Opinion: Great British buy-to-let can be an exciting place to invest

LET BY sign displayed on London street with traditional English terraced houses in the background

There's still value in purchasing a property to let out, says Jamie Minors - Credit: Getty Images/iStockphoto

With the days getting lighter and normality seemingly on the horizon, there’s much to finally look forward to after such a tumultuous year.

Even if you’re a property investor? It depends how you look at it. 

Whether you’re buying for a quick return, to have as your pension or to hand down to your loved ones, there’s different routes to consider. 

The government’s ever-changing tax rules have seemingly hammered investors in their pockets, with extra stamp duty surcharges, removing the interest allowance on the loan and taking away lettings agents application fees. 

With further talks over capital gains tax increasing, is there still value in purchasing homes to rent out? In short, yes. Absolutely. 

The debate needs to be on your strategy and what you actually want from your investment property. There are three basic things to look at here: to flip, to rent out based on yield, or to rent out for capital growth. 

The flip is straight forward, to purchase at a price, renovate and sell back on. We’ll skip this one for this discussion.

Photograph showing a row of Victorian terraces at sunset on an urban city centre street in Norwich

You might want to take into account capital growth when choosing a property to invest in - Credit: Getty Images

The debate comes over the next two, which is finding a property to rent out, and in theory to buy as cheap as possible to bring in as much as possible per month. (For the purpose of this short column, we’ll assume somebody is purchasing cash).

The gross yield is calculated by having the purchase price divided by the yearly rent. If we look at property A, let’s just say a terraced house in the city centre, purchased at £200,000, renting at £825pcm, achieves a gross yield of around 5pc, however this hasn’t factored in costs. 

You obviously need a quality letting agent to manage it, to ensure your tenants are adhering to their contract, to collect rent and to not have to call a boiler man on Christmas Eve at 11pm (this happened to one of our properties).

Bright pink 'to let' sign on fence outside house

Properties in less 'in demand' locations could achieve a higher gross yield - Credit: Getty Images/iStockphoto

Property B, is a property in a less ‘in-demand’ location, which is purchased at £100,000, and achieves a rent of £725pcm, therefore with a gross yield of 8.7pc. Property B sounds more appealing, doesn’t it? Well for many, it does, and Minors & Brady manage landlords portfolios who opt for this strategy. 

But, what about capital growth? If you purchased a city centre terraced house in NR1-NR3 in 2010, any of these sold for under £100,000, and now often sell for over £200,000. They’ve over doubled in price in 10 years. The properties in the less ‘in-demand’ areas? Generally speaking, they haven’t moved much in value – and certainly nowhere near the more popular areas of property A.

If you were fortunate enough to have purchased 10 of these homes back 10 years ago, you would’ve made £1m in capital growth, without even considering the monthly income and the surging tax liabilities that have and are unfolding on the monthly income.

Whichever way you consider the routes, there is still great value in buy-to-let investments, particularly versus volatile stock markets. Over a period of time, property can offer an exciting yet reliable place to invest your money if you are fortunate enough, so that you can safeguard for the future.

If you want to discuss your property portfolio with me, want some investment advice on where to buy, or to source attractive opportunities, e-mail me on jamie@minorsandbrady.co.uk.