7 Buy To Let Disadvantages You Should Know About

When you compare the initial investment to the share market, where you can get started for as little as £1, it can put some investors off property.

3. Ongoing Time Investment

Let me level with you; property investing is far from passive.

Now, as a landlord that also does his own refurbs and maintenance, I am more hands-on than the average property investor – managing my portfolio is more like running a small business than investing.

But even if you’re an “armchair investor”, you’re still going to be involved in the ongoing decisions regarding maintenance and finance as well as some admin work.

Proper systems and outsourcing the day-to-day management will cut down the time required, but not completely.

BUT… no investment is truly passive.

Passive income is actually a myth.

Even if you hold only gilts, which is as passive an investment as you can get, you’ll still review the performance of your portfolio and have to reallocate funds from time to time.

4. Void Periods

You’ll inevitably have times when your property is lying empty. Even your most stable tenants will one day move on.

And of course, when you don’t have a tenant, you don’t have an income. But that doesn’t mean your mortgage and insurance costs stop. And you’ll also have to cover the council tax and utilities during voids.

If you keep on top of maintenance, the best-case scenario would be a couple of weeks of voids every few years to allow for redecorating.

If you own property in a low rental demand area, the worst case is a lot scarier.

5. Bad Tenants

So far, I’ve only had two bad tenants – he says as he frantically touches every piece of wood in sight.

The first was a student who I was sure was subletting the property to other students. When I asked about why one of the bedrooms was filled with bunk beds, he said he had family coming over to visit. Fair enough, I’ll give anyone the benefit of the doubt.

But the neighbour’s reports, an endless stream of white lies, and that six sense you get when someone’s lying to you gave rise to my suspicions.

I never did find out if the place was being sublet. The only way of “busting” the tenant would be to wait outside the house, which is a massive waste of time, creepy, and illegal.

The second bad tenant I’ve had was a friend that stopped paying rent so that he and his girlfriend could get a “free” council house. It was six months before the tenancy tribunal granted an eviction and repayment order (which I’ve never seen a penny of), and I finally got the keys back.

I now look back on these events and laugh, but at the time they were a major pain in the arse.

And I’m lucky compared to the horror stories I’ve heard from other landlords: houses being turned into cannabis farms, tenants removing the kitchen and leaving behind a dump truck’s worth of garbage.

Rogue tenants are out there, but fortunately, they are few and far between, and the majority of renters are good folks looking for a decent home.

6. Increased Legislation

The amount of hoops property investors have to jump through is ridiculous.

While I think most of the legislation landlords must comply with is a good thing as it weeds out shady landlords, there’s seems to be an endless amount of tick boxes.

Even if you use a letting agent, you must be aware of all the legislation as the overall responsibility rests with the owner.

The latest requirement for all rental properties to achieve at least an E on the EPC (Energy Performance Certificate), is yet another to add to the list.

7. Increased Tax

Landlords are greedy, money-grabbing scrounges that rob our society of one of their most basic human needs.

I’m sure that’s the general consensus in parliament as landlords seem to be punished with constant tax reforms.

First, we had the removal of the wear and tear allowance, then came the addition of stamp duty, and most recently we’ve seen the removal of mortgage interest as a deductible expense.

There’s no denying that buy-to-let isn’t as profitable as it used to be. And I wouldn’t rule out future tax changes that will squeeze profit margins further.

Wrapping It Up

Buy-to-let isn’t for everyone. It may not suit your risk tolerance, time available, or free capital.

But that doesn’t mean you should rule out holding property in your portfolio. Investing in listed property funds will provide many of the benefits of property investing while limiting the downsides.

But if BTL still appeals, at least you now know the cons, and you can go into the investment with your eyes wide open.