Buy to let: Pros and cons

Buying to let is when somebody purchases a property with no intention of living in it, but instead plans rent it out to tenants who pay the owner rent. Over the past decade, this has become an increasingly popular investment due to its advantages over alternatives, but it does come with some serious drawbacks.

Advantages

Paying off mortgage
The most obvious advantage of buying to let is the tenants rent can be used to pay off the mortgage alongside any other regular income the owner might have. Once the mortgage is paid off the rent generated by the property is entirely profit. Demand for rented property
Demand for rented property is also relatively stable, especially if you buy the property in the right area, for example near a university or college. Owning a property has its own advantages as it improves credit rating, so long as the mortgage payments are kept up with, and the house can be offered as collateral if the owner wishes to get a loan or mortgage for another property.
Property sale
The property itself can also be sold on if the owner so wishes to generate income. In these circumstances buy to let should be seen as a long term, rather than short term, investment. Selling on the property should also be a key consideration when buying the house in the first place. If the area is deprived and is set to receive investment then the property’s price can go up, but it is important to remember it can also go the other way.

Disadvantages

Upkeep expenses
'If you are letting a property you are legally responsible as a private landlord for the upkeep of the property. This can lead to a lot of expenses and hassle in dealing with tenant complaints and maintenance. Income shortage
Many landlords also rely on the rent payments to pay for the mortgage, but if the property is inhabited by problematic tenants, the rent may not be paid in regularly at the end of the month leading to shortfalls in income.
Varying interest rates
It is also important to remember the responsibility the buyer is taking on by buying a property. If no tenants are found or there are problems with the rent, the property still has to be paid for. Interest rates on mortgages can also change rapidly. This can be both an advantage and disadvantage.
The facts
Between 2007 and 2011 interest rates have fallen and stayed low, which is a good thing if the property is bought on a tracker mortgage. Unfortunately rates can also become too high and the property purchased may all of a sudden become a lot more expensive than originally planned price.