Is buy to let worth it in 2024? Breaking down the pros and cons

Landlords have faced a difficult few years. Since at least the 2022 mini budget, landlords and property investors have had to contend with rising costs, tightened lending criteria, and nervous high street banks.

Not to mention the bleak sentiment that’s surrounding BTL investors. The wider market is struggling with a lack of suitable supply for both buyers and renters. Unfortunately, some of the blame for this has been levied – often unfairly – on landlords.

Commentary on this often paints landlords as greedy land barons, raising rents to unreasonable levels and taking much-needed stock off the market. This is despite the fact that our Housing Minister acknowledges that landlords are “vital[1]” for the sector.

To counter these apparent issues, many legislative changes have been put forward recently to amend the market. The Renters Reform Bill[2], and recent Furnished Holiday Let[3] changes being prime examples.

With these challenges, it’s no wonder that some investors may be questioning if buy to let is worth it in 2024. Fortunately, despite everything, 2024 may actually be a turnaround year for the rental market.

We need to remember – the success of any BTL investment will depend on the underlying investor’s circumstances. Nothing can be guaranteed in property investment, and borrowers should seek out independent, professional guidance if they’re unsure of their next steps. Still, the outlook for the general BTL market looks promising.

The good

Looking at the broader picture, it’s clear to see that the economy is likely on the mend. This, at the very least, should raise confidence across the board – among lenders, landlords, and renters.

In the last few weeks alone, the UK recorded its fastest growth in nearly three years[4]. In Q1 2024, UK GDP grew by 0.6%, officially taking us out of recession. Also, inflation continues to fall, currently sitting at 3.2%[5].

This is the closest it has been to the official 2% target in some time and while the Bank of England kept the base rate unchanged at its most recent vote, Andrew Bailey revealed he is “optimistic[6]” that we’re moving in the right direction.

All this solid economic news appears to be (finally) filtering its way through to the property market, and creating a more favourable environment for investors. Buy to let mortgage rates are beginning to fall[7], while product availability is also stabilising[8].

The actual investment case for the BTL market is also especially strong at the moment. Average gross rental yields hit 6.1%[9] in the first quarter, a near six-year high. Also, if investors are strategic in the locations and asset types they target, it’s possible to generate yields of nearly 10%[10] in the current market. For comparison, 5% is generally considered to be a good rental yield, according to Zoopla[11].

Looking ahead, there are also many potential positives to factor in to an investment strategy. Some tax incentives are still there to be utilised by expanding landlords, including claiming back on maintenance expenses, a property allowance, and the Rent a Room scheme[12].

Property investors may want to look into how they could utilise these kinds of perks, considering how many purchasing opportunities may be on the horizon. Some landlords have cut their portfolios in recent months due to various challenges[13], and we may see more of this soon.

The Treasury[14] has made no secret of the fact that it wants more private landlords to exit the market. Should this come to be, expanding landlords may be able to take advantage as a wave of new stock emerges.

The bad

While optimism is returning, it doesn’t mean property investors should get complacent. The questions of is buy to let worth it in 2024 will be heavily dependant on how borrowers act. Taking one’s foot of the gas pedal, or making too many assumptions, could be disastrous.

While the economy is improving, costs are still high in the market, and many landlords are struggling to offset them[15]. Inflation is slowing down, and will hopefully continue to do so, but there is no guarantee that it will continue to move in the way we want it to.

What’s more, more costs are on their way which may catch many out. Court fees have risen by 10%[16] for landlords, with the cost of possession claims jumping to nearly £400 alone. Also, maintenance costs are on the rise. According to analysis of recent data, landlords could end up spending over £34,000 on an average of 72 maintenance and repair tasks over a nine year period[17].

And of course, there are the regulatory, or legislative changes that can’t really be anticipated, or prepared for. A general election is looming and by the looks of things, we’re likely to have a Labour government by the end of the year[18]. A new government could result in a new set of priorities, obligations, and changes for investors.

Is buy to let worth it in 2024? The options

So, is buy to let worth it in 2024? In truth, there is only one solid answer for this: it depends. There are numerous variables that need to be taken into account. Landlords will have control over some of these. Others they won’t.

They need to prepare themselves for as many possibilities as they can. This is where specialist finance can help.

Our products, both bridging and specialist BTL, are designed with flexibility in mind. They can adapt to the needs of the market on a dime.

Also, our funding can be delivered in mere days where everything lines up. This means our borrowers can jump on any opportunities they come across. At MFS, not only do we feel that buy to let is worth it in 2024, but that the market has plenty to offer in any year. Where property investors find an opportunity that fits in with their circumstances, we’ll be there to help them realise its full potential.