Call the doctor: why you shouldn't invest in buy-to-let properties without advice from the specialists

Would-be landlords should get financial, tax — and medical — advice before they invest in a buy-to-let home. 
£588 a week: a three-bedroom house in Parkland Gardens, SW19, is available to rent. Through Ludlow Thompson (020 8012 5190)
Victoria Whitlock24 September 2018

You might be wondering how I became an "accidental landlord". Well, you will find the full and frank explanation in a podcast I made recently with The LM Experience on podbean.com — and if you make it all the way through to the end, I apologise for the awful singing.

However, these days, I am not sure that I would encourage anyone else to do what I did. I'm not even sure if it is possible any longer.

Until a couple of years ago, I used to encourage friends to invest in buy-to-let flats, telling them that if I could do it, anyone could. After all, I was completely green when I started.

I had no experience of the rental market in London and, what's more, I had absolutely no savings, not even a pound in a deposit account.

I just had a lot of luck. I was presented with an opportunity to buy a run-down property, I increased the mortgage on our family home to raise a deposit, then found a good mortgage broker who secured me a loan for the rest of the money.

As it happens, everything turned out more than okay, which is why I have encouraged others to follow in my footsteps over the years. But now when friends ask me if it is a good idea to buy a rental property, I tell them to proceed with caution, if at all, because I think the glory days are over. So why am I so pessimistic? For a start, property prices in London are so much higher now that it is difficult for new landlords to make enough rent to satisfy mortgage lenders. Also, the extra three per cent stamp duty that has applied to all second-home purchases since April 2016 has significantly increased landlords' start-up costs, especially in London and the South-East where property prices are highest. And now that the Government has replaced tax relief on buy-to-let mortgage interest payments with a less-generous tax credit for private landlords, it's even harder to make money. So, these days, I would advise anyone thinking of becoming a landlord to see three specialists before even setting foot inside the estate agent's.

First, speak to a good financial adviser to find out whether property is the best investment for you, or if there are better places to sink your cash, such as a pension or shares. Property might have the potential to make you more money, but it's not a hands-off investment, it is hard work and the risks are considerable. If the Government goes ahead with its proposal to introduce minimum three-year tenancies — which admittedly now seems unlikely — letting property will be even riskier.

Secondly, speak to a tax adviser to work out whether it's better to buy a property as an individual or if you should set up a company to make the acquisition. How you invest will affect how much tax you pay, so don't just do what your friends have done or what you have read others are doing. Everyone's circumstances are different, so it is important to get some advice from someone who actually knows what they are talking about. Finally, I recommend a trip to the doctor for a medical check-up to make sure your nerves will stand it.

Only with the benefit of all this expertise will you know whether buy-to-let is right for you.

Victoria Whitlock lets four properties in south London. To contact Victoria with your ideas and views, tweet @vicwhitlock

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