Readers can email any question about their finances, to be answered by our expert, Rosie Hooper. Rosie is a chartered financial planner at Quilter Cheviot Financial Planning and has worked in financial service for 25 years. Here, a reader wonders what to do with their money - and if being a landlord is as lucrative as it once was. (Photo: Anadolu)

Considering buying another property

Question: Myself and my partner are in our fifties and our children have left home. We own our own property and one other which we rent out, and were considering buying another as a second buy-to-let. We have around £150,000 to spend, so it would likely be a two-bedroom flat in the area we live in. At the moment though, we are seeing a lot about landlords selling up and know there is an extra tax on buying second homes since the Budget. Is it worth getting into property as an investment still, or generally can you get better returns from just investing the money? (Photo: Yui Mok/PA)

Being a landlord no longer straightforward

Answer: For decades, becoming a landlord was a profitable way for people with some spare cash to make significant sums. Property price growth provided long-term capital gains, while steady rental income offered an attractive supplement to other earnings. This gave rise to a significant number of amateur landlords. In recent years, the tide has turned. The tax landscape has shifted dramatically, regulations have tightened, and being a landlord is no longer the straightforward, attractive option it once was. (Photo: Nuttawan Jayawan/Getty)

Merits and problems in property investment

That said, property investment still has its merits, but it’s increasingly wrapped up in behavioural considerations. It’s no longer just about whether property stacks up financially – it’s about whether you truly enjoy and are prepared for the demands of being a landlord. Before deciding if property is the right investment for you, it’s worth reflecting on what it means to be a landlord. Managing tenants, maintaining properties, and dealing with unexpected problems can take a significant toll. Some people thrive on this level of involvement, but for others, it can quickly become overwhelming. Especially as you approach retirement, you don’t want to be out enjoying yourself only to receive a message that there’s a leak in one of your properties which needs your urgent attention. For some, this is all part of the process; for others, it’s an unwelcome disruption. Remember if you double the number of properties you own, you also double the potential for these sorts of headaches. (Photo: In Pictures Ltd/Corbis via Getty)

Financial realities

If bricks and mortar is in your blood and you’re excited by the idea, then the next step is to look at the financial realities. First, confirm whether the £150,000 you have is the total budget or whether you’re planning to use finance. If you need a mortgage, consider how current interest rates will affect your rental yield. You’ll also need to research the local market to understand potential yields, the type of tenants you’re likely to attract, and the ongoing costs involved, such as maintenance, service charges, and tenant void periods. Another important consideration is how long you plan to hold the investment. Buying property comes with significant upfront costs. In your case the stamp duty due will amount to around £7,500 at an effective rate of 5 per cent. If you’re planning to hold the property for only five years or so, these costs could eat into any potential profits. (Photo: Sakchai Vongsasiripat/Getty)

The tax environment for landlords

The tax environment for landlords has also become much tougher over the past decade. The removal of mortgage interest relief and the renters’ rights bill have driven many landlords to sell up. For capital gains tax (CGT) for property sales, the long-term outlook is uncertain. Rachel Reeves has stated that Labour does not plan to increase taxes, but there are no guarantees. Any growth you expect from a property investment could be reduced by future tax liabilities when you sell. If you’re looking for exposure to the property market without the headaches of being a landlord, you could consider investing in a Real Estate Investment Trust (REIT). REITs allow you to invest in property portfolios – such as commercial buildings or residential developments – without owning the physical asset. They can offer a steady income stream and long-term growth, and they’re more liquid than traditional property investments, meaning you can sell your shares more easily if needed. (Photo: Wiktor Szymanowicz/Future Publishing/Getty)

Thinking about your legacy

In comparison, property is an illiquid asset. You can’t sell just the roof or one room of a property if you need some cash; you have to sell the entire asset, which may take time and come with additional costs. By contrast, other investment options, such as onshore or offshore bonds, offer greater flexibility. Investment bonds allow you to withdraw smaller amounts as needed, giving you more control over your finances. They’re also tax-efficient, particularly for those looking to invest £150,000 over the long term. But of course, you are investing in the stock market and that comes with its own risks and volatility. If you’re thinking about your legacy, investment bonds can also be placed in trust, making estate planning simpler. Passing down property can create challenges if you have multiple children with differing views on whether to keep or sell the asset. A trust provides flexibility and can ensure that your wishes are followed. (Photo: Susannah Ireland/AFP via Getty)

Income needs and long-term goals

It’s also worth considering your income needs and long-term goals. Do you need the rental income now, or would you prefer to let your money grow in a diversified investment portfolio? Onshore or offshore bonds can be tailored to your risk profile and provide a tax-efficient way to achieve growth. However, if you do decide that property is the right route for you, it may be worth exploring the option of forming a special purpose vehicle (SPV), which can provide some tax benefits. That said, SPVs come with additional complexities, so professional advice is essential. I don’t want you to come away from this thinking that I am particularly negative on property as investment decision, but I do think that the potential hurdles that come with being a landlord nowadays should not be taken lightly. (Costs accurate at the time of first publication, December 2024) (Photo: Getty)