Is Buying-To-Let Worth It in Nottingham in 2023?

That’s a straightforward yes! When done correctly, buy-to-let in Nottingham can produce fantastic profits in 2022, but you must first recognize that this won’t always happen soon or easily.

Compared to other financial ventures, buy-to-let often requires more time to realise good returns because to greater investment costs. It may take some time to sell in order to receive your investment back, particularly if the market isn’t doing well. Additionally, if you don’t do enough research into the local supply and demand before making your investment, you can end up purchasing a property that offers you nothing in the way of rental income or capital appreciation.

Why Should You Invest in Nottingham?

If you were to look at Nottingham today, you would hardly know that it formerly had an industrial background and was a global leader in (legal) pharmaceuticals, bicycles, and lace-making, among other things. Today, the city’s new Creative Quarter has reportedly already generated 1,000 new jobs, and its primary businesses today include future-focused ones like finance and business services, logistics, advanced manufacturing, clean technology and medical sciences. 
Nottingham is a city on the rise, boasting a great quality of life for its citizens, being easily accessible from much of the UK, and going through significant economic expansion and regeneration.

Nottingham is an excellent place to invest in real estate right now due to its tremendous potential for capital growth, alluring rental rates, steady student and young professional populations, and comparatively reasonable housing costs. Here are several elements that make buying-to-let in Nottingham worthwhile.

Real Estate Values

Only Liverpool, Sheffield, and Newcastle are more affordable cities in England than Nottingham. The area’s current average price of £233,535 shows an increase of 42.5% over the previous ten years.

Rushcliffe, Gedling, Broxtowe, and Erewash are just a few of the local government boroughs that make up the city of Nottingham. You may find out which council a property is in by entering the postcode at www.gov.uk/council-tax-bands if you are unsure.

By the way, there is a selective licensing program for landlords on all rental property in a large portion of the City of Nottingham. Therefore, it would be wise to learn more about this before beginning your search for Nottingham buy-to-lets. See All Our Services

Nottingham Has a Thriving Startup Scene.

Nottingham, a city at the heart of invention and imagination, has a thriving creative economy. A solid business support network, access to a talent pipeline, and low commercial rents, in addition to fashion design, film, gaming, and TV production, make it a magnet for startups and scaleups.

The city’s Creative Quarter, which combines coworking spaces, company ecosystems, retail, restaurant, and housing spaces in an innovative and forward-thinking core, is the heart of its digital and creative economy.

Opportunities for cooperation, talent, and the tools to easily establish firms, as well as affordability, are just a few of the reasons for Nottingham’s growing popularity among young professionals.

Now that we’ve discussed Nottingham’s potential market, it’s easy to conclude that student housing and buy-to-let houses are the greatest places to invest.

Amenities

With a population of 329,200, Nottingham is frequently referred to as a place that is both large enough to enjoy a metropolitan lifestyle and small enough to yet feel intimate and human.

The largest centre for shopping, entertainment, culture, and sports in the East Midlands is Nottingham, which is also considered to be its capital. Due to the Robin Hood legend and other modern attractions, such as the Trent Bridge ground of the Nottinghamshire County Cricket Club, which is renowned across the cricketing world, the city also enjoys a developing tourism industry, with 267,000 visitors annually.

It’s also important to mention the NET tram system in Nottingham. With plans for future extension, lines currently connect Nottingham City Centre to Hucknall and Phoenix Park in the north, Wilford and Clifton in the south, and Toton Lane via the university.

Tenants are very drawn to buy-to-lets close to tram stops, and some reports claim that Nottingham real estate prices are also increased by tram lines.

Nottingham Investment Areas

Here, we’ll examine a couple of Nottingham’s most sought-after neighbourhoods, along with costs and potential rental yields.

Area for students

Population: 44,400
Average home cost: £194,000
In Nottingham, there are as many separate student housing neighbourhoods as there are campuses there. However, Lenton and Dunkirk are typically the places that University of Nottingham students prefer to live. The Arboretum neighbourhood and Nottingham City Centre are typically the most well-liked destinations for Nottingham Trent University students.

Also, Students are drawn to Radford because it is less expensive.

Lenton, which is well-known for its student housing, has an average price of £220,705, followed by Dunkirk and Radford at £184,938 and £175,825 respectively. Based on the NG7 postcode, these are the areas where Totally Money predicts an 8.89% yield.

City living

Population: 8,000 people
Average home cost: £169,716.

In contrast to certain cities Nottingham doesn’t have a sizable city living market, but more people are learning the advantages of living near their places of employment and the city’s facilities. There are townhouses, historic conversions, and newly constructed apartment buildings available. The city end of Derby Road, Hockley in the Creative Quarter, particularly the Lace Market area, and The Park are all well-liked locations.
A yield of 5 to 6% might be anticipated for an apartment in the city centre.

Inner city

45,700 people live in the inner city
Average home cost: £120,000.

The cheapest housing is located in Nottingham’s inner-city suburbs. These localities include Hyson Green, St. Ann’s, The Meadows, and Sneinton, with Radford and Lenton excluded. It’s important to note that despite the fact that these neighbourhoods are popular with investors looking for inexpensive buy-to-lets, they frequently receive negative headlines due to their social difficulties.
From approximately £116,000 in Sneinton to approximately £124,000 in St. Ann’s, the average price ranges (NG1 postcode).

Totally Money claims an 11.99 percent yield is attainable is NG1.

Beeston

Population: 53,148
Average home cost: £342,710
One of Nottingham’s most populated and upscale neighbourhoods is Beeston. It offers excellent accessibility and is close to Nottingham University, QMC, Nottingham Science Park, and the Boots Company campus. The M1 is nearby, there are tram connections across the city, and there are four main line trains an hour that take just 10 minutes to reach Nottingham City Centre. As such, Beeston is not in the City of Nottingham but rather the Broxtowe Borough.

The affordable housing and high demand in this neighbourhood are reflected in the pricing of homes. Beeston’s average price is £259,072, and yields are 4% (based on NG9). For Nottingham buy-to-lets, nearby Stapleford (£208,569) and Chilwell (£221,577) are less expensive but still well-liked.

West Bridgford

Population: 47,670
Average home cost: £338,592
In the Rushcliffe Borough, West Bridgford is located directly over the River Trent from Nottingham’s downtown. It’s an upscale area, frequently referred to as the Chelsea of Nottingham, and is well-liked by more affluent city centre commuters, particularly families.

West Bridgford and the Rushcliffe Borough are among the most expensive locations in Nottingham, as you might anticipate. This suggests that 3%t tight yields are typical.

Long Eaton

Population: 39,348
Average home cost: £231,563
Although nominally in the Erewash Borough or Derbyshire, Long Eaton is close to Nottingham. Families, people who work in Derby or Nottingham, people who want easy access to the M1, those who work at East Midlands Airport, and people who work in the surrounding logistics parks all like it.

Property prices in Long Eaton are reasonable. Prices average £164,437 for the entire Erewash Borough, while yields (based on NG10) are 4-5%.

North East Nottingham

Population: 48,500
Average home cost: £185,896.
Carlton, Arnold, Sherwood, Mapperley, and the nearby Mapperley Park are suburbs to the northeast of the city. They are all well-known family neighbourhoods with mid-range or higher property values. The Gedling Borough, not the City of Nottingham, is where a portion of northeast Nottingham is located.

4-5% is the anticipated yield in this case (NG3, NG4 and NG5).

North West Nottingham

Population: 68,000
Average home cost: £162,500.
Northwest Nottingham is made up primarily of suburban neighbourhoods with many big housing estates. There are a variety of privately held, former local government, and local government/social housing properties included in that. Buy-to-let investors can find nice deals here, but you’ll need to research the rental market and potential rentals in the specific places you’re considering.

In a less expensive neighbourhood like Bulwell, the average price is roughly £131,000, while in a more expensive one like Bilborough, it is £194,000.

Expect yields in the 3-5% range (based on NG6 and NG8).

In what ways has buy-to-let changed?

Admittedly, the current slowdown in the growth of real estate prices has increased the risk associated with buying to let. Additionally, by altering the tax code recently, the government has tightened its grip on the buy-to-let industry. First, stamp duty on additional properties, such as second houses and buy-to-let properties, was increased by 3% in 2016.

Second, the government has stopped providing mortgage interest reduction as of 2017. Prior to paying taxes, landlords may write off the interest they paid on their mortgage under the prior system. Higher-rate taxpayers received a 40 percent tax break on their mortgage payments as a result. Landlords are now eligible for a flat-rate tax credit equal to 20% of their mortgage interest.

Most landlords who were already basic-rate taxpayers won’t be negatively impacted by this, but it will mostly affect those who are higher or top-rate taxpayers. The requirement for landlords to report the money used to pay their mortgage on their tax return is a drawback (under the old system, they could declare rental income after deducting mortgage repayments).

This apparent increase in income may cause some people to move from the basic rate to the higher rate, increasing their tax burden.

 

Pros and cons of buy-to-let

This response covers more ground than just taxation. It largely relies on the kind of investment you’re searching for and the reason behind your investment activities (i.e., why do you need the money?). Here are some advantages and disadvantages of investing in buy-to-let properties.

The benefits of buy-to-let

  • Rent will bring in money for you (though possibly less than in previous years). Rental yield can reach as high as 8% in Nottingham.
  • Additionally, you could experience capital growth as the value of your property increases and your money grows.
  • You can purchase insurance to protect yourself from loss of rental income, damage, and legal expenses.

Negative aspects of buy-to-let

  • Your tax burden will increase from what it was previously, decreasing your profits.
  • If the property is vacant and you don’t have the appropriate insurance, you might not be able to make money.
  • Your capital will decrease if real estate prices decline. If the property sells for less than you paid for it, you’ll also be responsible for making up the difference if you have an interest-only mortgage.
  • You must account for the costs of insurance, wear and tear, and stamp tax.

Many retirees opt for buy-to-let as their source of income, frequently paying thousands of pounds out of their pension fund to do so. It is crucial to first see a financial advisor if you are considering this option. There may be severe repercussions and even tax fines if you touch your pension fund.

How can I begin with buy-to-let investing?

The standard path to become a landlord entails the following five steps:

  • Get your finances in order as a first step. Speaking with a financial advisor now will help you determine how much money to invest and what kind of returns to pursue. To acquire the greatest deal, consult a mortgage broker as well so that you’ll be prepared to submit offers when the suitable property is discovered.
  • Find your property and get your offer approved. If the property is already rented out, this might be quicker than buying a house, although it might not be. Give the procedure a few months at least
  • Step 3 is to purchase insurance. You’ll want to insure against unforeseen costs like tenant injuries, property damage, and lost rent in addition to your properties
  • Find tenants. You have two options for finding tenants: privately or through an agency. Depending on how involved you wish to be, you should choose the best course. But keep in mind, even if you hand-pick your own renters and are familiar with them, you should still create a binding contract. Much less has led to the end of friendships than a flat!
  • Step 5. When your present agreement ends, you’ll need to maintain checking your mortgage and take care of any required property repairs. Additionally, you should ensure that your buy-to-let revenue is managed in the most tax-efficient manner possible. An accountant can assist you with this.

What are some beneficial buy-to-let alternatives?

Buy-to-let has a lot to offer as an investment, including a consistent stream of income and the potential for long-term returns from any rise in property value. In contrast, it requires a lot of maintenance and your asset is difficult to access and locked away for a long time
Therefore, it may be worthwhile to investigate whether any of the alternatives better suit your financial goals.

Property investment trusts

Real estate investment funds can be an alternative if you want to engage in the real estate market without having to maintain a furnace every other winter. Through investment firms that trade

on public marketplaces, you can pool your assets with those of others and invest in commercial buildings. Although they are long-term investments that typically involve locking money away for several years, the average return over the past few years has been 10%. Though it is less liquid than owning a property outright, it is nevertheless a kind of investment.

Bonds

Although certain bonds are riskier than others, overall, bonds are a pretty stable, low-risk form of investing. Bonds are simply loans from the investor to the borrower, who is frequently a government or major organisation. The loans are returned over a certain time period at a predetermined rate of interest.

Large corporations around the UK offer these investments, along with government bonds, with returns that often hover around the 5% range. You can select bonds with varying terms, tying up your money for as little as one year or as long as ten years.

Interpersonal lending

You can lend money directly to people and small businesses through a number of channels. Peer-to-peer (P2P) lending typically produces higher returns due to the removal of the middleman than cash savings or bonds. The dangers are great, and the Financial Services Compensation Scheme does not cover your money, which is a drawback. But for the investor who wants to assume a little bit more risk in exchange for bigger potential rewards, this can be a good platform. Naturally, you can invest less money than you would in real estate.

Shares

Shares are regarded as high-risk investments since they are erratic and likely to lose value at times while gaining value at other times. For the patient investor, shares can be quite profitable because they typically return between 8 and 10% over the longer period.

Additionally, unlike with real estate, your money is not as long-term bound. However, be ready for a rough ride and refrain from investing money you might need in the coming years.

Let’s Build Something

hello@investmentnottingham.co.uk
Unit 3D, 4 North St, Langley Mill,
Nottingham NG16 4BS,
United Kingdom.