Buying a property to rent was seen as the preserve of professional landlords and persons who were sufficiently wealthy to pay cash or having sizable deposits enabling them to obtain commercial-style mortgages.
Buy-to-let mortgage balances outstanding recently grew to more than £200 billion – equivalent to the gross domestic product of Hong Kong.
In the best outcome for the landlord they will have benefited from the use of the lending banks money indicating that they have allocated the capital more efficiently than professional investors could have done.
If the landlord cannot meet the conditions of their mortgage repayments then the bank will seek to take possession of the property and sell it to gain the loaned money.
[4] On average, gross buy-to-let yields (the annual return on investment before the deduction of running costs) stood at 5.1% as of December 2014.
Gross rental yields on residential property have trended down globally for several years, and have generally continued to fall since the housing crisis.
In the late 1990s and during the early part of the 21st century, this type of investment became popular and helped drive house prices dramatically upwards.
[7] Buy-to-let has experienced much poor press over the past few years, with many commentators believing that it has contributed to rampant house price inflation.
[11]) The government has also taken steps to improve tax collection from BTL landlords over recent years, measures include: The Prudential Regulation Authority regulates a large number, but not all, buy-to-let lenders Phase I In September 2016, the PRA announced a deadline of January 1, 2017, for lenders to put in place recommended new minimum underwriting standards for buy-to-let applications.
Lending to portfolio landlords is inherently more complex given the quantum of debt in aggregate, the cash flows and costs arising from multiple tenancies and potential risks of property and/or geographical concentrations.” With the PRA changes, lenders now had to look in much more depth at the borrower’s finances.
Portfolio landlords must now submit significantly more information about their existing properties, rental income and business plans than were required prior to this change.
In the UK, particularly in London, there is a phenomenon known as 'buy-to-leave' where investors buy properties and leave them empty in order to benefit from rising house prices without the hassle of having to deal with tenants.
[14] Nationally 'buy-to-leave' accounts for a small percentage of vacant properties according to the charity Empty Homes,[15] but Kensington and Chelsea council estimated in 2015 that as many as one in four houses in certain parts of their neighbourhood are affected, driving up prices while restricting the number of households that actually live there.