BTL stands for Buy To Let, it is the technique that is followed when a house is bought specifically for the purpose of being rented out.
BTL is when you will buy a property and rent it out to tenants who are looking for a property similar to yours. Furthermore, you then set a rental payment, higher than your mortgage & bills but according to the market value of the area and your property. This will allow you to make a profit on the property, turn around the buying cost and also create a passage for some passive income.
People choose this option because it is generally a more safe option than investing in stocks or cryptocurrency, whose trends can go down in the blink of an eye. It also creates physical assets, which usually appreciates in value over time. When you Buy to Let, you can either act as a landlord alone or hire an agency to handle the day to day for you.
How does BTL work?
If you purchase a property and rent it out, you’ll still be paying house taxes and other added payments, but you can redirect your rent towards those payments and save the extra. If you want to make a profit from your BTL, the payment set should be more than the maintenance bills, stamp duty, and mortgage payments if any.
You might also be required to pay for renovation if needed before you rent out the property. You’ll also pay income tax on your house. Just like any other self-employed venture, this also needs yearly maintenance, insurance, and tenant assessment.
Pros & Cons of BTL;
- Just like any other property, it’s an asset for a lifetime that can be used for different purposes. These include recreation facilities, housing, renting offices, etc.
- It creates a stable income source which can come in handy. The rent you get can be used for investing or savings.
- You can further make an exponential amount of money by selling this for a higher price in the future.
- Pay the fees for maintenance, insurance, mortgage, etc.
- Problems with bad tenants
- Have to pay income tax on the money you make
- Have to pay high stamp duty in the dweller market
- Pay capital gains tax on any increase in the property’s value, should you decide to liquidate your investment
Buy to let is a good strategy if it is done correctly and you have good tenants who will keep your house like theirs. Also keep in mind that rent has to be defined as per the market conditions.