10 reasons why it’s G-R-E-A-T to be a Landlord!

November 12, 2014

The Guardian recently reported that private landlords in Britain are set to own £1trillion worth of homes by late spring 2015, as rising house prices and growing appetite from investors drives up the value of the booming buy-to-let sector.

Official figures show that since 2001, nearly 2 million households have been added to the sector and a report by mortgage lender Kent Reliance forecasts that by 2016 the total will have grown to 5 million, representing just under one in five households.

Additionally, it is predicted that pension reform in April 2015 will also bring new landlords into the arena.

In view of that, we thought we’d share 10 benefits of being a landlord and investing in property:

1.  Unlike shares, property is a tangible asset.

2.  Property can deliver two forms of income streams – cash flow from the rent, and equity from capital appreciation.

3.  Many landlords find that, with a bit of support from a lettings agent, they can run a property portfolio alongside their day job.  This provides additional income and financial security.

4.  With such low returns from savings accounts, property is an attractive place to “store” money.  Typical BTL yields range from 5% to 8% for single occupancy Buy To Let.

5.   Most people understand property at a basic level, and the fundamentals behind the property market are relatively simple.

6.  You could buy your dream retirement home now, at today’s prices, rent it out until your retirement, and then move there when you retire. (Clearly you would need to redeem a BTL loan on this property if you decided to move in, or change it to a “residential” mortgage).

7.  BTL mortgages are unregulated, have more relaxed criteria, and not necessarily based on your income.  However, you are likely to need a 20% to 25% deposit.

8.  If you have a property with a mortgage on it, the debt is eroded by inflation over time.

7.  Property investment allows you to “leverage”.  In the context of BTL, this means being able to take control of a large asset, putting in a relatively small amount of your own money.  A BTL investor would typically put in a 25% deposit, and a bank would provide the other 75%.

For example if you have £20,000 to invest in a property, you may then use leverage and borrow £80,000 from a bank. By combining your money with the bank loaned money, you can potentially buy a £100,000 asset.

Assume that each year, for 10 years, your investment property will appreciate by 5%. This is where the ability to leverage benefits you. The appreciation is on the entire £100,000 asset, not only the £20,000 of your own money.

8.  Property is a scale-able business and can be as “hands off” or as “hands on” as you wish.

9.  There are many different ways of investing in property – from buy to let, buy to sell, trading, holiday lets, HMO’s etc – and landlords can tailor their strategy to suit their own personal situation.

10.   There are a number of tax advantages and efficiencies to investing in property.  A professional tax advisor will be able to advise which of these apply to your situation.

If you are thinking of becoming a landlord and investing in property, we recommend that you invest a lot of time in the “research” phase.

Part of that research phase should involve speaking to your local lettings agent to get a steer on the demand and that type of properties that rent out quickly.

At Northwood, we are always pleased to advise landlords with our in-depth knowledge of the local area and can even help you find a suitable property that is already tenanted!

If you are in full-time employment, you may like to work with a lettings agent on a “fully managed” basis, whereby the agent takes over the full running and management of the property, including tenant finding, referencing, rent collection, compliance issues, repairs etc.

Our Director of Operations, Nick Harris, shares the many benefits of working with a reputable agent:

You can find your nearest Northwood office for sales or lettings >>> here.

We are proud to let you know that all our offices are members of the Property Ombudsman and SAFEagent, showing our commitment to professional standards and giving landlords and tenants complete peace of mind when dealing with us.

*DOWNLOAD Northwood’s free guide:  How to find a professional letting agent*

Northwood is an established and recognised lettings agent with coverage across the U.K. and the leading supplier of Guaranteed Rent to give landlords complete peace of mind.

Find us on Twitter @northwoodUK or visit our YouTube Channel.

 

IMPORTANT NOTICE: Northwood does not provide investment advice. All figures quoted are correct at the time of listing and published in good faith. Whilst property has proven an excellent investment over many years, past performance is no guarantee as to future performance. You are strongly advised to obtain independent financial advice from an Independent Mortgage Advisor (IMA) in respect of any mortgage product required and independent legal advice as necessary.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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