Should you invest in buy-to-let?

The number of buy-to-let loans advanced in the three months to the end of March was 34,400, 2% more than in final quarter of 2012, data from the Council of Mortgage Lenders (CML) has revealed. The value of the loans also rose to £4.2 billion, up by 8% compared with the previous three months.

But while the value of buy-to-let lending in 2012 was up by 19% year-on-year, the CML points out it is recovering from a low base and remains subdued compared with the pre-credit crunch era.

However, four-fifths of Britain's private landlords say their properties are their pensions and 61% of them plan to live off the rental income, according to a recent survey by BDRC Continental's Independent Landlords' Panel.

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So is now a good time to enter the market?

There are some reasons for optimism. Tenant demand was up by 7% in the first quarter, compared with the previous three months, and rental yields are up by 0.5% to 6.7%, BDRC figures show.

"There are many factors that point towards now being a good time for anyone considering becoming a landlord," says Mark Sandall, letting agent and managing partner at Andrew Granger & Co.

"While house prices have fallen, rental prices have soared in recent years and potential first-time buyers struggling to raise the large deposits needed are staying in rental properties longer than ever before."

But Kate Faulkner, managing director of independent property advice site, urges first-timers to be careful. "In terms of property prices, we don't know whether we are at the bottom of the market or not yet. In some areas prices have passed 2007 heights, but they tend to have poor rental yields of less than 7%.

"This figure is significant as when interest rates go back to 5% plus, mortgage lenders will add on their margin and many buy-to-let investors will struggle with cashflow. In areas where you get yields of 7% and above, property prices are still falling."

Sandall also urges caution. "Being a landlord is not a get-rich-quick scheme; it's a business and should be treated as such."

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