The Motley Fool

Buy-to-let is becoming increasingly risky! I’d rather buy this FTSE 250 property stock

Image source: Getty Images.

Regular readers at The Motley Fool will know that we’re not big fans of buy-to-let. It’s difficult to argue that buying up rental properties hasn’t proved an exceptional investment option in past decades because of stratospheric home price values and the subsequent boom in rental yields.

However, our bullish opinion of the sector has turned over in the past couple of years. Government has increasingly sought to punish landlords with higher costs and more regulation, efforts concocted to soothe the country’s homes crisis by reducing the number of properties being bought for buy-to-let purposes.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Labour pains

And the risks to participants in the rental market has risen a notch or two this week as the unrelenting Brexit problem weakened the Tory government again and raised the prospect of an imminent early election. Bookmakers have slashed the odds on a 2019 ballot box battle further and Ladbrokes for one is offering 6/4 on such an eventuality.

Why does this present further cause for landlords to worry? Well, it raises the possibility of Labour grabbing the keys to Downing Street and imposing even more painful legislation for the sector. Just last week, the party announced it would introduce indefinite tenancies should it win an election and sits alongside other potentially-crushing policies like rent caps and tighter standards for rental properties.

A better bet

I certainly wouldn’t get involved in buy-to-let in the current climate. Indeed, I’ve decided to use my extra capital to invest in the stock market instead, and I reckon you’d be better off following suit.

If you’re looking to get exposure to the property market, a better way to do so would be to buy shares in Unite Group (LSE: UTG).

The student accommodation provider saw pre-tax profit jump 7% in 2018 to £245.8m and there’s plenty of reasons to expect the bottom line to keep on swelling. Participation rates for the UK’s best universities remains strong, and Unite in particular is well placed to benefit from this — around nine-tenths of the company’s properties are located around the UK’s high- and mid-ranked universities. It’s also intending to focus all future expansion efforts on these popular institutions.

Unite is also benefitting from the country’s housing shortage, as the growing exodus of buy-to-let landlords amid a backcloth of increasing costs and regulatory loopholes boosts the company’s outlook still further.

Dividend darling

An important addendum for income hunters is that Unite Group is a particularly great stock for those looking for great dividend growth. Last year, the business hiked the full-year payout to 29p per share. With earnings expected to keep ripping higher — brokers are forecasting earnings rises of 12% and 9% in 2019 and 2020, respectively — dividends of 32.2p and 35.1p are projected for these years.

Consequently, the accommodation play sports chubby yields of 3.6% and 3.9% for this year and next. For those seeking big returns in the years ahead I reckon investing in this property stock is a much better place to deploy your investment cash than the buy-to-let sector.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.