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What Are The Pros And Cons Of Property Investment?

What Are The Pros And Cons Of Property Investment?

The UK housing market is currently in crisis.  Houses are not selling because nobody can afford to buy and due to the cost of living, increasing numbers of families are being forced into rented housing, which in turn is in very short supply.  And for anyone who can afford to buy, lenders are making it difficult by asking for large deposits.  Consequently, younger people are finding it impossible to save up enough money to take a step on the housing ladder, which is being made worse by the continually rising cost of living.  But not everyone is suffering.  There are many who are taking advantage of the buoyant property investment market by becoming part-time landlords.

Cash in on the Demand for Rental Property

If you have the means to invest in a second property, it can be an excellent way of boosting your income.  Buying a property for cash is obviously the preferred option, but as long as you have sufficient savings for a deposit, you should be able to find a buy to let mortgage from one of the big high street lenders.  However, it is important to remember that there are lots of rules and regulations to adhere to as a landlord, most of which are related to health and safety issues, but as long as you do everything by the book, you will soon have a regular income to look forward to.

Pros of Investing in Buy To Let Properties

  • The average return on an investment property is around 8%, which is a lot higher than any return you can expect to see from a savings account.
  • Once you have a reliable tenant in the property, you can enjoy a hassle-free regular income.
  • If at any point you need to release some capital, you can sell the property.
  • An investment property can provide a good nest egg for retirement purposes.
  • Property normally appreciates in value over time, so the longer you hold on to the property, the greater your profit will be.

Cons of Investing in Buy To Let Properties

  • You may have to spend money on your properties to make them suitable for letting purposes, which could involve taking out cash loans to pay for the work.
  • There are a lot of regulations involved in letting put properties and if you don’t abide by the law, you may end up being prosecuted, fined, or even imprisoned.
  • Not all tenants are pleasant members of the community – some deliberately damage their rental homes and cause conflict in the local neighbourhood through criminal activity, which can cause untold headaches for a landlord.
  • Void periods (when a property is empty) can cause cash flow problems for landlords, especially if you have a mortgage to pay.
  • There are a lot of extra costs involved when you are a landlord – appliances have to be serviced regularly and repairs must be taken care even if you can’t afford the expense, which could necessitate borrowing money via cash loans.

How to Manage Your Cash Flow

In theory, investing in buy to let properties should give you a regular income, but with the economy the way it is, a lot of tenants are finding it hard to pay the rent each month.  As such, you may find your tenants are sometime late with their rent cheque, which could leave you with cash flow problems.  If this happens and you are certain the money is on its way soon, temporary cash loans may be enough to tide you over until you have the money in your bank account.  But whatever the situation, it is always wise to discuss the matter with your tenants and if necessary, try and help them out with a discount on the rent until they get back on their feet.

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