Investing in buy to let

[shina]

Hi,

Is it still profitable to invest in buy to let as 2nd house?
I understood that tax are going up soon and I have some money i want to invest in property but not sure it'll be worth it.
There are 2 options:
1. Buying a house, renovate and sell it
2. Buy a house renovate it and rent it and hopefuly have some monthly profit.
Are these options still reasonable? or I shouldn't waist my time and wait for better times?
I have a friend who has few properties and he told me that he doesn't think it's the right time to enter the buy to let business, should I listen to him or should i try my luck and there's still profit to make in this market?

I will be happy if someone can spread some light.

Cheers all,

Shina

 

[George Ahye]

Hi,

Is it still profitable to invest in buy to let as 2nd house?
I understood that tax are going up soon and I have some money i want to invest in property but not sure it'll be worth it.
There are 2 options:
1. Buying a house, renovate and sell it
2. Buy a house renovate it and rent it and hopefuly have some monthly profit.
Are these options still reasonable? or I shouldn't waist my time and wait for better times?
I have a friend who has few properties and he told me that he doesn't think it's the right time to enter the buy to let business, should I listen to him or should i try my luck and there's still profit to make in this market?

I will be happy if someone can spread some light.

Cheers all,

Shina

Hi Shina, in my view there's always a way you can make profit in any given circumstance. There's a famous saying by Warren Buffet: Be fearful when others are greedy and greedy when others are fearful. Now is a market full of fear!

You would pay tax on a second home, and you'd also pay capital gains tax on profit you make from flipping a home (i.e. buy & sell),so this does make it hard. Making profit from renting is also becoming harder as alongside the added stamp duty tax for investments, the Government are reducing the tax relief on rental income. I'd spend a good amount of time looking into all tax implications before forming a plan.

Personally, I buy to keep, knowing that eventually my tenants will pay off the mortgage, thank you very much, and also providing I buy right (i.e. location, price),in a few years I could take out my investment and have the income effectively - with no money invested! Not a bad thought.

One thing you could consider is if your partner is not on your residential mortgage, they could buy the second home as their main and principal home, avoiding the added stamp duty as well as capital gains should you wish to sell it. To rent this out they'd need permission from the bank and in my experience this isn't a problem.

Lots to consider but definitely don't shy away from a good opportunity!

Hope this helps.

George

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[FWL]

Never be scared of change, embrace it and use it.

If your rental income covers your mortgage payments then in effect you have a property - hopefully a long term growth asset - for nothing. Always look long term. Personally I think there are still many opportunities to make money in the buy to let market but size is critical - I think those with larger portfolios will be better positioned to absorb the ever growing costs and taxes.

 

[realdeals]

While there is still potential in buying second homes/buy to let properties, it is not as easy to make money today as it once was. You need to research potential purchases and the surrounding area in great detail, ensure you are not overstretching your finances and, as a rule of thumb, calculate you income/profit on 10 months rental income as opposed to 12 (this errs on the side of caution incase you have to change tenants).