The case against Buy to Let

Buy to Let (BTL) is in the news again as a hot topic, with investors looking for ways to generate income in the current low interest environment. Potential property investors are attracted to the savings to be made whilst the stamp duty holiday is in force.

However there are some drawbacks to using BTL either as an income stream or as an investment.

Here are the top 6 offending factors which may deter you:

  1. The cost of set up: If you own the BTL as a second property you will still have to pay stamp duty at 3% of the purchase price.
  2. Complicated: you may have to arrange landlords insurance and a tenancy deposit scheme
  3. You run the risk of having times when the property is empty. But you will still have to pay for any bills or mortgage whilst not having rent coming in.
  4. Cost of property repairs if your tenants damage the property, and general upkeep.
  5. Cost of agents fees. If you don’t want to be bothered with finding and vetting tenants and property inspections an agent can do the job for you, but fees can eat into your profits.
  6. If you decide to sell you will have yet more costs to consider. Capital Gains Tax could be charged at 28% for a higher rate tax payer

What are the options?

Consider an investment instead. Whilst there are fees for advice these will almost certainly be less expensive than the eye watering stamp duty for second property owners. Some investments can offer the chance to draw a tax free income or capital from them.

Although all asset classes, whether it be property or equities can rise and fall in value, an investment or pension will never call you in the early hours of a Sunday morning to report a broken boiler or blocked drain.

Further help

If you would like assistance or more information on this matter, please contact our team on 01903 534587.

The value of your investments can go down as well as up, so you could get back less than you invested. The Financial Conduct Authority does not regulate some Buy to Let mortgages or Tax Advice.