What Is Up for New Players in the Buy to Let Investment Market
Despite the dreary predictions that have been circling the drain as far as the demise of the profitable buy to let investment scene, this sector of the market continues to have a surge in growth that seems untamed by the dire purveyors of doom. New investors and investors looking to fatten their portfolio will not find things as rosy as their predecessors.
Despite the increase in the prices of houses and the soaring rise of interest rates, landlords, new and seasoned alike, continue to push forward with their goals to purchase properties for their buy to let investment portfolio. Unfortunately, landlords now have to play a balancing game and compare the rate of return on their investment with their ideal rate of return. Housing is quite a bit more expensive now than in the heyday of the buy to let business sector, and the return rate is not quite as profitable.
In fact, higher costs including both the purchase price of the house as well as the interest rate for financing the purchase have shrunken the profit that new landlords or landlords who are increasing their holdings currently make or can even hope to make. While the amount of rental incomes has only seen a slight increase in value, the cost of providing the property has increased considerably. This means that landlords are forced to spend a great deal more on an annual basis to realise a return that is only slightly greater than the return of say, two years ago.
Where Does the Buy to Let Market Go From Here?
The buy to let housing market has escaped the perils of stagnation that the buy to own market has been plagued with over the last few years. The credit crunch might have had negative consequences for the health of the personal homeowner market, but it seems to have bypassed the majority of buy to let investors in the UK market to date.
However, despite the surge in buy to let investors that began a decade ago and the steady increase in the number of buy to let mortgages, the picture is not all that clear. Some ripples of trepidation and caution are entering the melee and the future is yet to be seen.
Yet, many landlords are failing to heed the call to be wary and possibly cease action and continue to forge forward with their buy to let investing schemes. If the past is any indication of what they should do, then, clearly they are on the right track. Dire warnings that the slump in the property market was going to seriously impinge on the buy to let sector have fallen by the wayside. Is it any wonder that new predictions of doom and gloom will also fall on deaf ears?
The worry is that the bottom will fall out of the buy to let financial arena as house prices drop due to a financial market that is experiencing such turmoil in so many facets. Whether it will or not is yet to be seen.
Is the Buy to Let Housing Market Worth It?
Housing is incredibly expensive, interest rates are up, and personal credit is not what it used to be years ago. In fact, it really has not been that long since the housing market in the UK began booming and prices were soaring higher and higher. That simple fact is actually part of the problem for new investors in the buy to let housing market. It’s also a problem for seasoned investors who are looking to expand their buy to let estate portfolios.
No matter how you look at it, the purchase of a house in the UK is going to cost more now than it did three years ago. The purchase price is going to be considerably higher. The interest rate that the investor is going to pay on his buy to let mortgage is higher. Plus, the size of the deposit that the landlord is required to place on his purchase is considerably higher than the size of the deposit that was required three years ago.
With all of the added cost, how can a landlord continue to make a profit and realise a positive steady return on his investment? In fact, landlords do and can realise a profitable return on their buy to let investments. It is just that they cannot realise the same heady return of the past that the buy to let market experienced. With a greater cost on his investment to the landlord, even a modest increase in the rental income is not going to create the same high level of profit. Is it worth it? That’s a question for the landlords to answer in time.
|
