The three ‘whys’ of buy-to-let: income, capital gain, and lifestyle
When you invest in property as a buy-to-let landlord, there are three ways that you can profit. Yes, that’s right: three. These are:
- Rental income and cash flow
- Capital gain
- Lifestyle
In this article, you’ll learn how you profit from each of these elements of buy-to-let investment.
Rental income and cash flow
For most buy-to-let landlords, this is the main reason for investing. The higher rental income your property commands, the better your cash flow should be. The better your cash flow, the more money your investment puts in your pocket.
Of course, what you are probably most concerned with is net cash flow. This is what you’re left with after all costs have been deducted.
For many investors, at the beginning of the journey this may be negative; in other words, you must subsidise the monthly costs of your investment from your own pocket or other means. Over time, as you increase the rent, this negative cash flow turns positive. Your mortgage payments remain the same (subject to interest rates), and you begin to benefit from valuable extra cash in your pocket.
Building a portfolio of buy-to-let properties has proved to be an effective retirement investment strategy for many, with income building each year and inflation-proofed through their retired years.
Capital gain
Capital gain is paper profit until you sell your buy-to-let property. Only then do you get to put it in your pocket. But that doesn’t mean you can’t use it.
As the value of your properties rises, you can access this increase by remortgaging and building investment property wealth, using the equity build-up to fund further buy-to-let investments. Every additional property you purchase has the potential to increase your cash flow.
When your mortgage term expires, one option you may consider is to sell your property, paying off the capital outstanding, and banking the capital gain (after capital gains tax has been paid). With the average price of UK property doubling every 8 to 10 years historically, your investment properties could be worth hundreds of thousands to you when you retire.
The thing is, whether you are investing for income or capital gain (or both), buy-to-let investment has the potential to pay for the lifestyle you desire.
The lifestyle reason to invest in buy-to-let property
This is the third way to profit from buy-to-let investment. It’s probably the underlying reason why investors buy property. That extra cash flow and/or capital gain can transform the way you live. It can mean you get to work shorter hours, retire earlier, and take those holidays you’ve been promising yourself.
Of course, you need time to take advantage of the financial benefits of buy-to-let property investment. And this is where many property investors fail to reap the lifestyle benefits that property promises. The more properties you buy and manage yourself, the less time you’ll have to enjoy your extra income.
Profit in all three ways from buy-to-let property investment. Benefit from rental income. Build capital gain. And set your lifestyle free. Contact the Ezytrac team on +44 01522 503 717 and discover how.
Live with passion,
Brett Alegre-Wood