The Best Alternative Investment To Buy To Let – What Is It?

Written by Myles Hemingway

Myles is our self-confessed ‘word nerd’ and property geek. You’ll find him mythbusting everything from mortgages to maisonettes, as well as giving you our spin on the latest property news and industry trends.

Is buy to let worth it in 2021? Or is now the time to withdraw your equity?


Covid 19 has hit landlords hard and seen many hunting for alternatives to buy to let. Only in the past, these alternatives haven’t really stacked up. They’ve not so much been alternatives, but other suggestions to settle for if buy to let was out of reach. However now that the effects of Covid are eating into a landlord’s yield and regulations are tightening all the more, it’s no wonder a large portion are now hunting for buy to let alternatives.

Ask the NRLA and they’ll tell you a whopping 56% of landlords lost out on rental income as a result of the pandemic - 12% of these claiming to have lost more than 20% of their income! And the support from the government hasn’t exactly been great either. Tenants’ rights have soared through the roof, meanwhile a landlord’s… haven’t. If anything they’ve shrunk, despite them being the one who owns the property. You could even argue that landlords have been left to foot the bill for the pandemic.

So with this in mind, what are the alternatives to buy to let? And are they viable or no better? All this and more coming up…

Is it still worth being a landlord in 2021? How has buy to let changed?

Throughout its time as an investment strategy, buy to let has been through many ups and downs. However, unfortunately for landlords over recent years, it’s mostly been downs. Don’t believe us? Here’s just some of the legislative changes, which have ushered landlords towards alternatives to buy to let…

  • 2008 onwards: Slow growth in the market - One major consequence of the 2008 financial crash was that property values in the UK took a nosedive. 16 months after the crash and the average house price had dropped by a whopping 20% on average (What Mortgage)! From which it took 6 years for prices to recover, and even then it’s been argued that parts of the market still haven’t returned to their pre-2008 levels. All of which has meant that capital appreciation has become less of an income for landlords, making them more reliant on their rent. Spring forward to Covid Britain and we’ve seen just what an impact such reliance can have (cough) arrears.

  • 2016: 3% Stamp Duty surcharge - Just as property prices had begun to recover, landlords were then hit with another blow. One that forced a lot of aspiring landlords to go in search of alternatives to buy to let. The Stamp Duty surcharge introduced in 2016 saw the government introduce a 3% stamp duty charge that would be payable on the purchase of a buy to let or a second home, be it in the UK or abroad. Even properties that didn’t qualify for Stamp Duty (at the time under 125k) were still liable to pay this 3%. The only way anyone would be exempt would be if they bought a house solely in their child’s name or inherited a property. Either way, for the majority of landlords, it added a couple of extra hundreds, maybe even thousands to their tax bill (gulp)!
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  • Reduced mortgage interest relief - It’s this legislation that had landlords asking themselves, ‘is buy to let worth it? Or should I consider an alternative?’ Tax makes up a major part of any buy to let landlord’s expenses, and as of 2016, Landlords had it pretty good. Prior to 2017, landlords could deduct 100% of their mortgage interest off their tax bill, which meant they’d only pay tax on their profits, not their rental income. Sounds great, but unfortunately it didn’t last. Come 2017 and the government’s new BTL tax system was about to make life as a landlord far less profitable. That year the amount of mortgage interest a landlord could deduct fell to 75%. In 2018, this fell to 50%. Come 2019 it was 25% and in 2020 it was replaced with the 20% tax credit that's available to landlords today. So as you can imagine, Section 24 as it’s been dubbed, is the reason many landlords have since been looking for buy to let alternatives.

  • 2020: No Stamp Duty exemption - Fast forward to 2020, and the Covid pandemic practically brought the country to a standstill. So with a cloud of uncertainty brewing over the economy, Chancellor of the Exchequer, Rishi Sunak, enforced a Stamp Duty Holiday, to stimulate demand and keep the market buoyant. For the majority this meant low Stamp Duty rates, however as they always seems to be these days, for anyone buying a buy to let there was a caveat. While Stamp Duty rates were reduced, they weren’t as low as were for anyone who’d be making a residential purchase. Neither did it get rid of, nor lower, the 3% Stamp Duty surcharge – that was still payable too. No wonder the amount of landlords in the UK has hit a seven year low (Landlord Today) and many are asking 'is it still worth being a landlord?'.

  • 2020: The tenant eviction ban - It’s safe to say that 2020 was an eventful year. A year that brought with it a tenant eviction ban. A ban that has been subject to multiple last minute extensions and is still active as we write this blog. Essentially what this meant was that no landlord could evict a tenant or go ahead with a repossession, unless they had ‘good reason’ – i.e. the tenants were abusive or violent. The result was that a large proportion of landlords had to get by on reduced rents or in some cases without them altogether. Not exactly the easiest situation, especially if you’re reliant on your rental income to make mortgage payments. In the words of Ben Beadle, chief executive of the NRLA, the government needs to “get a grip” and “do something about the debt crisis renters and landlords are now facing”(Property Industry Eye).

  • 2021: legislation around pets - Pet ownership is soaring in Britain, especially since lockdown. Close to half of all Brits who own a pet, bought another one or more during lockdown, so it’s little surprise that buy to let legislation around pets has been forced to change. Government figures estimated that before the change, just 7% of all landlords actually advertised their properties as ‘pet friendly’. The new legislation means that as of January, landlords have been prevented from issuing a blanket ban of ‘no pets’. Therefore tenants who have a well behaved pet, can keep them without a landlord’s permission, although they will be liable for any damages. Damages that could become a liability for landlords in the future and is likely to see many look towards buy to let alternatives.

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Viable Alternatives to buy to let

At the end of the day, buy to let is simply a form of investment. By being a landlord you’ve simply invested your money in the housing market, opposed to the various buy to let alternatives. A market which could be in for a rough time post Covid.

Now As much as you could say that’s all speculation, we feel it’s only sensible to take it into account. After all, we didn’t feel the full effects of 2008’s financial until 2009 and onwards.

Either way, having your eggs in one basket is never really a wise idea. So to help you decide if there are actually any valid buy to let alternatives out there, we’ve put our heads together to bring you what we consider to be the top five…

DISCLAIMER: This is in no way investment advice, more observations that we think could be viable alternatives to buy to let.

    Buy to let or stocks and shares ISA

    Stocks and shares are an investment that comes with a reputation for risk. However that’s not to say it’s a risk you can’t minimise, especially today. In a world where information is at our fingertips, there’s arguably never been a better time to invest in stocks. And while they do tend to be more volatile than buy to let, it’s not necessarily a bad thing. Do your research and you can leverage this volatility to have it working in your favour. A few smart decisions and stocks and shares could very quickly become a better alternative investment to buy to let.

    FYI:In this point we'd also include investment in precious metals like Gold, and Silver which has recently slumped - a good time to invest, perhaps? Also, Crypto currencies can be leveraged in a similar way too.

    Are classic cars good buy to let alternatives?

    While your typical car isn’t an asset that will appreciate in value, invest your money wisely in a classic and you could be in for a high return. A return that more than exceeds your buy to let yield. For instance, buy a Lamborghini Murcielago a couple of years back and you’d be expect to pay in-between £50k -£80k. Fast forward to today and these cars now retail for in excess of £150k - £300k if you chose the coveted LP670-4 SV model! So providing you choose sensibly and buy when prices are low, classic cars can be a great alternative investment to buy to let.

    Confused? Think of classic cars like character properties. The more unique you buy, the more likely they’ll appreciate in future. The Aston Martin DB7 is rumoured as one to watch.

    Switch your buy to let for a holiday let

    Despite the Covid pandemic bringing holidays more or less to a halt, there’s a good chance that holiday lets are likely to continue to grow. Why, is actually pretty simple.

    If Covid makes holidays abroad more expensive, then it’s likely that more people will holiday across Britain and to do so will use sites like AirBNB and Booking.com to source their accommodation. So if you’ve currently got a small inner city pad, then it might be worth looking into what it’d achieve as a holiday let. Or if you’ve got an outbuilding that you’re not entirely sure what to do with, consider converting it into accommodation and starting your own B&B. A perfect alternative to buy to let if you’re looking to be more of a hands-off landlord.

    Withdraw your equity and become a lender yourself

    In the case you have a fair bit of equity under your belt, you might want to consider Peer-to-peer (P2P) lending. Yet another one of those hands-off alternatives to buy to let. Essentially what you do in P2P is take the place of the bank and lend money out privately to a person or business. In many cases this can see you achieve far more than you would in a bog standard savings account, especially what with interest rates been SO low at the moment!

    But just like everything that sounds good on the surface, P2P does come with its fair share of risks, so you have to be pretty lucrative about who and where you lend. Saying that though, it's still arguably less volatile than the stocks and shares. It's also another alternatives to buy to let, which doesn't eat up that much of your time. Management of your P2P loan is all done by the website you choose to go through.

    Become a property developer

    For any property nut, buy to let alternatives don't get much better than this. Providing you have the equity, withdrawing it to development could be a very wise choice, as flipping property seems to be the 'in' strategy. Read the next section and you'll see why.

    Although becoming a developer isn't what you'd call the hands-off approach, it usually delivers a heftier ROI. Of course it can be hands off - you could outsource the DIY to someone else, but it's worth remembering that every time you do so, you're eating into your profit margin.

    Arguably the best thing about becoming a developer is the diversity. You can invest in residential, commercial, land - the spectrum of choice is practically off the scale. And you don't just have to work by yourself. You can club together with investors to fund a big project too. If you were to ask us, out of all the buy to let alternatives out there, this is the one we'd pick. But eh, that's probably just our property nerdism showing through.

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Is buy to let a good investment?

Whether buy to let is a good investment all depends on your situation.

While buy to let still can be a profitable venture, there's no getting around the fact that it's become substantially harder to do so over recent years, especially if you're just starting out. The Covid pandemic itself has hammered home just vulnerable you can be as a buy to let landlord. If you ask us, we'd say buy to let is going through a shift.

Just as with any investment strategy, it’s all about getting in quick. Get into buy to let in the late 80s when the first ever BTL mortgages were available and chances are you’d do very well for yourself, particularly as rental demand picked up through the 90s. However it’s when you compare this early version of buy to let to the highly regulated and diluted BTL we have today, you realise just how much profitability has slumped. You can thank the internet for that.

Go online and you’ll soon be able to see why a lot of young people are getting into buy to let. The secret's out! Rewind the clock back to life before the internet and you had to be very much 'in the know' to get your foot into buy to let and do well. Now though, within 5 minutes online you've got property 'gurus' all up in your face doing their best to persuade you why BTL is the ‘easy’ way to make a second income. A sign perhaps that the highly profitable days of buy to let are behind us and that considering the alternatives to buy to let wouldn't be a bad move.

Remember - the market may be steady at the moment, but it's what it'll be like in the future that you really need to assess. How long will it be before the market becomes saturated?

FYI: If you were to ask us, we’d say the way things are looking post Covid, that flipping is likely to be a stronger alternative investment to buy to let, especially if the market slumps. One in 40 homes bought in 2020 were sold again in less than a year!

How to withdraw your equity FAST

So what with buy to let becoming more restricted each year, selling your portfolio or at least some properties while the market remains buoyant, wouldn’t be a bad idea. Do so and not only could you funnel your equity into new ventures, but you could also increase your ROI. Most likely the reason anyone gets into buy to let in the first place. However, selling your property isn’t as simple as it sounds. Well, it can be, but only if you consider all your options.

The most common way of doing so is to juggle multiple sales over the open market. But let’s face it, that’s time consuming and often a lengthy process, which could likely cause you more hassle than it’s worth. Then of course you could go to auction, but as with all auctions, this would come at a cost. A particularly large cost for anyone selling off their entire portfolio. But thankfully not one you have to put up with.

You see, as an industry leading cash buyer of property, we’ll buy your portfolio for CASH and charge you just £0 in fees. Fans of a quick sale will also be pleased to know that we can buy all your properties as one job-lot and in as little as 7-days! What’s more, our quote of £0 includes solicitor’s fees and surveys too. We’ll even help you negotiate an onward purchase if you do decide to reinvest elsewhere.

Sound like a plan?

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