If you’re considering becoming a landlord you should be aware that new legislation means you need to do your research before you go ahead and sign on the dotted line.
The legislation means you’ll have plenty to think about before you part with your hard earned cash. However, to make things somewhat easier for you below you will find the pros and cons of real estate investing:
– Plenty of Options
You no longer need to have a lot of cash to spare if you want to make an investment. From as little as £100 you can eventually own and manage a property. There are a number of property investment accounts that offer you the chance to invest through your pension, or even through a standard account using a property ISA. Your investment could be boosted by rental returns which means if the cost of the rental property rises so do all of your returns.
– Long-Term Returns
We all know that the cost of almost everything tends to fluctuate including property prices. However, if you’re looking for long-term returns you’ll be pleased to know that prices are likely to rise in the near future. With property values up approximately 20% over the last decade there is still room for more improvement.
– Stamp Duty
In recent months, buy-to-let landlords have been hit by tax changes. This means you’ll have to pay an extra three percent stamp duty on a new property if you already own another property elsewhere.
– It’s Harder to Borrow
With the Bank of England’s base rate at 0.5% at the time of writing, borrowing costs can be cheap for a buy-to-let investor. However, mortgage lenders often insist that your rental income needs to be around 125 percent of your mortgage’s interest payments. Lenders are also beginning to check your property portfolio when they’re making a mortgage decision. This potentially means that if a few of your properties do not generate enough cash to cover those repayments you may not be able to get a new mortgage.
As you can see, there are a few good reasons to invest in real estate and a few not-so-good. The trick here is to determine whether the pros outweigh the cons and whether you’re prepared to take a chance and boost the size of your real estate empire.