The future of Buy to Let

With new Prime Minister Boris Johnson’s proposal to raise the 40 per cent tax threshold to £80,000 set to benefit landlords, is the buy to let market a dead duck or is it set for a revival following new leadership promises?

With the government marking its intention to remove section 21 evictions back in April 2019, which will make it much harder for landlords to evict tenants who simply won’t leave their property – regardless of whether they have paid their rent or not, the buy to let market has stalled over the summer months with many landlords looking at student lets and HMO investments as a much safer bet.

Following around twenty years of growth, the buy to let market started to run out of steam back in 2018 thanks to tax changes, with statistics showing that investors spent £5.2 billion less on buy-to-let property purchases in the first half of 2018 than they had in the same period in 2015, a drop of 30 per cent.

So, are the new tax proposals set out by the new PM enough revive the market?

Financial commentator Paul Lewis states “Boris Johnson’s tax plan will benefit landlords twice as much as anyone else. People who make a living through rents, dividends and pensions do not pay NICs, which will result in them gaining £6,000, over the salaried and self-employed who will make £3,000 a year,” explains Lewis.

“For landlords who earn £50,000 a year, this proposal is good news, but for the landlords who generate over £80,000 a year through renters, this is great news.”

If you’re still considering if being a student landlord, HMO property owner or buy to let landlord is the right option for you, let’s take a closer look at the financial impacts.


Interest-only or capital repayment?

There is a wide range of buy to let mortgages available to potential and current landlords, but the product you choose can have a real impact on the future of your investment.

An interest-only mortgage can be the far cheaper option to owning your own buy to let property, but if house prices go south and you want to pull out of the market, you’ll have very little to show for your previous payments.

Capital repayment, on the other hand, will help you make a dent in the property value but will cost you far more, so you’ll be taking a much bigger risk in terms of monthly repayments. There are a number of buy to let mortgage comparison sites that will give you a better illustration of the financial implications of your investment, so take a look at this online comparison tool.

Where to invest

Many buy to let landlords look to London as a safe haven for their investment properties, but with house prices backsliding in the city, getting a buy to let mortgage would seem foolish in this area. Instead, house prices are standing strong in areas such as Manchester, Sheffield and Leicester where there is a increased demand for student accommodation and private residential rentals.


Standard BTL vs HMO

With over 160,000 HMO properties all over the UK and numbers rising, it seems that savvy investors are tapping into modern ways of living and investing in HMO property portfolios in favour of the standard buy to let.

Communal living spaces are rising in popularity in many cities across the UK, and the demand for student accommodation for home grown and overseas students steadily growing in areas with an industrial heritage, such as Sheffield and Manchester, where there is always high demand for good quality student lets.

Now, ex buy to let landlords are transforming themselves into student landlords and transferring some of the skills and lessons they have learnt previously for HMO investments that offer significantly better yields than a standard BLT property.

Another advantage that HMO or student accommodations have over buy to lets is that the majority of their tenancies are short term, so that the amount of time that an unwanted tenant that is failing to care for a property or pay their rent digging in their heels and refusing to leave is minimised and therefore reduces the risk for potential landlords who are concerned about the removal of section 21.

For more information on the benefits of HMO properties and student lets, speak to the team at Smart Property today.


Smart Property are the UK’s No1 student property investment and management company.  Find out more about our investment and management services in Leicester, KegworthSheffield, Salford & Manchester  and Chester

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