A popular alternative to a pension and an attractive method of accumulating wealth is buy-to-let investment property. Buy-to-let investments are unquestionably wise investments, but they also involve a long-term commitment, labour, and careful money management.
It is definitely worthwhile to weigh up the benefits and drawbacks of becoming a landlord if you’re wondering whether to go ahead and purchase your first buy-to-let property. We have outlined some of the main pros and cons below.
PRO – Rental Income
This is the main motivation for people to purchase a buy-to-let property. The thought of having a consistent income that not only covers the mortgage on their buy-to-let property but also provides some extra cash each month is very alluring.
CON – Rental Void
However, if your tenant misses a rent payment, you will be responsible for paying the mortgage until they catch up, and if your property is unoccupied for a period of time (a rental void), you will be liable for paying all costs during that time as well.
PRO – You’re your own boss
You may fully control both your income and your own time if you are fortunate enough to be able to live off the income from your rental properties. Many landlords are motivated to expand their property portfolio because it gives them the flexibility to work the hours they choose, make all the decisions, and feel totally in charge of their lives.
CON – Responsibilities
As a landlord, 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. Many people find the responsibility of managing their buy-to-let properties while working a full-time job to be too much. A letting agent can manage your properties for you, helping to reduce the stress, but this can cut into your profit.
PRO – Allowable expenses
When calculating your taxable rental profit, you may subtract expenditures from your rental income. Maintenance charges, utility bills, agency fees, and insurance premiums all fall under the category of “wholly and exclusively for the purposes of renting out the property” expenses.
CON – Costs
You must legally notify HMRC as soon as you begin to make a profit from your buy-to-let property. You may need to file a tax return so that HMRC can determine how much income tax you need to pay. Higher stamp duty rates apply to buy-to-let property purchases. Additionally, you must pay Capital Gains Tax on the amount by which the property has increased in value during the time that you have owned it. Remember to account for expenses like the deposit, survey and conveyancing fees, refurbishment expenditures, and administrative expenses for inventories, deposit protection, gas safety certificates, and EPCs.
Being a landlord certainly requires more time, effort, expense, 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 becoming a landlord in Hampstead and would like to know more about how Vita Properties has helped hundreds of landlords in NW London to maximise their profits and minimise the stress of owning a buy-to-let property, then please do give us a call on 020 7759 2199 or send an email to enquiries@vitaproperties.uk and we will be happy to discuss how we can help you.
