The experts at Belvoir reveal five good reasons to become a landlord ...because you can't sell y...
The experts at Belvoir reveal five good reasons to become a landlord
...because you can't sell your own home
“We have a lot of landlords who would initially have preferred to sell but due to the current property market have opted to keep hold of the property and borrow additional money to purchase their new home,” says proprietor of Belvoir Liverpool West Derby Adam Rastall. “These are known as ‘accidental landlords.”
Proprietor of Belvoir Swansea Ben Davies explains, “you may need to move because of work or other circumstances and are unable to sell your house,” he says. “If so, the professional rental sector could provide you with a viable alternative. At the same time you will be building up the equity in your home until you are better prepared to sell in the future.”
While some ‘accidental landlords’ choose to sell their properties once the market has improved, others don’t.
“Some ‘accidental landlords’ choose to wait out the property ‘slump’ and then sell, while others go on to letting the property long-term,” says Adam.
...as a pension pot
“Increasingly we are dealing with first-time landlords who are looking at property as an alternative to, or to run alongside, a pension scheme,” says Ben Davies. “We have landlords achieving a yield on these properties of 6% upwards and, if they buy in the right area, they can then hope to sell the property for a profit. Capital appreciation is an important factor.”
Proprietor of Belvoir Bury St Edmunds Patsy Day agrees. “Many people turn to the property market for long-term investments when gains from other investments aren’t proving fruitful,” she says. “In the current climate we’re seeing a lot of new landlords because they’re not getting the returns from the traditional stock market or bank investments route.
“A property is a tangible asset, which many people like, and the combination of income and capital growth is attractive to most – whether a landlord wishes to sell on retiring in 10, 15 or 20 years, historically property prices have risen over a significant time-frame.”
Proprietor of Belvoir Cheadle Darragh Lee adds, “I would suggest that when people are thinking about their future and retirement that it’s good to have your money invested in a variety of ways and not purely rely on a pension. I would suggest that investing in property is another option that should be considered.”
Always ensure you are properly informed and, if in doubt, ask a lettings specialist or wealth management company for advice. Also remember that property prices can go down as well as up and it’s important to choose the right property in order to maxmise your investment.
...for your children to live in
“In recent years we have seen a rise in the number of landlords who have purchased properties for their children to live in,” says Adam. “If your child has left home to study in another part of the country – and you are in the fortunate position to be able to purchase a property for the child to live in – this can be a great investment opportunity.
“If the correct property is purchased, several of your child’s friends can also live in the property and pay, rent which would class as investment income.
“This is a win/win situation for parents – you will be happy to know what type of property your child will be living in, while receiving a good income from the other tenants renting the additional rooms.
“Once your child has finished their studies, you can then continue renting the property to other students.”
Some parents also purchase properties for their children to live in because they can’t afford to buy their first home themselves. As the rising cost of property has priced lots of young adults out of the market, buying a house for your child to live in until they can afford to finance the mortgage themselves is also a good way of enabling your child to get onto the property ladder.
And, forward-thinking parents buy investment properties for their children while they are still young. Darragh explains, “it’s a very good idea to buy an investment property with your child’s future in mind while they are still young,” he says. “If you buy a property now – and rent it out while your children are growing up – you will benefit from capital growth, plus your tenants will effectively be paying off your mortgage. When your child is older and wants a property themselves you’ve already got a mortgage-free property for them to move into or sell if they wish.”
...building your own business
Some people view being a landlord as a business opportunity. These investment landlords with large portfolios have dozens (sometimes hundreds) of rental properties. Profits from each property are used to help finance the purchase of additional properties.
Many go into partnership with other investors, while others go it alone – and some even started their business as a result of being an ‘accidental landlord’.
“Becoming a landlord due to current market circumstances can be a good first step towards becoming a professional landlord in the future,” says Adam. “I was speaking to an investment landlord recently (who now has more than 10 properties) and he told me that being an ‘accidental landlord’ in the last property downturn is what started his portfolio.”
...because you inherited a property
“Inherited properties can often make great investment properties and we’ve had quite a few of these scenarios recently at Belvoir Bury St Edmunds,” says Patsy. “An inherited property can provide income and capital growth and represents a safe investment.
“As you inherited the property your outlay would be little or zero and therefore the monthly rental yield would be higher than buying your own investment property at today’s current market value. Plus, if you are sentimentally attached to the property, renting instead of selling will allow you to keep it in the family.”
Proprietor of Belvoir Swansea Ben Davies agrees. “Maybe you have inherited the family home and cannot afford to live there just yet but do not want to sell for emotional reasons,” he says. “Renting it out can give you the best of both worlds by giving you a monthly income from the property as well as keeping it in the family long-term.”
Although it’s important to take into account that many inherited properties are likely to need modernisation, long-term gains are likely to be high.
“Inheriting a property is usually as a result of the homeowner dying or going into a care home and, as such, the property will probably need renovating and updating,” says Patsy. “However, despite this, you could still get a really good rental return once work is completed