More landlords are carving out a full-time career through buy-to-let investments, according to new research. Kent Reliance’s Buy To Let Britain report shows that 31% of landlords now make a full-time living from their property investments. This is up from 26% just three years ago. The research also shows that rents are expected to rise because the demand from tenants continues to outpace the number of available rental properties. Whilst the market has slowed down because of changes to tax, mortgage relief and increased regulations, the report suggests that the future remains bright for investors. While all landlords, obviously, have been affected by these changes, many professional investors are willing to stay the course and look at the long-term picture. Other ‘accidental’ landlords or those with smaller portfolios may not have the diversity needed to continue making money or they may find the increased legislation is a step too far. This is, in many ways, good news for the rental sector as a whole. The sector becomes more dominated by professional landlords who can work with the legislation and understand the rental market.
Another piece of research, from Simple Landlords Insurance, shows that there is a class of landlord emerging who is looking at property in a different way and is able to adapt to market changes. They are also investing in different areas or diversifying. The need for quality rental properties will also increase in all regions, as people cannot afford to buy or do not wish to burden themselves with a mortgage.
OneSavings Bank chief executive, Andy Golding, said first-time buyers are not coming forward in great numbers. So with the number of households growing and the limited availability of new housing stock, the private-rental sector will be the area which picks up the slack. Indeed, Mr Golding continues, the housing crisis would be even deeper if it was not for the private-rental sector. If nothing changes in the foreseeable future and the supply of available rental properties dwindles further, it is tenants who will suffer. They will face higher rents as demand outstrips supply, along with less choice and security over their properties. If they had desires to be property owners themselves, this would become more unlikely as they will pay higher rents which means they are less able to save for a deposit.
So there is a growing demand for professional landlords, particularly those who are willing to diversify and continue to invest in further rental properties. One way to diversity is to look at different geographical locations, as some areas outside of London and its commuter belt offer much higher yields. Leicester, Manchester and Birmingham are delivering good returns at the moment. There could also be the case for investing in Houses of Multiple Occupancy as there is a growing need among students and professionals. Semi-commercial properties are an interesting option, because landlords could avoid the 3% stamp duty surcharge levied on investment properties. Developing disused commercial buildings into residential properties, such as flats or HMOs, is another avenue being explored by investors.
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