Buy-to-lets in the UK can be profitable, even among rising challenges for landlords such as new regulations, rising interest rates and lower tax thresholds.
While certain changes in the UK have made profitability harder for landlords to achieve, rent prices and demand for rentals remains high.
With the right property management partner, landlords can ensure that their buy-to-lets are profitable. At J Property Management, we help landlords get the most for their money by optimising their rentals. Want to increase profitability on your buy-to-let property? Contact our team of experts today!
What Is A Buy-To-Let?
Buy-to-let properties are bought to rent out to tenants rather than be lived in by the owner. Historically, buy-to-lets have been a great investment strategy, allowing people to earn rental income. Property assets tend to increase in value over time too, meaning that as well as rental income, landlords could earn a profit when they sell the property in the future.
Why Is Having A Buy-To-Let Profitable?
Investing in a buy-to-let can be profitable for a number of reasons, including:
Physical Asset
In a world of cryptocurrency, stocks and shares, owning a physical asset such as property still holds a great deal of value.
Property Appreciation
Across the UK, properties tend to appreciate in value over time so investing in a buy-to-let is usually a sensible long-term strategy with good resale prospects.
Diversifying Investment Portfolios
Investing in property is something physical and stable. It can be a great addition to portfolios to balance out more high-risk, volatile investments.
Rental Income
Purchasing a buy-to-let property can be a reliable source of rental income – either as an additional revenue stream or even as a main income. For this, you’ll need to make sure that you’re increasing rental yield as much as possible.
How Are New Laws Affecting Buy-To-Let Profitability In The UK?
One of the challenges for profitability when it comes to buy-to-lets is the changing laws in the UK.
Section 24
A change in taxes (Section 24) means that landlords can no longer deduct mortgage payments from their rental income. Instead, they receive a separate 20% tax credit for their annual mortgage interest. This has had important implications for landlord tax relief and eats into their profit significantly.
Renters’ Rights Bill
In the UK, the government is trying to give more rights to renters and create a fairer situation both for tenants and landlords. Buy-to-let profit could be negatively impacted by the proposed limit of rent increases. Landlords may be limited in how often and by how much they are able to increase rent, affecting their overall buy-to-let profit.
Increased Stamp Duty
For buy-to-let purchases, there is now a higher amount of stamp duty tax. This means that the initial purchase of a buy-to-let property is now more expensive for landlords and potentially less profitable from the offset.
EPC Ratings
The UK government is pushing for greater sustainability, including more energy efficient properties. While no plans have been officially made, there have been talks to raise the minimum EPC rating from ‘E’ to ‘C’ for rental properties. Landlords will have to consider implementing changes to make their properties more energy-efficient. Although this could attract tenants and reduce costs in the long-term, it is a significant short-term cost they’ll need to take into account.
How To Make Your Buy-To-Let More Profitable
Buy-to-let properties can still be profitable and these following steps can help:
Decrease Vacancy Periods
Vacancies can kill profit with an average vacant period of 21 days costing landlords £957 annually. Sometimes vacant periods are inevitable if you need to carry out necessary reformations or repairs; however, ensuring regular maintenance checks and addressing quick repairs as soon as possible could help you to reduce these.
Other vacant periods can be due to gaps between tenancies or being unable to find reliable tenants. Outsourcing tenant sourcing to a team of experts, like the team at J Property Management, can reduce vacant periods substantially and keep profits for buy-to-lets high.
Set The Right Rent Price
It can be tempting as a landlord to increase rent prices to ensure that buy-to-lets are profitable. However, setting a price that’s too high can risk extended vacant periods and deterring tenants. Finding the right rent price – one which is profitable and still fair for tenants – is key. It can be difficult to know what’s the right rent price for your buy-to-let but using this free rent valuation tool makes it simple.
Work With A Property Management Company
Working with a property management company can make sure your buy-to-let is profitable. From helping you stay on top of the various buy-to-let regulations and avoiding costly legal and financial implications to securing trustworthy tenants to reduce vacant periods, they can handle everything. They’ll make sure that your buy-to-let investment is actually making you money rather than losing it. Not only that, by outsourcing stressful landlord duties to a property management company, you’ll reduce your workload, free up personal time and gain valuable peace of mind.
Make Your Buy-To-Let Profitable With J Property Management
At J Property Management we’re London property management experts. We help landlords across London and the rest of the UK get the most out of their buy-to-let investment. From our full property management solutions to services such as tenant sourcing, rent collection or Airbnb management, we can help you make your buy-to-let profitable. Talk to our team of experts today to see what actions we can take to maximise your buy-to-let profit.
