There is no shame in wanting to be rich. In fact, it is something that many people aspire to be. After all, who wouldn’t want to have more money than they could ever possibly spend?
Some of the wealthiest people in the UK are property owners, according to the Sunday Times Rich List. These individuals have made their money through a variety of means, including real estate inheritance, investment and development.
Many of them own multiple properties, including in London, which is one of the most expensive real estate markets in the world.
While some of these individuals are well-known, others have managed to keep a low profile despite their immense wealth.
But the questions remains, can buy-to-let make you rich?
Buy-to-let can be a great way to secure your financial future and start you on a path to becoming rich. But it’s not a guaranteed path to riches. You’ll need to do your research and invest for the long term. Whether you become rich or not, buy-to-let can help to build your wealth over time.
Many people believe that investing in real estate is a surefire way to become rich. While there are certainly many stories of people who have made a great deal of money through real estate investing, it is important to know that there are also many stories of people who have lost a great deal of money through real estate investing.
Like any investment, there is always a certain amount of risk involved.
However, if you do your research and invest wisely, buy to let can certainly be a great way to build your wealth.
‘You only need a small amount of the right knowledge to succeed.’
Andy Walker
Many of the people on the Sunday Times Rich List are property owners. Some have made their fortune in the real estate business, while others have been successful in other industries and simply parked their money in real estate to reap the rewards of capital growth.
The time it has taken house prices to see significant growth, is not hundreds of years, but only a matter of a few decades. I took a deep dive into the growth of property prices over the last 60+ years and wrote an article on Do Property Prices Double Every 10 Years? You may be surprised with the results!
Contents
What Are The Different Ways To Make Money In Buy-To-Let?
There are two main ways to make money in buy-to-let:
Rental Income
The first way to make money in buy-to-let is through rental income. This is the money you earn from renting out your property to tenants.
The amount of money you can earn from rental income will depend on a number of factors, including the location of your property, the type and condition of the property you have, and the number and type of tenants you accommodate.
If you own a property in a desirable location and charge a reasonable rent, you can expect to earn a good amount of money from rental income.
However, if your property is in a less desirable location or you are seeking to charge a higher rent compared to the rest of the local market, you may struggle to let your property to prospective tenants.
With the right property and tenants in place, buy-to-let can be a great way to earn rental income.
Capital Growth
The second way to make money in buy-to-let is through capital growth. This is the increase in the value of your property over time.
The amount of capital gain you can achieve will depend on a number of factors, including the location and condition of your property, the local and national economy, and the housing market.
If you own a property in a desirable location with high demand and the housing market is strong, you can expect to see good capital growth.
However, if your property is in a less desirable location or the housing market is weak, you may not see as much capital growth.
Capital growth is always a possibility with buy-to-let investment properties, but it is not guaranteed.
How To Get Started In Buy To Let Property
If you’re thinking of getting started in buy to let and becoming a landlord, there are a few things you need to know.
First, you’ll need to have a good credit score and enough money saved up for a deposit, unless you are in the fortunate position of being able to purchase your investment with cash.
You’ll also need to be prepared for the additional costs associated with buying a property, such as stamp duty, legal and mortgage fees.
And last, but not least, it will help if you have an understanding of the steps required to purchase and let your first property before making any decisions.
I have broken the process down into 7 steps in my ebook which you can download for free. The 7 steps are:
- Funding – Ideas to help you raise funds
- Mortgage – Position yourself to be a credible buyer
- Research – Property is all about research, research and research
- Viewings – Use the free checklist when viewing potential investments
- Calculations – Double check the numbers to make sure they work
- Making Offers – Negotiation is an art that can be learned
- Letting Agents – Essential if you do not have the time or experience to manage the property yourself
Other Potential Rewards Of Buy-To-Let Property
In addition to regular monthly income from your rental property, and the potential of capital growth, you will also be in a position to leave a legacy.
You can spend your whole life working in a career to become successful in a specific field and earn a good income, but you will not be able to hand your position down to your children.
If you have children, and they wanted to follow in your footsteps, they would have to start their career themselves. Having you as a mentor will most definitely help, but they will still need to start at the bottom of the ladder – so to speak.
Owning a property portfolio puts you in a completely different league! Every minute and penny you spend on purchasing and maintaining your properties can help both you and your successors to reap the rewards for many years to come.
Capital growth and an inheritance for my children are my top two motivating factors to invest in property.
There are many other benefits to owning a second property which I wrote about in this article here.
What Are The Risks Involved?
As with any investment, there are risks involved.
However, by doing your research and being aware of the potential pitfalls, you can make informed decisions that can mitigate the risks and help you to achieve success as a buy-to-let investor.
Here is a list of potential risks with solutions to help minimise the impact:
1. Void Periods – There may be times when your property is empty and not generating rental income. This typically happens when a tenant hands their notice to the landlord to vacate the property. Advertising your property for let as soon as the tenant gives notice, will help to keep the void periods to a minimum. Having funds set aside to cover void periods is also advisable.
2. Repairs – Rental properties often require works. Leaky plumbing and broken boilers always seem to occur when you least expect it. Of course, having funds set aside will help to cover the unexpected expenses OR paying in advance for landlord emergency cover can relieve you from both the financial and administrative aspects of repairs.
3. Tenant Default – Another risk is that of tenant default, where tenants fail to pay their rent on time or at all. This can have a significant financial impact, so again it is important to have a contingency fund available. Another option is to pay for rent guarantee insurance. There are many companies that offer this service and it is best to apply before the tenancy starts.
4. Market Crash – Yes, property prices can fall as well as rise. Providing you do not put yourself in a position where you have to sell, you can easily ride out any downturns in the housing market. When property prices have fallen in the past, the rents have remained constant. So providing you can still cover your overheads, you will not need to sell your property for less than you paid for it.
5. Interest Rates – Rising interest rates could make your buy-to-let mortgage interest payments more expensive and decrease your rental yield. To avoid uncertainty in the short to mid term and to mitigate your risk, you can fix your mortgage payments for 2 – 5 years thereby knowing the total costs of your overheads.
How To Make Buy-To-Let Work For You
For most people, investing in a property locally is a good place to start. Before buying any property, it’s advisable to have a good understanding of the local property market and identifying the types of properties that are in demand on the rental market.
Buying property near, or within, their home town or place of work, often provides some reassurance for first time landlords as they already know the area well. It can also help to provide some comfort in knowing that they can easily keep a close eye on their purchase during the first few years.
Although people shouldn’t rush in blindly when purchasing their first buy-to-let property, it’s also important to take actionable steps to get the ball rolling. Yes, there is such a thing as analysis-paralysis! Some people research and think about property investing for years and end up not doing anything about it. So don’t let that be you!
There are numerous resources available online to help give you the confidence to start, including my free 7 Steps To Purchasing A Buy-To-Let Property Investment ebook.
here are also a number of online forums that a filled with experienced property investors who are more than happy to help and answer peoples questions. My favourite forum being propertytribes.com.
Summary
It’s possible that buy-to-let property investing could make you rich. But there are no guarantees and property is definitely not a ‘get-rich-quick’ scheme.
Nevertheless, if you do your research and invest wisely for the long term, property can certainly be a great way to build your wealth.
Buy-To-Let can provide you with a regular income and the potential for capital growth. Property values tend to go up over time, so if you buy a property and hold onto it, chances are that it will be worth more in the future.
In fact, property is one of the most popular ways to become wealthy in the UK. There are many stories of people who have made a great deal of money through property investing.
Of course, while money can provide a certain level of comfort and security, it is not guaranteed to make you happy.
The bottom line … Whether you become rich or not, buy-to-let can help to build your wealth over time.
