Buy-to-let appears to have become a popular property investment vehicle, is it really a ‘golden egg’ of some certainty?

“Real Estate has always been the most reliable of dinner topics, no matter where in the world you are based. The UK is still the most established market that allows buy-to-let (BTL) investors, and in particular the overseas investor, to take advantage of some fairly benign tax rules set by the UK Inland Revenue. Investing in BTL properties is not a sure fire recipe for immediate financial success, but observing some simple ground rules will make sure that you don’t get your fingers burnt.”

There are many expatriates who seem to feel that not all BTL streets are paved with precious metal, doesn’t this tend to indicate a lack of results?

“Firstly, I have met many clients overseas who feel that they have failed with BTL. Many people’s first instance of experiencing BTL has been stumbling into the market with their own property whilst moving overseas. In many situations, failure is because the property was bought as an owner occupied property rather than as BTL. After that, it can also become very personal, when either the property does not rent out quickly or when tenants do not take the same love and care as the owners did during the occupation. If it does not work at the start, many overseas based clients are put off from BTL terminally.”

Are you saying that application of a BTL methodology to your existing owner/occupier estate is not the best approach?

“It doesn’t have to be that way. You can’t get personal with BTL. To be proactive when considering investing in BTL, a potential buyer has to take a small step into the commercial world with their mindset when becoming a landlord.”

Alan Wheatley, has actually put his money where his mouth as he does own a number of BTL properties in the London area, which is reassuring as a practical response to the more sceptical elements of society and his view is positive on the validity of property as an investment component.

“Certainly, property is valuable as an alternative to investing in shares via a pension, or something to supplement your retirement planning”.

Referring to the benign UK tax rules, Alan continues, “Despite the collapse of SIPPS (Self Invested Personal Pensions) that would have allowed residential bricks and mortar to contribute to your pension, there are still numerous allowances that should hearten the BTL landlord.

The major benefit is the ability to offset the interest element against the mortgage. When set up efficiently, this should mean that the landlord will be able to offset this against income tax. There are also Capital Gains tax benefits to overseas landlords as well as a host of other tax deductible expenses, such as reductions for wear and tear on contacts and furnishings, direct expenses such as management fees and even the costs of your own time can find their way onto the balance sheet. All in all, the UK still provides an excellent location for a tax efficient property investment.”

Alan also believes that now is a good time to borrow money to invest in BTL. “There are plenty of good mortgage offers around this year. The market has been slow to develop over the years, but it is noticeable that lenders are coming up with good rates and more flexible lending criteria. The overseas BTL investor used to have to pay a premium for a mortgage with a loaded rate of about 2 per cent higher than a UK home owner buyer, but now the rates are the same as ordinary residential mortgages and lenders are competing for the business”.

So, exactly how do you find the perfect opening transaction for your property portfolio?

“Since the mid 1990’s, there has been a roller coaster of buying to let and there is currently a shortage of tenants. It is not surprising with low interest rates that it appears everyone wants to buy, or is interested in buying. As a general rule, I would want to buy in an area where there will be a sustained demand for both sales and rentals. I would aim at the major cities, starting with London but also including other major cities such as Manchester, Edinburgh or Leeds, where a stream of new apartments are coming off the drawing boards with stylish trimmings such as designer kitchens and state-of –the-art bathrooms that are ideal for the hardworking, child free, late twenties/early thirties tenants.

Hotel style apartments that are within close proximity to the town centres, either walking distance to work or as a result of efficient travel links, river views that add to the value and also close proximity to good bars and restaurants have proved to be new and desirable features, driving the expansion of a successful BTL property market”.

Clearly, this is a topic that warrants further debate, and sure as bricks are bricks and mortar is mortar, the topic will arise during the course of many dinner parties in the future. What is undeniable though, is the fact that the UK is still one of the most attractive locations to buy residential property in the world.