Is buy-to-let the best and safest way to invest your money?

 
Is buy-to-let the best and safest way to invest your money? [Photo: iStock/BernardaSv]

In the past few years, buy-to-let has become one of the most popular ways to invest. Since around 2010, more and more investors have been putting their money into the UK's private rented sector, meaning it has moved ahead of more traditional assets such as stocks and shares, and gold. 

But is buy-to-let still the best way to invest in the current market? Here, we take a look at some of the real benefits of spending your money on rental property that show buy-to-let has managed to stay among the very best investment options around. 

Rising demand

Buying a home used to be the way to go for Brits, seen as one of the great milestones in life, but a lot has changed over the past couple of decades and the number of homeowners has been slipping. 

At one time, more than three-quarters of people who lived in the UK owned their own home. However, Eurostat data shows that this has been falling considerably for some time particularly since 2010, with a little over 60 per cent of people now living in their own property. 

This is largely due to the rise of the private rented sector, which gives young people in particular the freedom they need to be able to move around as and when their career demands it. It's meant that the number of people living in the rental market has increased by two million over the last ten years, according to the Office for National Statistics (ONS), leaving the total number of rented homes in the UK at 4.5 million. 

Given that this is a trend that has been going on for some time now, it's safe to assume that demand for rented homes is only going to continue to rise for some time, giving potential investors peace of mind in terms of its future prospects. 

Increasing rental prices

For any investor, no matter the asset they are spending on, the number one goal has to be returns. Improved returns rely on increased income, and this is something that the private rented sector has been providing investors for some time now. 

According to the ONS data released recently, over the course of the seven years since the private rented sector really started to pick up pace, rental prices have increased for investors by as much as 15 per cent. When you consider that your stock is already paid for, any increases like these are welcome, and provide a little boost to your returns. 

And it's a trend that's likely to continue for some time, with Savills, among other experts in the property market, suggesting that it's likely we see rents rising until at least 2022, with the market still centred around expansion and not likely to slow any time soon. 

Even at present, where political uncertainty is the order of the day, the rental sector is still performing well, with prices tenants pay having increased by 1.1 per cent in the space of the past 12 months. It shows that there is not only stability in rental investments, but also the likelihood of further improvements on returns in the years ahead, even while other assets might stall. 

Gear investments

Another reason property, and in particular rental property, has become such a valuable asset in recent times, is that it allows you to capitalise on rises in value in ways that other purchases would not. This is because in property, you can invest with a deposit and mortgage, which you can't do elsewhere. 

For example, the Guardian states that if someone had £100,000 to spend, rather than just investing that money directly, they could, in theory, spread their cash across three separate properties, all valued at £100,000 apiece. 

This practice, known as gearing your investments, allows you to capitalise far more effectively on price increases in the market, giving you substantial capital gains and spreading the rises across numerous assets to maximise the value gain. And even if you aren't planning to offload your rental stock any time soon, knowing that it has that value if and when the time does come to sell, is a fantastic benefit to investing in property.