Buy to Let? Issues to Consider

As the owner of a rented property in North Wales for almost four years I have a reasonable understanding of the pros and cons and my aim is to inform the thinking of anyone considering investing in the same way.

The first issue is the decision to invest. If you inherit money from your parents as I did you will want to do something significant with it. There is no benefit in just putting it in savings as in the long term the value of that cash will drop. I did what many people do which is invest in property.

I suppose I could have invested in art or wine or seek out a high interest account but my decision was based on long established evidence that over a long period, that in excess of 20 years, property is one of the soundest investments. Like everything, there are always the downsides.

You will not be able to access your money short term. The value of your bricks may go down as well as up which was indeed what has took place during the recession of the past few years. You will have to find a reliable tenant who will look after your investment. In fact you will have to find a whole series of tenants over a 20 plus year time frame as the average tenant will only stay one year.

You will be on call to your tenants over maintenance and other problems. You will have to pay out for repairs etc. You will have to protect the property. Interest rates may rise and cut into your profit. Your profit is taxable although on an interest only mortgage you can currently offset all the interest against tax. You may not be able to dispose of the property when you wish to. If you sell you will be liable to capital gains tax if it's your second property. And finally you will have to pay for conveyancing in north wales plus other lawyers and professional costs.

Not as simple as you first thought? So why do people like me do it at all? Well long sight I believe the capital value of my property will go up well. When the time comes I aim to take out amounts of equity from the property and re mortgage it. The equity is currently non taxable. With low interest rates I currently get a monthly small income from the property. I happen to like DIY so up keep is not a problem.

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