Buy to Live or Buy to Let: which is the savviest choice?

by Housesimple on 1st November 2017

When is a home not a home? When it's an investment in your future, of course. If your ultimate goal is to make money from your property, you'll need to think carefully before signing on the dotted line of your mortgage agreement. In particular, it's worth weighing up the pros and cons of renting out or staying put.

Return on investment

The first thing to think about is how much money you're likely to earn, and how quickly. If you buy to live, you'll need to wait until you're ready to sell before seeing a penny, unless you take out an equity loan (which means more debt). If you become a landlord, you'll need to invest some money in getting the property rental-ready. Once you find a tenant, you'll be earning on a monthly basis.

Rental prices are booming

The average cost of renting has risen by 2.1% in London since 2016, and by 2.2% across the rest of the UK. There's been no increase in the number of potential tenants hunting for homes, but the number of private properties available has dropped. There are around 18% fewer across Britain, and up to 48% fewer in places like Barking and Dagenham.

New taxes are putting landlords off

Only 10% of homes sold in July were purchased by landlords, and this drop in buy-to-let investments has pushed up rental prices. One reason behind it may be the recent changes to the way landlords are taxed. There's a new stamp duty land tax (SDLT) surcharge for those buying second (or multiple) properties. 

Housing market is currently on an upward trajectory

If you want a good return on investment from a property that you live in, you'll need the price to increase significantly from when you bought it. At the moment the British housing market is relatively healthy – in August 2017, property prices were 5% higher than the year before.

Yet there's a risk of a property bubble

However, confidence in the UK housing market is also currently at a five-year low, with concerns that another housing bubble is on the horizon. As inflation increases and wage growth slows, house prices are likely to start coming down soon. If they do, buying at the right time could present an opportunity to secure a more profitable long-term investment.

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