Some 32% of ages 45 to 64 with a pension are considering using it for a buy-to-let property. With this in mind, when the pension changes come into force in April of this year, there could be a rush on buy-to-let property.
Two pure-plays on the buy-to-let market areBelvoir Lettings andMWinkworth, although these two companies are micro-caps with market values of less than 35m so they may be unsuitable for some investors.
The industrys larger players could be better picks.
Biggest is best
National property groupCountrywide(LSE: CWD)is one of the largest players in the UKs booming property market and buy-to-let business.
Countrywide has a national presence andoffers services covering the whole property market, from estate agent and mortgage provider to lettings agent.
And with all bases covered, Countrywide can profit whether the property market is going up ordown. The letting business gives a stable, predictable flow of income.
The company reported strong demand from buy-to-let landlords during 2014, reporting a year-on-year rise of 25% in the number of residential properties under management.
Pre-tax profit is set to nearly triple this year to 103m, and Countrywide currently trades at a forward 2015 P/E of 12.8. The group supports a dividend yield of 4.4%.
With its diversified operations, Countrywide is a great play large-cap play on the buy-to-let sector.
One-stop-shop
A better pick for small-cap investors could beLSL Property Services(LSE: LSL),a one-stop shop for property and related services. The company conducts the sale of residential property, provides lettings services, surveying, mortgage advice and services to mortgage lenders, including valuations, asset management and property management.
In September of last year, the group signed a new contract withLloyds Banking Groupto provide surveying and valuation services for one of the UKs largest mortgage lenders. Group income from lettings income expanded atan annual rate of 26% for the 10-month period ended 31 October 2014.
Unfortunately, LSL did issue a profit warning last year as deteriorating housing market conditions slowed growth. Nevertheless, at present the company only trades at a forward P/E of 10.4.
Cash is king
Lastly,the UKs number one property website,Rightmove(LSE: RMV).
Even though Rightmove isnt technically in the buy-to-let business, the company is set to benefit from an increasing level of activity in the property sector.
Last year Rightmove was one of the UKs most visited websites. Whats more, thegreat thing about a business like Rightmoves is the fact that the company has very low overhead costs, but generates large amounts of cash. During 2013 Rightmove generated 83m in cash from operations, but capital spending only amounted to 1m.
Still, you have to pay a premium for this kind of quality. The company currently trades at a forward P/E of 27.5 and a 2015 P/E of 24.3.
Current City forecasts expect Rightmoves pre-tax profit to jump 14% this year, followed by growth of 13% to 129m during 2015.
Blowing bubbles
Right now is the perfect time to be in the property business. House prices are surging, and buy-to-let demand is rising rapidly. However, there are some who believe that we are in the midst of a property bubble.
Only time will tell where this market is going, but it alwayshelps to protect yourself, just in case the market turns against you.
To help, our analysts here at The Motley Fool have put togetherthis free report, which covers the sevenways in which you canprotect your portfoliofrom fall in UK house prices.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended Rightmove. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
