The UK rental market is booming; with demand still far outstripping supply, buy-to-let continues to offer an attractive investment opportunity. For some, it’s a full-time job but for others it’s a way to top up their income, save for a deposit or plan ahead for retirement.
UK buy-to-let property is still seen as a reliable and stable investment despite the rising costs (due to regulatory and tax changes), and it consistently delivers long-term returns that far outstrip the equity markets and other investable assets.
In fact, the buy-to-let sector is more popular than ever, with the number of buy-to-let investors in the UK hitting a record high of 2.5 million in the latest tax year (1). This figure is 5% higher than the previous 12 months and 27% more than five years ago.
However, like most investments, investing in your first buy-to-let property requires careful consideration to ensure that risks are minimised and profits maximised. Here we explore the buy-to-let investment model in more detail and answer five frequently asked questions…
The buy-to-let model
The buy-to-let investment model is based on rental yields. Buy-to-let investments can supplement your primary income with a secondary source over a longer term (typically three to five years), providing you with a regular monthly income through shareholdings, as well as potential capital growth at the end of the investment term (once the property is sold.)
Whilst investors are likely to benefit from capital growth at the end of the investment term, the type of property that produces highest capital growth will not always produce the highest yield – this is due to the difference in property requirements from tenants and buyers.
At Hubb Property Group, we specialise in sourcing undervalued and under-utilised real estate opportunities in emerging and high-demand locations. Our buy-to-let properties are specifically designed to appeal to students, young professionals and corporate tenants to ensure the strongest rental yields and maximum financial return.
If you’re interested in investing in your first buy-to-let property, below are five questions we’re frequently asked by first-time investors.
How much should I invest?
You can start investing from just £10,000; when you consider the average deposit put down by first time buyers in the UK is £51,821 (2), for just a small outlay, you can start to build your own property portfolio and own a share in high-yielding buy-to-let property whilst also spreading your risk.
What level of returns can I expect?
Each month, you’ll earn rental income in proportion to your share in the property after the deduction of all costs and provisions. Each investment opportunity will vary, however you’re likely to achieve rental yields of between 6 and 12%. The dividend yield on each property represents the net rental income you will receive each month.
How is my investment protected?
Your investment is secured through a special purpose vehicle (SPV), which is a subsidiary Limited Company created solely to hold the property, and is ring-fenced from all other assets and liabilities within the Hubb Property Group.
What happens if I want to sell?
If you’d like to sell your shares before the end of the term, you’ll have the opportunity to offer your shares to another investor. Alternatively, wait for the property’s exit cycle, where investors will have the opportunity to exit at market value or extend the term.
Why should I consider investing with a property investment company?
Here at Hubb Property Group, we use our experience of the property market, combined with and our understanding of the challenges presented by newly-introduced legislation, to create a business model that protects our investors’ income and returns.
So, by joining forces with an experienced property investment company like Hubb Property Group, you’re not only utilising our experience and knowledge of the market, but you’re boosting your buying power and opening up opportunities to own a share in high-yielding buy-to-let property with a relatively small outlay, whilst also spreading your risk.
Plus, it’s completely hassle-free with our team managing everything from estate agents and solicitors to tenants and maintenance issues.
It’s clear that investing in buy-to-let can still pays dividends over the long term, providing you understand the market and can navigate the newly enforced regulations – something that is often best left to the property experts. Of course, property prices can go up as well as down, and we’d always recommend seeking independent financial advice before committing to your first buy-to-let investment.