At a time of low interest rates and political and economic volatility, an increasing number of savers continue to go down the buy-to- let route in order to achieve reliable and regular income. Some investors also see it as a way of bolstering their pension for a bigger retirement income, with many still viewing bricks and mortar as a safe haven when housing demand is continuing to outstrip supply.
Consequently, buy-to- let still represents a significant opportunity for mortgage lenders and intermediaries alike and has become a powerful force in the housing market. Therefore, due to the increasingly competitive market, more and more lenders are looking to gain a competitive edge in order to stand out from the crowd by expanding their buy-to- let propositions to HMOs as well as limited companies.
However, entrants to the market must also consider the costs as well as the benefits of buy-to- let. These new landlords should ask themselves what they would do if the tenants trashed the property, what would happen if they failed to get the correct tax or mortgage advice, and how would they cope if they suffered from rent voids. It is also crucial that these landlords weigh up the upfront and ongoing costs verses the long term return on investment, because those who expect to make a fast return in a couple of years will soon learn that is not the case. Buy-to- let is a long term investment.
Therefore, due to the recent regulatory and tax changes including buy-to- let interest which has been axed and replaced with a 20% tax credit, those who are inexperienced in the world of debt and finance should seek professional advice, otherwise they will get their fingers burnt.
However, intermediaries offering advice in this space have been warned not to unintentionally stray into giving tax advice to clients as this could affect their tax position in the future. Therefore, intermediaries must continue to insist that clients seek the necessary tax advice from tax specialists and accountants.
With the governor of the Bank of England indicating that the bank rate is likely to go down and with demand for tenants expected to remain high, I am confident that buy-to- let will continue to provide further support to the property market and will prove to be a good investment for those who have done their homework and have taken professional advice.