Buy-to-Let in Central London
Buy-to-Let (BTL) in Central London
With a steadily growing population and increasing demand for living space, London’s private rental sector has never been stronger. The UK capital is one of the most exciting cities in the world with an international reputation as an attractive and cosmopolitan metropolis. In terms of investment, London residential property has long established itself as a safe haven for both domestic and overseas investors in Buy-to-Let property.
Overview
Growth within the private rental sector (PRS) and better availability of BTL finance over recent years has propelled it into the national consciousness and proved a very popular investment option for many people. This has not been without some controversy, as buy-to-let landlords have been accused of pricing first time buyers out of the market by buying up stock that would ordinarily be available to them.
Although this may have little relevance in Central London on account of the high starting cost per unit and where very few first-time buyers purchase, it did prompt the UK government to introduce taxation specific to second home buyers and individual landlords by removing some of the tax advantages previously available to private landlords. This change started in April 2017.
The banking crisis of 2007 and mortgage lenders’ subsequent tightening of mortgage lending qualifying criteria (particularly to second homes and investment purchases) has reduced the ability of some to be able to enter the market, and this was tightened up still further in January 2017. Despite these measures, the prospect of a regular rental income coupled with reliable long-term capital appreciation ensured that Buy-to-Let remained a hugely significant component of the property market.
If anything, demand for rental property in London is now higher than ever, and rental prices in the capital have risen to unprecedented levels over the last year. This can partly be attributed to the reversal of what some have termed the ‘London exodus’ during the COVID-19 pandemic. The after-effects of the Chancellor’s mini-budget in September 2022 are another factor, as higher borrowing costs discouraged many first-time buyers who remained in rented accommodation. For investors into private rental property in London, 2023 should be a promising year.
Our Top Five Tips for Buy-to-Let Landlords
- Choose the right location
As with any property purchase, location is the key consideration. A Buy-to-Let investment requires a different approach compared to buying a property for your own occupation, although some of the factors will certainly overlap. Primarily, you need to consider your target tenant market and their requirements, and obvious considerations include proximity to public transport and place of work or study. Equally important is the prospect for future capital growth. Historically, Central London has been regarded as a ‘safe’ prospect for reliable capital growth, and it is possible to identify certain hotspots or areas where gentrification is planned or taking place. This is where Hudsons can provide specialist advice on recommended locations within our geographical areas of expertise.
- Find the right property
The right choice of property will principally be determined by your budget. Along with location, it is important to consider the profile of the tenant you are seeking to attract. For example, a student tenant may be less fussy on interior condition than a professional tenant. Also consider the maximum occupancy of the property. As a general rule, the greater the number of occupants, the higher the rental yield. That said, each Borough Council may have different rules on HMO’s (Houses of Multiple Occupation); Hudsons will be more than happy to guide you through this. Another very important consideration is the prospect for strong capital growth. Questions to discuss with your agent should include: Is the area on the up or in decline? Are there likely to be any future large maintenance bills that you might be liable for? Are there any restrictions to renting the property?
- Furnished or unfurnished
Whether or not to furnish the rental property is a question we are asked by most new landlords. Generally speaking, we have greater tenant demand for furnished homes as opposed to unfurnished properties. However, this preference does vary depending on the profile of tenant and tenancy type that you are offering. Tenants in unfurnished properties have a tendency to stay longer, so there are benefits to both. Longer-term tenants, especially those of two or three-year terms, normally prefer their own choice of furniture. Short-term lets will invariably require a furnished property, although this method tends to attract more ‘wear and tear’ on walls and furniture.
- Managed or unmanaged
Along with determining the length of tenancy you are prepared to offer your property for, it is also important to consider just how personally involved you want to be with the tenancy and tenants. Some landlords are quite happy to deal with the day-to-day maintenance. That said, dealing with the ever-changing legislation (there are over 100 laws to comply with) and the practical issues that arise within their tenants’ tenancy term require a significant investment of time.
For landlords that have neither the time nor inclination, or those who lack the necessary understanding of property legislation, a fully managed service is recommended, and this will normally also take care of all aspects of the landlords’ legal compliance. Here at Hudsons, our extremely experienced property management team are ready to guide you through the whole process, ensuring that your tenancy is administered under best practice principles and is fully legally compliant. Additionally, we will provide easy-to-understand statements and invoices produced for tax return purposes, and monitor and chase rent payments where necessary, with your rent paid straight into your account. With the full peace of mind of knowing that Hudsons will take the strain, it leaves you with more time to sit back and relax without worrying about your rental property.
- Be aware of your responsibilities as a landlord
Recent years have seen a steady stream of new legislation governing the private rental sector to ensure that landlords provide safe and fair accommodation to their tenants, and there is no sign of this slowing any time soon. Landlords have been given many new and more complex levels of responsibility and it is vital that you are aware of your obligations and responsibilities. The penalties for non-compliance can be severe including, in the most severe instances, prison sentences, so it is essential that you fully comply with the law.
Should you have any questions regarding any aspect of Hudsons Lettings and Management Service, or the laws relating to residential tenancies, then please do not hesitate to contact our office on 020 7323 2277.
