Many people dream of having a property portfolio, but being a landlord can be daunting. Over the last few years, changes to mortgage interest relief and stamp duty on second homes, coupled with the more recent rising mortgage rates and high inflation, have caused many would-be landlords to consider whether rental properties are still a good idea.
While the property investment market may have seen some changes recently, high demand for rental properties and skyrocketing rents may still make letting a property a viable and lucrative option in 2024. Here, the team at Shortland Horne take a look at the potential benefits and risks of investing in property to rent out to tenants.
Is buy-to-let still a smart move for investors in 2024?
The answer to this question will largely depend on your unique situation. It will largely depend on the types of properties you are looking to invest in and also your investment goal. Some things to consider before investing include:
- If mortgage rates go up, will the rent you receive still cover it, and can you afford to pay the mortgage if not?
- Have you considered the tax implications and the effect these will have on your profit?
Will you be able to secure a mortgage based on your financial situation and potential rental income? - What types of property will you invest in, and do you have a plan for where you want to invest? For example, are you looking at one or two-bedroom properties, family homes or student accommodation?
- With interest rates pricing many out of buying, the demand for rental properties is extremely high.
Advantages and disadvantages of rental properties
When contemplating property letting, it’s easy to be enticed by the prospect of substantial rental incomes. However, it’s crucial to thoroughly consider the advantages and disadvantages of this venture.
The advantages of letting property include:
- It can be a sound investment. Landlords can potentially gain a new revenue stream with rental income. Rental yield can vary depending on the size, location and condition of the property, but it can be as high as 8 per cent in some areas.
- Landlords can also generate capital growth as their investment grows as the value of the property increases.
- Demand for rental properties is high in 2024. Rising mortgage rates and an uncertain economic climate are driving a shift from home ownership to renting for many first-time buyers, which is great news for landlords.
- Landlords can take out insurance to protect against loss of rental income if the property is vacant, damage to the property and cover legal costs.
The disadvantages of letting property include:
- You may pay a higher rate of tax, which could leave you with less profits.
- If property prices fall, your capital will reduce. If the value of your property drops below your mortgage amount, you could have negative equity.
- There are many costs to consider, such as stamp duty, property damage, repair and maintenance and insurance.
- Changes to the capital gains tax allowance in April 2024 mean you may face a higher tax bill if you sell your buy-to-let property.
Are you thinking about letting a property in 2024?
If you’re thinking about letting a property in 2024, the experts at Shortland Horne can help you manage all aspects. Our award-winning team can help landlords ensure they are fully protected and compliant, giving you peace of mind that your investment is in safe hands. Get in touch with Shortland Horne today to discuss your requirements.