While many fortunes have been made in the past from buy-to-let investing, it’s becoming more difficult to be a property investor. In fact, the effort required to be a landlord appears to be rising at the same time as the returns from the industry are falling. As such, many buy-to-let investors may find that they’re working hard for what are disappointing returns over the medium term.
As a result, buying shares could become increasingly appealing. With online sharedealing making the process far simpler and easier than it has ever been, now could be the right time to switch from buy-to-let investing to the stock market.
The process of buying a property is becoming more difficult. While in previous years obtaining a buy-to-let mortgage was generally straightforward, now there are increasingly demanding requirements on rental cover versus interest payments. They’re set to become increasingly challenging, since interest rates are due to rise over the coming years.
Furthermore, with many potential first-time buyers being priced out of the housing market, regulatory changes could become increasingly onerous for landlords. Recent changes have included more rights for tenants, and this process may continue as renting becomes increasingly common in major cities across the UK. Ultimately, this is likely to mean an increased workload for landlords.
At the same time, property prices are under pressure. This situation may continue during the remainder of the Brexit process, as well as following its implementation. It may mean historic levels of capital growth prove to be elusive for landlords, while rental growth may slow if the UK economy experiences a difficult period.
Clearly, buying and owning shares has always been simpler than undertaking a buy-to-let. However, the difference in workload between them, as well as their potential returns, could be widening.
Online sharedealing means that an individual can set up a standing order each month, pick their favourite stocks, and then do next-to-nothing as those stocks are regularly purchased. With tax-efficient accounts such as ISAs being available, there are no tax calculations to make for many investors. And with mobile investing apps becoming increasingly popular, it may be possible for individuals to invest with even less effort over the medium term.
In terms of the return potential from shares, the valuations of major indices such as the FTSE 100 and FTSE 250 suggest there is further growth potential ahead. Certainly, risks such as Brexit remain in place. But with a minimal amount of effort an investor can choose to focus their capital on industries and regions that may have more favourable growth potential over the long run.
Therefore, since investing in shares offers the potential for high returns with minimal effort, and buy-to-let investing seems to have an uncertain future at the same time as landlords’ workloads are increasing, now could be the right time to invest in shares rather than property.
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