The Homelet Rental Index reported that rents across the United Kingdom had hit a record high in August 2019. Average UK rent is now £970 as more people are choosing to rent a home than purchase one due to the uncertainty of Brexit.
If you have been hesitating about investing in a buy to let property then now is the time to act. Although it is unclear how long there will be uncertainty over Brexit it people are still favouring the private rental market as they see buying a new home as too much of a risk. They don’t want to enter the market at the wrong time.
Rent rises across the whole country
Average rents in London showed an increase of 3.5% at £1,689. This figure is over 74% higher than the average rent price in the United Kingdom. However taking the capital out of the equation leaves the rest of the UK with an average rent of £802 which is a 2% increase over August 2018 prices.
As far as the London Boroughs go, Westminster was at the top of the tree with an average rent price of £2,526 per month. Lambeth took second spot with an average rent of £2,150 followed by Camden in third place with an average rent of £2,137.
Strong Demand in the Private Rental Market
The Homelet report claims that with the increase in rents buy to let investors are taking advantage of the situation. Landlords find themselves in a strong position when it comes to rent prices.
There is a strong demand in the private rental market and with all time high levels of employment and continuing wage growth it really is a good time to be a landlord. This demand will continue to be strong for some time to come.
What to look out for with a Buy to Let Investment
The first decision that you need to make when you are considering an investment in the buy to let market is the type of tenant you are looking for. Do you want to rent to a family, students or young professionals? This decision will determine the kind of buy to let property you need to invest in.
Do your homework after you have made the decision. Talk to various letting agents in the location where you want to purchase a buy to let property. Find out what the average rent prices are in the area and work the numbers so you know what kind of return on your investment you can expect.
Calculate the Rental Yield
As an example let’s say that you invest in a buy to let property and you will receive £2,000 a month in rent. If your tenant stays for a full year then your gross income will be £24,000 per year. Calculate all of the other ownership and maintenance costs and deduct these from the income amount.
What is your return on investment? You need to ensure that it is high enough to cover any mortgage payments that you have on the property. A return of 5% might not be enough so aim for a higher return.
We recommend that you do not consider capital growth in any buy to let property you invest in. Treat this as a bonus. Remember that house prices can go down as well as up. Just focus on rental income and your costs and go for a rental yield that works for you.