellence and the implementation of effective systems. James' appreciation for his team’s hard work and dedication is evident, making Allen Residential a thriving and dynamic company.

Why choose Allen Residential?

Why choose Allen Residential?

With an owner who has 35 number of years experience in the industry and 20 years of company history, we bring knowledge, reliability, and expertise to every property transaction.

Our approach is casual and professional, aiming to form personal connections with the people we work with instead of treating them as a number.

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