Nick Carlile, of Platinum Portfolio Builder, reveals what impact inflation rise and falls have on buy-to-let property investors.
“From an investor’s point of view, how much impact inflation has, really depends on how much actual cash you have to play with and whether you can afford the squeeze on your finances that an inflation rise implies,” he said.
“When inflation rises it means that not only does the everyday cost of living increase, but all the goods and services you buy when developing a property to sell on or rent out, also become more expensive. These can include plumbers, surveyors, electricians and solicitors as well as paint, flooring and furniture. If rates were to rise on top of this, it’s easy to see how investor profit margins get squeezed from all directions.”
Two important factors to consider when working out a property’s investment potential and how inflation rise and falls will affect you, are factoring in rising rental incomes if you’re investing for buy-to-let, and of course, purchasing the property at the best possible price.
Inflation, simply defined, is the erosion in the purchasing power of money. Nick continued: “The interesting thing about property investing is that over time it offers some protection against inflation. Because many buy-to-let property investors have borrowed money to invest in a real asset, they are letting the bank’s money erode in value while they, in exchange, have a real asset in their investment property that should retain or grow in value over a period of time.
“With falling inflation and continued low interest rates the outlook seems bright, even for those considering dipping a toe in the property investment market for the first time.”
