The Buy-to-Let Experience
For many individuals in the last generation of property investors, the term ‘buy-to-let’ might evoke mixed emotions. However, in the current city centre market, it is worth revisiting whether ‘buy-to-let’ could be the best form of property ownership.
One landlord shares his experience of purchasing a pair of buy-to-let properties at the age of 18. Despite the properties’ values dipping and only being worth what he paid for them back in 2004, the landlord is comfortable with his investment in bricks and mortar, as the rental income covers his mortgage and annual costs. As a private rental sector tenant himself for 10 years, he appreciates the flexibility that comes with renting.
Leeds City Centre: Investment Potential
With this perspective in mind, the question arises whether one’s money is better placed in a property purchased solely for letting it out, rather than buying a home for personal use. Although the idea may seem unconventional at first glance, property deals in Leeds city centre, for example, can represent substantial investment potential in terms of both capital growth and annual return on capital invested.
In one instance, a potential buyer considered a studio for sale at £58,000. With a 25% deposit (£14,500), the annual rental income would not only cover the mortgage, service charges, ground rent, and a letting agent’s management fee (including VAT), but also provide a £2,000 surplus (before tax) in the first year. This amounts to a forecasted 14.2% annual gross return on investment – significantly higher than the £70-£100 per annum that most people might earn from £14,500 savings in a bank.
The Three-Year Plan
The investor in question plans to hold the property for three years, and considering occasional voids and minor maintenance, hopes to net £5,000 in this period. Industry experts forecast that the property’s value may increase by 10% during this time, resulting in an overall return of £10,800 above the initially invested £14,500, or approximately 74% over the three years.
However, buying an investment property carries risks, and prospective investors should approach a buy-to-let venture as a business. For example, the investor in the aforementioned studio plans to use the generated deposit of around £25,000 after three years for a significant down payment on a property for personal use.
The Importance of Timely Investment
It is essential to consider the likelihood of property prices in city centres rising substantially in the next three years. Many people may look back and regret not seizing the opportunity to buy apartments while prices remain relatively low, and demand for private rented properties is at an all-time high.
For those interested in buy-to-let investment opportunities in Leeds and other locations across the UK, UK City Residential offers advice and a wide range of options. Whether it is your first or 100th investment, UK City Residential is a valuable resource for interested investors.
For more advice and information, contact Jordan at:
E: Jordan@ukcityresidential.co.uk or visit www.ukcityresidential.co.uk