September 5

Is buy-to-let worth it in 2023?


The rising popularity of serviced apartments attracts guests seeking hotel-like comforts while maintaining their privacy. To stand out among the competition and increase profitability, it’s crucial to enhance your marketing strategies for your multiple properties in town.

Having a negative perspective is common for landlords, both seasoned and prospective. Interest rates have risen, significantly increasing mortgage costs compared to a year ago. Moreover, the tax situation has become less advantageous. Let’s address these challenges upfront, as there’s no shortage of them!

Each year, both aspiring property investors and current landlords ponder the opportune moment to expand their portfolios. With the slowdown in annual price growth since the summer of 2022, is 2023 an auspicious year for investment?

Our assessment suggests it could be, contingent upon your property investment objectives. While average property values are projected to decline this year, this follows double-digit market growth for many properties during the pandemic, and recovery is expected within five years. Furthermore, rents have been steadily increasing due to limited supply. Given that buy-to-let entails a longer-term investment approach, sluggish property price growth, coupled with robust rental growth, might be advantageous for new and established landlords alike.


Reasons why 2023 might be the best time to invest in buy-to-let: 

Here are five compelling reasons why we believe the current year presents an excellent opportunity to enter the rental market or expand your existing property portfolio:


  1. A Noticeable Rental Shortage

The past few years have witnessed robust rent increases primarily due to an overwhelming demand for rental properties, significantly outpacing the available supply. Fierce competition among tenants has driven rental prices upwards, with many tenants willing to surpass the advertised rental rates to secure suitable accommodation.

Nonetheless, it remains crucial to conduct thorough research on supply and demand dynamics in your specific area. This ensures that the property you acquire not only performs well in the current market but also maintains its appeal in the long term. It’s essential to acknowledge that tenant preferences can significantly differ from one part of a town or city to another. Collaborating with local experts, like Leaders, can help guarantee the long-term viability of your buy-to-let investment.


  1. A Decelerating Market Can Present Investment Opportunities

While some prospective buyers become apprehensive when property price growth starts to slow, it can actually create favourable conditions for property investors. Particularly, it provides opportunities to purchase properties at prices below their perceived market value, facilitating quicker transactions.

This situation often arises when sellers encounter challenges, such as the burden of higher mortgage rates, the necessity to access the equity tied up in their homes, relationship breakdowns, or urgent relocations due to new job opportunities. The key is to identify these “motivated sellers.”

By offering a swift and convenient transaction that helps sellers move forward, you gain leverage for negotiating a reduced selling price. Any discount you secure translates into immediate equity in the property, enhancing the property’s income potential as well.


  1. Landlords Exiting the Market Create Opportunities for Immediate Cash Flow

As a result of legislative and tax adjustments that have impacted the buy-to-let sector in recent years, some landlords are opting to exit the market. However, others have merely reached the natural conclusion of their investment strategy and had intended to sell at this point.

Acquiring a property that complies with all legal requirements for letting and already has tenants in place eliminates the need for additional capital investment to make it “rent-ready.” This scenario could potentially generate rental income from the very first month of ownership.


  1. Energy-Efficient Homes Can Attract High-Quality Tenants

With the government’s ambitious target of achieving net-zero carbon emissions by 2050 and increasing emphasis on combatting climate change, especially among younger generations, properties that are energy-efficient and environmentally friendly are highly sought after by tenants.

Purchasing either a newly constructed property with cutting-edge eco systems and features already in place or a property you can renovate to include low-carbon heating and other environmentally friendly attributes can help you attract top-tier tenants who are willing to pay premium rents. Additionally, you might explore funding options to assist with the cost of these eco-friendly improvements; our energy efficiency grants article provides further insights.


  1. Anticipating Future Legislation

Following the government’s release of the long-awaited White Paper, ‘A Fairer Private Rented Sector,’ last June, which includes proposals for ensuring new tenancies meet a minimum ‘C’ EPC rating in the next few years, it’s evident that regulations governing the private rented sector will become more stringent.

Being aware of potential forthcoming changes provides you with the opportunity to acquire a property that already complies with these proposals or undertake any necessary renovations before entering the rental market.

As with any property purchase, it’s essential to ensure that your offer is financially feasible and that obtaining a mortgage won’t pose any challenges. If you’d like to discuss financing options in the current market, you can reach out to our affiliated company, Mortgage Scout, for a complimentary and obligation-free consultation.

If you have questions about investing in buy-to-let or would like to learn more about the property market in your locality, feel free to contact your nearest Leaders branch.


Who can get a buy to let mortgage?

If you intend to lease your property, securing a buy to let mortgage is essential. Many lenders perceive buy to let mortgages as higher risk, and eligibility criteria may vary from one lender to another, encompassing the following considerations:

  • While not always a prerequisite, some lenders may require that you already possess a property of your own, whether fully owned or with an existing mortgage.
  • A sound credit history is typically expected, with a manageable level of other financial commitments, such as credit card debt.
  • You might need to demonstrate separate income from employment or self-employment, typically around £25,000 or more annually. Earning less than this could pose challenges with certain lenders when seeking approval for your buy to let mortgage.
  • Lenders often stipulate a maximum age requirement, typically around 75 years, though some may set lower age limits.
  • A loan-to-value ratio (LTV) limit of at least 75% is common, meaning you’ll need a minimum deposit of 25% for your bu to let mortgage.
  • The amount you can borrow hinges on your rental income, either current or anticipated. Lenders usually require your rental income to cover at least 125% of your mortgage repayments.


How much deposit do I need for a buy to let mortgage?

To secure a mortgage for an investment property, you’ll typically require a deposit amounting to a minimum of 20-25% of the property’s value.

Similar to traditional residential mortgages, the rate you can access improves with a larger initial deposit. The most attractive buy to let offers are typically reserved for investors who can put down deposits of 40% or more.

Lenders, during their affordability assessment, take into account your existing property portfolio (more on this topic later) and your prior track record in obtaining and repaying buy to let financing.



MORE Buy To Let blogs HERE: 

Buy To Let Defaults Surge with Rising Rates

Cashing Out of Buy To Let? Top Places to Make a Quick Sale


How much deposit do I need for a buy to let mortgage?, Is buy-to-let worth it in 2023?, Reasons why 2023 might be the best time to invest in buy-to-let, Who can get a buy to let mortgage?

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