The feeling that buy to let has become a lot harder in recent years has prompted some to consider whether they should exit the buy to let market. Here we’ll look at the pros and cons of getting out – and staying in – and consider what you need to think about before making a decision.

Why should you consider exiting buy to let?

Financial reasons. Changes to income tax, specifically Section 24 withdrawing mortgage interest tax relief, may mean it is not as financially rewarding as in the past for some investors.

Impact of more rules and regulations. More rules and regulations – with minimum energy efficiency standards and electrical safety checks being some of the latest – mean that being a landlord involves more work, and more possible problems, than it used to.

Impact of Covid. Covid has had a major impact in the property market and could potentially change the rental market for good. In future, it’s possible there might not be so many tenants for some kinds of property, and there may be more tenants who struggle to pay the rent. It’s not unlikely that some aspects of the evictions ban brought in as a result of Covid could become more permanent and create an additional problem for some landlords.

Good reasons to stay in buy to let

Strong demand.There’s still good demand for rented accommodation in most places. Millions of people still need or want to rent a home. If more landlords exit the rental market there will be even more need for the properties that are still available.

This report suggests rental demand is strong and increasing right now, particularly outside of London.

Property values are still rising. While many experts suggest house prices could be static or even fall slightly this year many still expect them to keep rising in the medium term. So the chances of making a good capital gain from your investment are still pretty good.

Savills believe that property values could rise by an average of 20.4% across the UK over five years. They believe that rents could rise 13.6% over the same period too.

What alternatives are there? It’s hard to think of many ways of investing for the future that still offer the benefits that property does. If exiting buy to let leaves you with a cash lump sum what could you do with it that stands to make you a better return?

Steps you should take before deciding on a buy to let exit

If you’re considering exiting buy to let here are some things to consider before deciding:

Consider what you can do to improve your rental returns. Investigate whether changing your property to a different type of buy to let might work better. Holiday lets for example can be more financially attractive in some cases. If your property is currently vacant, talk to letting agents about you can get it relet, and how you can maximise the rental income.

Consider if you could make the numbers work better by remortgaging, or perhaps operating your property portfolio through a limited company – limited companies can still claim mortgage interest tax relief.

Check your tenancy agreements. If your property is let on an assured shorthold tenancy your tenant has a right to stay in their home until the agreement ends. Even then, it might not be so easy to get them to leave .... and of course you may not want to.

Take advice from an estate agent. Ideally several estate agents. Ask them, if you decide to sell, how easy/difficult it will be to sell your property or properties, and what they are likely to be worth.

Take financial advice. Selling a buy to let property could result in a big Capital Gains Tax bill, partly thanks to rising property prices over the last decade. Take advice from a financial adviser if you need to. They can also advise you on tax efficiency, whether investing through a limited company could save you tax or remortgaging for example.

If you have mortgages, check if there is a fee for redeeming them early. Also get quotes for what the other costs of selling will be, eg. estate agent’s fees and conveyancing fees.

At the end of the day, there is no simple answer as to whether you should stay in buy to let or exit it. It all depends on your property, your location and your personal circumstances.

For example, highly geared investors in the higher or additional tax bands may take a more pessimistic view than basic rate taxpayers with just a single property, or those who own their property outright. Investors with property in city locations where demand has been affected by working from home may take a different view – compared to those letting family property in suburban locations whose future prospects may actually be quite good.

The best course of advice, rather than relying on gut instinct, is to do the numbers. Compare the costs/benefits of keeping your buy to let and the costs/benefits of selling it. The situation may be better (or worse!) than you think. Weigh up all the pros and cons before deciding whether to stay in property investment .... or to head for the door.

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