Why Understanding Buy to Let will Help You Kickstart Your Property Portfolio to 100

What is BTL?

BTL stands for Buy To Let, it is the strategy that is followed when a house is bought specifically for the purpose of being rented out. 

How does Buy to Let work?

Buy to let is when you will buy a property and rent it out to tenants who are looking for a property similar to yours. Furthermore, you then set a rental payment, higher than your mortgage & bills but according to the market value of the area and your property. This will allow you to make a profit on the property, turn around the buying cost and also create a passage for some passive income. 

People choose this option because it is generally a more safe option than investing in stocks or cryptocurrency, whose trends can change in the blink of an eye. It also creates physical assets, which usually appreciates in value over time. When you Buy to Let, you can either manage the property yourself,or hire a management agency to handle the day to day for you. 

The main aim of BTL is to make a monthly profit. These profits are usually relatively low. 

As a BTL landlord, you’ll need to consider the following costs: 

Mortgage payments, Landlords Insurance, Management Fees, Tenant Find Fees, Maintenance, Voids. 

BTL us a great strategy for people who are risk averse, and are happy to just slowly grow their wealth over time. 

Pros & Cons of Buy to Let:

Pros

• Just like any other property, it’s an asset for a lifetime that can be used for different purposes. These include recreation facilities, housing, renting offices, etc. 
• It creates a stable income source. The rent you get can be used for investing or savings. 
• Properties in the UK double in value approximately every 10 years. This is a great opportunity to grow your wealth. 
• There is a shortage of property available to rent in the UK, which has resulted in very high demand for BTL properties. 
• They are the easiest property to get lending on. 

Cons

• Pay the fees for maintenance, insurance, mortgage, etc. 
• Problems with bad tenants
• Have to pay income tax on the money you make
• Monthly profits can be quite low after all of your expenses
• It can take a long time to evict problem causing tenants
• Pay capital gains tax on any increase in the property’s value, should you decide to liquidate your investment

Buy to let is a good strategy if it is done correctly and you have good tenants who will treat your property like theirs, and it’s considered as a relatively safe investment. Keep your tenants happy, and they will look after your property.