It’s fair to say that private landlords have never had it so tough. From soaring interest rates greatly pushing up the cost of mortgages to the scrapping of lettings relief and the introduction of ever-tighter regulations on the private rented sector, most agree that traditional buy-to-let is nowhere near as lucrative as it once was.
Thankfully, there are still plenty of ways to make money from property. One such buy-to-let alternative is Avora Capital, our smart investment model that can generate regular rental returns from carefully selected sectors without many of the associated hassles and rising costs of being a private landlord.
Read on to learn more about this and why we believe it offers a credible buy-to-let alternative in these uncertain times.
Is the Golden Age of Buy-to-Let Finally Over?
Buy-to-let has long been the most popular way to invest in property in the UK, with a mixture of rising property prices, historic low interest rates and high demand making it an attractive investment proposition over the last few decades.
But the situation in 2022 is very different to what it was just a few years ago. While the number of private landlords has increased massively over the last 20 years, peaking at more than 3 million at one point, it was reported that this has fallen to around 2.66 million - the lowest number in 7 years.
What’s driving the shift away from buy-to-let? Considering everything landlords have had to contend with, it is perhaps little surprise that many have had enough and decided to quit the market altogether.
One crucial factor is that landlords have faced much higher tax bills as a result of the cut in mortgage interest relief. Following the change in April 2020, landlords can no longer deduct mortgage expenses from their rental income and instead receive a much less generous tax credit based on 20% of the interest payments on the mortgage, forcing many into a higher rate tax bracket.
In addition, landlords have faced increasingly tighter regulations that are increasing costs and administrative burden, including the requirement for gas safety certificates and Energy Performance Certificates (EPC). With the publishing of the Government’s recent white paper on rental reforms and the associated legislation expected to be introduced in due course, it’s a situation that’s only likely to get worse.
As if all that wasn’t enough, we’ve also seen interest rates start to rise over the last months as the Bank of England seeks to curb soaring inflation which has already reached a 40 year high. This is massively increasing the monthly repayments on many typical buy-to-let mortgages, significantly reducing any profits being made - and in some cases wiping them out entirely.
What’s the Solution?
While many would argue that traditional buy-to-let is no longer the opportunity it once was, there are still many viable ways to make money from property. What’s more, many of them offer a credible, hands-free alternative to being a private landlord while delivering regular returns without the associated hassles that often go hand-in-hand with BTL.
One such solution is to purchase shares in a property portfolio like Avora Capital. The way it works is simple: investors become a member of a larger consortium, with the money invested then used to purchase a diverse portfolio of income-producing assets.
Hands-Free Investment
For investors, there are many advantages to this over buying or mortgaging a property to rent to individual tenants. For one thing, it is a hands-free investment option, with no worries over day-to-day management of the properties, ongoing maintenance and repairs, or constantly changing landlord legislation. All this is looked after within the contract.
What’s more, investors in Avora Capital do not have to chase rent payments, worry about rent arrears or pay any estate agents fees. Instead, returns are simply paid to investors on a quarterly basis.
In these times of rising interest rates, many investors also appreciate that a property portfolio offers a way to invest in property without needing to purchase a property or take out a mortgage. With rising interest rates severely reducing landlord profits, it’s one less thing to worry about.
Lucrative Asset Portfolio
For seasoned investors, a key attraction of property portfolios is that it allows you to invest in a diverse range of well-performing assets acquired with rigorous research to help ensure they deliver solid results over the long-term. Many of these sectors may also be inaccessible to individual private landlords, opening up lucrative new opportunities.
One sector that we believe will deliver consistently high rental returns and long-term asset growth is social housing.
In short, the UK has a severe shortage of social housing, which means councils and housing associations are looking for new solutions to what has become a chronic problem, with waiting lists reaching record levels in many areas.
Through a little known Government-backed initiative, social housing providers are currently acquiring large numbers of residential properties from investors on 25 or 30 year leases, helping meet the huge demand for social housing by increasing housing stock without the capital outlay that would be needed to build new housing.
Social housing forms a key part of Avora Capital’s asset portfolio, offering the chance for investors to benefit from a lucrative turnkey investment while helping solve the social housing problem.
For more information on this opportunity, please get in touch and we will be happy to talk you through it in more detail.
Important note: The information provided in this article is general in nature and does not constitute personal financial advice. If you are unsure whether an investment is right for you, please seek professional advice. If you choose to invest, the value of your investment can both rise and fall so you may get back less than you put in.