The present economic landscape is an understandably worrying one for households across the country. Rising inflation has given rise to increased costs overall, whether in relation to average energy bills or average food shops. Economic insecurities have spread, though, from lower earners to those with significant investments – particularly those with buy-to-let mortgages.
As more horror stories appear of landlords without the means to hold on to their portfolios, questions are emerging about the viability of investing in property as a whole. But are these questions valid, and is buy-to-let any less viable than it was before the cost-of-living crisis?
The shifting property landscape
There are two major reasons for which buy-to-let opportunities have fallen under increasing scrutiny in recent months. Buy-to-let mortgages have seen change over the last few years, as mortgage tax relief was replaced with a much smaller tax credit allowance on interest. However, the most recent and most significant reason relates to wider movements in the economy.
Liz Truss’ brief stint as Prime Minister saw the attempted roll-out of damaging fiscal policy, which was wholeheartedly rejected by markets – and which forced the Bank of England to raise interest rates by record amounts in order to quell its potential inflationary impacts. This rise in interest rates saw mortgage rates skyrocket, realising significant risk for many buy-to-let landlords without the capital to swallow the cost.
Is Buy-to-Let still a worthwhile investment?
The rise in interest rates was a relative surprise to many in buy-to-let circles, but not unprecedented. Buy-to-let properties are beholden to the same risk as all other investments and assets, with recent months illustrating well the extent of that risk. Profit margins may be lower in the face of higher interest repayments, but this doesn’t mean that buy-to-let is no longer profitable. Rather, new landlords need to be more agile than ever in meeting and mitigating costs, to make the most from their best investment.
Becoming a Buy-to-Let landlord
If you are willing to shoulder the new risks posed by buy-to-let landlordism on your own journey to building a portfolio or business, then there are some simple steps you can follow in service of your goals. Your first step should be to reckon with your finances and calculate whether buy-to-let investment is right for you at the present moment.
In the assumption that you are comfortable enough to shoulder unexpected costs while building your rental portfolio, your next steps are logistical in nature. Landlord insurance is a wise decision with regard to protecting your ongoing investments, particularly where difficult-to-control elements like new tenancies come into play. You might also take this opportunity to investigate agencies for managing properties on your behalf – a further cost to eat into your finances, but a worthwhile one if you value your free time.