Every time the government makes changes which (are perceived to) have an adverse impact on landlords, which has been quite often over recent years, the question is raised as to whether now is the time to exit buy-to-let.
In reality, however, the fundamentals of buy-to-let are still much the same as they have been for most of modern history.
There is strong demand for high-quality rental accommodation, which means that there is the potential for landlords to make good profits with the right property at the right price.
The question, therefore, is not really whether or not people in general should exit buy-to-let at this point, but whether or not you personally, should exit buy-to-let at this point (or at least reduce your exposure to it).
Should you stay or should you go?
In very simple terms, buy-to-let property investment has always been a numbers game but in the current climate there is much less margin for error, in fact, in some local markets, there may be none at all.
The residential buy-to-let market is now very highly regulated and while predicting the future is a dangerous game, it’s probably fair to say that, right now, the political winds of change seem to be blowing very much in favour of a greater degree of tenant protection.
This, in and of itself, is not necessarily bad news, since it is in everyone’s interests to eliminate rogue landlords, but could be problematic in the short term, if governments implement well-intentioned measures without really understanding their potential (likely) consequences.
Basically, if you an existing buy-to-let landlord, you need to decide for yourself whether or not the game is still worth the candle or if you would prefer to move on to another form of investment.
Commercial property investment may be an attractive option
While the term “commercial property” may conjure up images of offices, shops and warehouses, it also extends to the likes of purpose-built student accommodation and retirement homes. These can be attractive points of entry for property investors used to the residential buy-to-let market.
It should be noted that, not only is commercial property regulated differently from the residential buy-to-let market, but the practicalities of it are different too, for example, even if you buy a unit in a purpose-built student accommodation development, you never actually own the asset as you might do in the residential buy-to-let market, you are simply buying the right to the income from it.
Selling investment property is best undertaken mindfully
If you do decide that you wish to exit the residential buy-to-let market (or just reduce your exposure to it), you typically want to be able to sell investment property on the most favourable terms possible.
While there are several factors involved in this, possibly the single, most important one is the question of whether or not you should sell the property with a tenant already in situ.
If the property is currently empty, or the current tenant has advised you that they intend to leave (even if they haven’t, yet, given formal notice), then the most pragmatic approach may simply be to go ahead and sell the property with evidence of the income it generated (for investors) but without any actual tenant in place (thus opening the market to residential buyers).
If there is currently a tenant in the property and they wish to remain for the foreseeable future, then it may be appropriate to try to sell on the property to another investor, at least in first instance.
If you are unable to sell the property within a certain time period, you may then wish to move on to evicting the tenant and selling the property on the open market.
Hopwood House are a specialist property investment firm, with a wide range of investment properties for sale in various markets including student property and buy-to-let in Manchester, Liverpool, Birmingham and Leeds.
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