Now's a good time to find a property to buy-to-let

by John Fitzsimons on 14 November 2011  |  6 comments
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With buy-to-let lending and rents both on the rise, now's a good time to find a property to buy-to-let.

Buy to let, if not quite blooming, certainly appears to be in relatively rude health. The latest stats from the Council of Mortgage Lenders revealed that both the volume and value of buy-to-let loans have jumped significantly.

In the three months to September, there was a total of 34,500 buy-to-let mortgages dished out, up 16% on the previous quarter. In total, those loans were worth £3.8 billion, an increase of 19% over the quarter.

Indeed, the number of buy-to-let mortgage loans is now at its highest level in three years.

Figures from Connells further highlighted the heightened activity levels within the sector, with 89% more valuations for buy-to-let purchases in October compared to a year ago, leading the firm to describe buy to let as “red hot”.

Soaring demand

The big reason that so many people are keen to get into buy to let at the moment is that demand continues to grow.

Research by the property service group Countrywide found that rental properties are disappearing from the market at an astonishing rate. Over quarter three, properties were let on average within 12.7 days of becoming available, a new record.

Viewings of rental properties are also significantly up, by a whopping 17.8% compared to the previous quarter. There are now five tenants competing for each property on the market.

And that demand is pushing rents up once again, with the latest figures from LSL showing they hit an average of £718 in September, yet another new record. For more, check out Stop blaming 'greedy' landlords for rising rents.

With rental properties flying off the shelves, why wouldn’t landlords want to expand their portfolios and cash in?

No option but to rent

That demand for rental properties shows little sign of letting up, either.

My dad has always maintained that renting is essentially throwing money away. You pay your money each month, just like someone with a mortgage, but you don’t end up with the asset of a property at the end. It’s no wonder he’s now an estate agent.

But he’s far from alone in that viewpoint. It’s something seemingly ingrained in the DNA of Brits, to be focused first and foremost on owning your home. However, doing that is becoming ever tougher.

Some new research by Santander has found that 28% of prospective first-time buyers plan to take up second jobs, or work overtime, in order to get together a deposit. Somewhat worrying more than a quarter (27%) say they will take out a personal loan to do so. A third of the wannabe homeowners Santander spoke to admitted they doubted they would ever own their own home.

So many people are now locked out of the property market, with no realistic chance of owning a property any time soon. As a result, the private rented sector has a big role to play in providing good, affordable housing to a generation of renters. Like them or love them, professional landlords aren't going away any time soon.

Making the right investment

However, just because the rental sector is doing well, that doesn’t mean that renting out any old property will be a smart move. If you do want to invest in property, whether you’re a first-time landlord or an experienced one with a large portfolio, it’s all about buying the right property for the area, and for the type of tenant you want to attract.

After all, there’s no point buying a small flat in a University town, and then moaning that the only tenants you can attract are students!

I’d suggest having a read of our How to become a buy-to-let landlord guide for some tips on picking the right property to invest in, as well as advice on how to get the most out of your investment.

Problem tenants

One issue all landlords occasionally face is tenants that either can’t or won’t pay. This may get worse with the festive period upon us, with money stretched even more tightly than usual. Indeed, a study earlier this year by the Financial Inclusion Centre found that the number of renters struggling to pay their bills each month may be as high as three million!

Perhaps we are reaching breaking point, where rents simply cannot continue to rise so dramatically?

But if you’re a landlord missing out on your rent, be sure to read Landlords: What to do if your tenant won’t pay!

15 excellent buy-to-let loans

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