Why indeed given the problems, headaches, risks and worry that inevitably go hand in hand with borrowing a substantial amount of money simply to house someone, who doubtless won't appreciate all the time and trouble that you have put into providing them with a home.   A fool's game you may say. Well in part you may be right.

There will be problems that you will have to deal with or at least your Agent if you retain one.

Headaches, again probably, particularly if problems get on top of you.

Risks certainly, you will be borrowing a large amount of money and you will be dependent on another person, your tenant, to pay their rent, on time, to enable you to service the loan that you have taken out, and this ignores other costs like maintenance, annual gas checks to mention two, plus the cost of making good your property that has been trashed by someone, who really did not appreciate all your efforts.

Worry; well, if the foregoing does not worry you, then maybe not. In fact, you may be an ideal buy-to-let investor.

So what's in it for you if you decide to take the plunge?

The ability to increase your net wealth.

If you have a spare £ 25k lying around you could go out and buy a property for circa £ 100k with a loan of £ 85k spending circa £ 10k on buying and setting the property up for letting which, after 10 years could be worth at least £ 200k. (Average annual growth of 8%)

If so you would be £ 100k better off. Your initial £ 25k would have increased in value at an average rate of £ 10k per year.

Okay, so the taxman wants some of it, but only a maximum of £ 24k ignoring personal allowances and so forth.

That still leaves you with £ 76k. This represents just over a 300% increase in your initial stake.

The ability to increase your net income.

If you were able to borrow the £ 85k at say 6.5% interest and then let the property at say £ 10k per year, and all three are possible, you would receive an income of £ 4,475 each year after paying the interest charges.

Aside from Agency Fees, your other costs would probable not exceed £ 1,500 per year over the 10-year period.

If you added in Agency Fees then the total would increase to around £ 3,260. That still leaves between £ 2,975 and £ 1,215 each year and this ignores any rent increases that will occur during the 10-year period. Even paying tax at 40%, you will still be better of to the tune of £ 729 – 1,785.

So, 10 years later you will have received between £ 7k and £ 17k in income, net of tax, a net-of-tax annual return of between 2.9% and 7% on your initial stake and you still have another £ 76k to come.

What other investment compares, given the low level of risk, if you do it right?

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