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Is Buy To Let
Worth It?

Is Buy To Let Worth It In 2023?

For many of those looking for an investment, buy to let is often the first to come to mind.

After all, with regular rental income offered each month, plus the value of property appreciating constantly, buying real estate can be a compelling solution.

However, after two years of the economy subjected to Covid-19, and several changes to mortgage interest relief and stamp duty, buy to let investors have taken a hit to their profits.

So, are buy to let properties a good investment in 2023 and are they worth your money?

Let’s find out in this no nonsense guide.

Topics in this buy to let guide 2023 include:

  • What happened to buy to let property investment in 2023?
  • Advantages of buy to let in 2023
  • Disadvantages of buy to let in 2023
  • Alternatives to property investment
  • How to invest in property checklist
  • How to maximise your returns on property
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What Happened to Buy to Let Property Investment in 2023?

Property Prices

Despite the pressures of three lockdowns caused by Covid-19, the property market experienced a record-breaking year.

Since March 2020, after the introduction of the UK’s first national lockdown, the average UK property value soared by over 18.06%, rising from £232,684 to £274,712, according to official Land Registry data.

In fact, The Guardian found that property prices were increasing at the fastest rate since 2004 in August 2023, with Rightmove noting that buyer demand was twice as high as pre-pandemic levels as of September 2032.

This is the first-time UK house prices have ever exceeded an average of £250k.


Rental Market

The rental market felt more impact than the housing market from Covid-19, but recovered well during 2023.

In March 2023, the National Residential Landlords Association released a report assessing the rental market one-year on from Covid.

It found that 7% of renters – around 840,000 tenants – had built up rental arrears from Covid-19.

Of this number, 18% had rental arrears valued at over £1,000.

This stemmed from a hike in unemployment caused from the economic fallout of Covid, with 11% of private renters now unemployed.

Naturally, the lack of rental income impacted many landlords, with 60% of NRLA members experiencing a loss of income, with 14% losing out on more than 20% of their rental income.

However, rental income felt a resurgence over the course of 2023, with the HomeLet rental index recording an average rent of £1,064 as of January 2022 – the highest-ever amount.

Is Buy to Let Worth It UK 2023?

With property investment, you can earn sizeable rental income every month through rent.

This is often a big appeal for investors, with the current average rent valued at £1,064 as of January 2023 – an all-time high pushing the annual rental income on a typical single property to £12,768 before expenses.

Rent and the return on investment you earn from rent, otherwise known as rental yield, can get considerably higher depending on what city you invest in and the type of property you buy.

For instance, the average rental income in Southampton is currently £19,524, all while offering property prices over £50k below the UK average.

This means the average gross rental yield for a property in Southampton is 8.79%, compared to the UK’s current average rental yield of 4.70%.

While rental yields can sometimes be misleading as it assumes that an investor won’t encounter void periods, landlords can feel confident that they can minimise the impact of void periods thanks to the huge rental demand currently ongoing in the UK.

A report from BuyAssociation in 2021 found that it took just 8.9 days to rent a property in April 2021, down from 31.9 days in April 2019.

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A major benefit of investing in property is that it’s a tangible asset.

Unlike stocks and shares or cryptocurrency, property is a tangible asset that can often increase the appeal to an investor.

Moreover, property is reliable.

Unlike stocks and shares, property returns can remain incredibly consistent, and aren’t usually heavily impacted by external sources.

For instance, during the unprecedented first UK lockdown from Covid-19 – that saw the UK housing market shut from March 26th to May 13th 2020 – the average UK property price dropped by just -0.51%.

In comparison, March 2020 saw the stock market suffer its worst crash since 1987.

Confidence is seemingly high with investment property in 2022, with 64,500 buy to let mortgages taken out in 2020 and 41,700 buy to let limited companies set up in the same year.

Download The Complete Buy To Let Guide

What Are The Disadvantages Of Buy To Let?

How to Maximise Your Returns on Property

Now that you know how to buy your property, it’s time to take a quick look at the steps you can take to maximise the return potential of your property investment.

Form a Limited Company

An increasing amount of investors are choosing to buy properties through a company rather than as individual private landlords.

The reason for this is that not only do limited companies still get full access to mortgage interest relief, but they also can save thousands in income tax.

This is because limited companies don’t actually pay income tax and instead pay corporation tax, which is especially beneficial for a property investor at the higher tax brackets as corporation tax is a flat 18%.

While you’ll still pay tax, and other costs can appear for limited companies in different areas, those building a large investment portfolio could improve their returns as a company.

Be sure to read our full guide to learn more about the pros and cons of forming a limited company.

Stay in Your Investment for as Long as Possible

To maximise your capital growth, you will need to stay in your investment for as long as possible.

This shouldn’t be a problem if you’re planning for retirement, but property investors looking for short-term returns may be tempted to sell up after a year to earn a 10% or even 15% profit.

However, to get the true benefit of property and to see your investment double in price, you will need to wait potentially 10 or more years depending on what area you invest in, and what type of property you’ve purchased.

Provide the Right Features

A smart way to boost your income is to provide the right features to retain tenant interest in the coming years.

Naturally, if you offer an underwhelming property that lacks the facilities demanded by tenants, you may encounter a high turnover of tenants, resulting in void periods and you missing out on income.

To avoid this, you will need to supply much-needed features like high-speed internet and outdoor green space, which were revealed as the two most important features by estate agents Benham and Reeves in 2020.

Target the Right Area for Your Tenant

While offering facilities is an important aspect, the best way to ensure tenant demand is by investing in a popular area.

Let’s say you’re targeting young professional tenants in a popular city like Liverpool. In that case, it would be a good idea to choose a city centre apartment with easy access to good transport links.

Likewise, a student investment would need to have good access to transport links and local nightlife, and should be located near to universities.

Alternatives To Property Investment In 2023

While property is a top choice for investments in the UK, it’s not the only option out there.

In fact, there are tonnes of alternatives with their own pros and cons and suitability for investors.

The main options in 2023 are:

  • Real Estate Investment Trusts
  • Stocks
  • Cryptocurrency
  • Bonds
  • Peer-to-Peer Lending
  • Savings Account
  • Property Crowdfunding

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