Why Buy-to-Let Property Investment Can Yield Long-term Profit


Whether first-time home buyer or otherwise, purchasing a property is a huge commitment. For many, the purchase represents a move into your own dwelling ñ a place to call home, to lay down your roots and take your first steps onto the property ladder. But what about the options of purchasing a property for investment purposes? Of investing in property as a means of planning finances for the future?

Planning for one’s retirement when youíre starting out may not be uppermost in your mind; it just seems such a long way off doesnít it? But the reality is that itís never really too early to start giving it due consideration. For long-term sustainable growth, bricks-and-mortar offers some real opportunity. And, for those who have gotten involved in the UK property market in recent years, buy-to-let property investment has been considered a ripe environment for long-term profit opportunities.

What is the buy-to-let market?

Quite simply, buy-to-let in the United Kingdom is the practice of purchasing a property for the express reason of renting it out.

While there may be rare instances of a property being purchased outright, far and away the most common way to finance the a buy-to-let property is through specific buy-to-let mortgages. Although fundamentally these mortgages work in the same way as a regular mortgage, they do tend to differ in criteria and stipulations from a home purchasing mortgage. As a rule a buy-to-let mortgage would require a much larger down-payment (typically 25% of the property value) and you might expect to pay higher interest rates and arrangement fees.

And, while this might sound like a detraction for buyers, buy-to-let remains an attractive proposition for long-term investment. Indeed, the market has seen spectacular growth upwards of 35% in the past year alone in the UK, with overseas investors playing a significant role in this surge.

There may be higher costs at the point of purchase but if you have the capital in place and set yourself up to correctly manage the property as an investment and to maximise your earnings, then there can be real opportunity to make a regular income yielding steady growth in the long-term.

A Market Ripe for Growth

So why does the UK buy-to-let market offer potentially sound long-term profit opportunities? We need to look at a number of factors about the UK economy and property market in general.

House Shortage

The current situation in the UK property market is that while the number of first-time buyers continues to rise, the number of suitable, affordable and indeed, available properties lags some way behind. With less properties available for sale, the gap is generally being filled by the rental market, where demand remains consistently high.

Long-Term Increases in Value

While there may be fluctuations in property prices over short periods, a look at the historic trend of the UK property market will show that, over the longer term, house prices tend to increase. If therefore you have a property (or portfolio) occupied by tenants to provide regular earnings (or at the very least ensure all costs are covered) in the long term, the value of the property† itself stands a better than average chance of increasing to deliver a positive return on your investment which can help those longer term saving plans.

Even in the short-term, in the current UK economic landscape, there exists opportunities for growth in a market thatís seeing record price increases across the UK. Combined with a buoyant rental market and, with careful planning and sound investment, healthy growth can be found in the buy-to-let market in the UK.

About Jennifer Cribsly

I'm a former real estate broker who specialized in helping first time buyers be able to purchase a home. Now full time mom, part time real estate owner/investor.
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