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Is This A Good Time To Invest In Property To Let
- By P Green
- Published 03/14/2008
- Real Estate
- Unrated
P Green
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It's been an interesting 18 months for the property market. The introduction of the Hips Home Information Packs affected it a little, as did a number of interest rate rises and the credit crunch.
Is it still somewhere you should sink your money? It can be a big risk buying a property to let out to tenants, although as a long-term investment there can be many financial rewards.
We take a look how recent news stories are reflecting the pros and cons of being a property investor (For further info see http://www.propertytoday.co.uk/Is-this-a-good-time-to-invest-in-property-to-let.11018.3846412.story )
For
Rental yields from property to let are higher than they have been for two years according to the monthly Paragon Buy-To-Let index.
The yield is the amount you can expect to receive in rent, expressed as a percentage of the purchase price. The higher the yield, the better the investment.
Paragon has calculated that average yields increased to 6.3 per cent in January. That's a 0.3% increase on December, and is the highest level recorded since March 2006. The firm's figures show yields have increased in line with rising rents for property to let. In all, tenants pay an average of eight per cent more for a rental property than they did in September last year.
Other good news comes from the Birmingham Midshires Bank. Its research shows that landlords involved in property to let saw the returns on their investments increase dramatically in 2007. It discovered the average total return for an investor was 16.3% in the year up to December 2007.
And that's up from 13.5% in 2006. Figures are calculated on a standardised basis with rent movements tracked like-for-like, allowing easy comparison.
Against
So
everything looks great from a financial point of view. But what's it actually like being a landlord and having property to let? Apparently you are swamped with paperwork.
That's according to a firm called Property Portfolio Software. It has just revealed the five biggest hassles facing landlords right now, based on three years' feedback from its customers.
Keeping on top of bills and rental income is the biggest hassle, followed by the need to stay legal. There are safety certificates and legal documents to track, and it is the landlord's job to ensure they are always up-to-date.
Other hassles include managing tenants and making sure they get the info they need, income tax management, and maintaining a positive cash flow. The company produces software tools to help investors keep track of paperwork and manage tenants.
Another potential problem facing you if you have property to let is a new crackdown by the taxman.
Her Majesty's Revenue & Customs (HMRC) has been contacting landlords and property owners asking for details of the income they receive through rent, according to a business called Nationwide Specialist Lending.
It's reminded us that HMRC declared last year it was intending to target those people with property to let. And after a slow start, the taxman has already written to around 500 property owners asking for clarification on rental incomes.
The firm believes many inexperienced investors may be penalised for mistakes, such as not declaring rental income on a tax return each year ??“ even if the revenue isn't taxable. If there is a tax demand it could be backdated to take into account years of ownership.
And finally...
So there you are, the two sides of the coin judged by current news stories. If you've still got your heart set on building a financial future through UK property, good luck, and get ready for a few years of hard work!
Is it still somewhere you should sink your money? It can be a big risk buying a property to let out to tenants, although as a long-term investment there can be many financial rewards.
We take a look how recent news stories are reflecting the pros and cons of being a property investor (For further info see http://www.propertytoday.co.uk/Is-this-a-good-time-to-invest-in-property-to-let.11018.3846412.story )
For
Rental yields from property to let are higher than they have been for two years according to the monthly Paragon Buy-To-Let index.
The yield is the amount you can expect to receive in rent, expressed as a percentage of the purchase price. The higher the yield, the better the investment.
Paragon has calculated that average yields increased to 6.3 per cent in January. That's a 0.3% increase on December, and is the highest level recorded since March 2006. The firm's figures show yields have increased in line with rising rents for property to let. In all, tenants pay an average of eight per cent more for a rental property than they did in September last year.
Other good news comes from the Birmingham Midshires Bank. Its research shows that landlords involved in property to let saw the returns on their investments increase dramatically in 2007. It discovered the average total return for an investor was 16.3% in the year up to December 2007.
And that's up from 13.5% in 2006. Figures are calculated on a standardised basis with rent movements tracked like-for-like, allowing easy comparison.
Against
So
That's according to a firm called Property Portfolio Software. It has just revealed the five biggest hassles facing landlords right now, based on three years' feedback from its customers.
Keeping on top of bills and rental income is the biggest hassle, followed by the need to stay legal. There are safety certificates and legal documents to track, and it is the landlord's job to ensure they are always up-to-date.
Other hassles include managing tenants and making sure they get the info they need, income tax management, and maintaining a positive cash flow. The company produces software tools to help investors keep track of paperwork and manage tenants.
Another potential problem facing you if you have property to let is a new crackdown by the taxman.
Her Majesty's Revenue & Customs (HMRC) has been contacting landlords and property owners asking for details of the income they receive through rent, according to a business called Nationwide Specialist Lending.
It's reminded us that HMRC declared last year it was intending to target those people with property to let. And after a slow start, the taxman has already written to around 500 property owners asking for clarification on rental incomes.
The firm believes many inexperienced investors may be penalised for mistakes, such as not declaring rental income on a tax return each year ??“ even if the revenue isn't taxable. If there is a tax demand it could be backdated to take into account years of ownership.
And finally...
So there you are, the two sides of the coin judged by current news stories. If you've still got your heart set on building a financial future through UK property, good luck, and get ready for a few years of hard work!