There are many different variations on the traditional property market across the US, different price brackets and different levels of demand. One thing all of these markets have in common is a growing interest in the buy to let sector and in theory perpetual rental income. So, is buy to let the cash cow the keeps on giving or is it not as simple as that?
Location, location, location
While there are many factors to take into the consideration when looking at the buy to let market, location is the main one. The location of your property will ultimately dictate rental demand and long-term capital appreciation and rental increases. So, while in theory it may be relatively simple, buy a property, find a tenant, bank the rent and sit back, there is a lot more to it than this.
There are many areas of America which have been hit by a downturn in the local economy not to mention natural tragedies such as hurricanes. Even though the general US economy may have moved ahead since these downtimes, many of these areas have not recovered and are unlikely to do so in the short to medium term. So, while in theory it may be simple to acquire a buy to let property and watch the money roll in, there are risks as you would expect in any investment market.
Finance costs
The simple equation for a buy to let property is rental income less the cost of finance, upkeep and taxes which equates to net income. At this moment in time base rates in the US, and around the world, are relatively low therefore “cheap” finance is readily available. Taxes are an issue which can vary from state to state and obviously need to be taken into consideration. The general cost of upkeep should be fairly minimal if the house is kept in good repair so this should not be a major problem. All in all, in the current economic environment (and also the traditional economic environment) there is potential to create a surplus net income from buy to let acquisitions.
There will be opportunities to refinance properties where the equity value has increased and these funds can be put to good use investing in other buy to let properties. Once you have one successful buy to let investment it can very often lead to many more.
Competitive markets
As we touched on above, finding the right location for your property should ensure that even if your current tenants are planning to leave there should be others ready to step into their shoes. You may need to adjust your prices, you may need to be more competitive but if you pick the right location, with a vibrant economy, there should be an endless flow of potential tenants going forward. There may be instances where it is best to sell up your buy to let investment if the local economy changes and perhaps look elsewhere. However, this is nothing different to traditional investment where you need to keep an eye on your assets.
Conclusion
In theory buy to let investment is fairly simple, find a suitable property, find a tenant and bank the rental income. In practice it is not quite as simple but there is still the potential to make a significant gain in the longer term in terms of both income and capital appreciation. Many people around the world are looking towards buy to let investments as their “pension fund of the future” which if managed correctly offer steady long-term income and capital appreciation.