Tuesday, 29 April 2014

Buy-to-let now 18 years old in the UK

Back in 1996 ARLA The Association of Residential Letting Agents came up with the "Buy-to-Let" concept. This was to encourage investors to buy property and let it out. This had followed on from an earlier Government's scheme called "The Business Expansion Scheme" BES. The objective of this earlier investment model was for specialist BES Companies to be established, they had their own tenancies and the properties could be bought for a given amount, kept for three to five years and sold on for a profit.

Then the housing market collapsed, double mortgage relief for couples was abolished and many BES Companies found that there was no way they could sell off their property portfolios without heavy losses.

Many landlords / investors had to continue letting out under normal assured shorthold tenancies of the era and wait (and in many cases wait for years) till property prices recovered again.

So this time around it was not a Government imitative , but one set up letting agents, after all ARLA was established by letting agents for professionals in that business. You did not have to set up a company for this and you did not need to buy a portfolio of property, just one.

I remember loads of leaflets arriving at our office from the various financial institutions behind this scheme. Well 18 years later it is still going strong and last Saturday "The Independent" like other newspapers had a feature on the subject.

They said "Over the past 18 years buy-to-let has provided average returns that outstrip those of comparable major asset classes, according to a report from the Wriglesworth Consultancy - It reckons that every £1,000 invested in an average buy-to-let property, purchased with a 75 per cent loan-to-value mortgage in the final quarter of 1996, would have been worth £13,048 by the final quarter of 2013, a compound annual return of 16.3 per cent".

With the rental market the way it is in the UK at present, it looks like buy-to-let will be with us for a long time yet.

If you are going down that route, consult a professional letting agent, one who is a member of ARLA. Follow guidelines on how to present your property. Keep it updated, after all if it was brand new ten years ago, there might been a lot more smarter properties built since then in your area.

Pay particular attention to upgrading kitchens and bathrooms and of course make sure you take out specialist landlord insurance. Rent protection / legal protection products should also be considered.

Find out more about these here.   

1 comment:

auto said...

what a nice article, thakns for the info.