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The pros and cons of buying a buy-to-let property

Posted in   Aug 31 , 2023

Buy-to-let property is often seen as an attractive way of accumulating wealth or as an alternative option to a pension. However, while purchasing buy-to-lets is undoubtedly a good investment, they are also a long-term commitment that requires hard work and good financial planning. 

If you are unsure as to whether to take the plunge and buy your first buy-to-let property then it is definitely worth considering the pros and cons of being a landlord before you invest. 

PRO  - Rental Income

This is the biggest incentive for people who buy a buy-to-let property. The idea of receiving regular income that not only pays off the mortgage on their buy-to-let property but also gives them a little bit extra in their pocket each month is a very attractive one. 

CON - Rental Void

However, if your tenant misses a rental payment then you will be responsible for covering the mortgage payment yourself until they catch up and if you should have a period when your property is not let (a rental void) then you will be left covering all of the costs during that time too.

PRO - You're your own boss

If you are fortunate enough to be making enough money from your rental properties to live on then you can have complete control over your income and your own time. The ability to work the hours you choose, make all the decisions and feel completely in control of their own life is what drives many landlords to build their property portfolio.

CON - Responsibilities

Being a landlord means you have both legal and moral responsibilities towards your tenants and no one can choose or predict when urgent maintenance issues such as a leak may occur. For many people who are trying to hold down a full-time job alongside managing their buy-to-lets, the responsibility is too much. An easier solution is to have your properties managed by a letting agent but this will of course cut into your profit. 

PRO - Allowable expenses

You are permitted to deduct expenses from your rental income when working out your taxable rental profit. These expenses must be 'wholly and exclusively for the purposes of renting out the property and includes maintenance costs, utility bills, agency fees and insurance payments.

CON - Costs 

As soon as you start to make a profit from your buy-to-let property you are legally obliged to inform HMRC. You may be required to submit a tax return so that HMRC can calculate how much income tax you should pay. Buy-to-let property purchases are subject to higher stamp duty rates. Also when you sell a buy-to-let you must pay Capital Gains Tax on the amount that the property has increased in value during the time that you have owned it. Don't forget to factor in costs such as the deposit, survey and conveyancing fees, renovation costs and the administrative costs for inventories, deposit protection, gas safety certificates and EPCs. 

Being a landlord certainly requires more time, effort and planning than most people think it does but for those willing to put in the work it can be a highly profitable endeavour. 

If you are considering buying a buy-to-let property then please do give us a call on 01698 441327 and we will be delighted to help you to find the perfect property.

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