Becoming a UK Landlord
The Buy to Let Market in the UK
With the potential for substantial returns over the longer term, primarily by way of capital appreciation, this form of investment has enjoyed significant growth in recent years. A number of early investors who entered the buy to let market in the eighties now have portfolios worth millions of pounds
So how did all of this come about? The Housing Act of 1988 made it possible for house owners or landlords to evict those who failed to meet their obligations as a tenant, and evaded payment of rent or caused damage to the property they occupied. This was a significant departure from the past, when the law favoured the tenants rather than the owners of property.
Lending institutions which were averse to financing the private purchase of property for rental began to compete with each other to grab a share of the market. This, combined with a number of consecutive falls in interest rates in the intervening periods, led to more people having access to funds, further fuelling demand.
Becoming a Professional Landlord
Understanding the basics of how to invest in a buy to let property is the first step towards becoming a landlord. Some intend to do this for one or two properties only, by way of creating a ?nest egg?. For others it has become a full time occupation with many professional landlords owning a string of a dozen or more properties.
As of 2005, the number of residential buy-to-let mortgage properties in the UK was estimated to be around 767,000, with a total value of £83.9 billion. Statistics reveal that in the first half of the year 2005, some 152,500 loans, amounting to £17.5 billion were extended towards buy to let property purchases in the UK.
It is essential that you understand the financial model. You will need to have sufficient capital not only for the deposit on a property but also to provide for initial renovation and subsequent maintenance. In addition your pockets need to be deep enough to cover any ?dry? periods when the property is untenanted and thus not generating rental income. For most people, the primary gain in a buy to let investment is that of long term capital appreciation, with monthly rental income primarily consumed in funding mortgage payments. This is not a trategy for those looking for capital returns over a short period.
Assuming that you have the necessary wherewithal and have arranged appropriate finance, you will need to carefully research the property market in terms of which areas are both desirable to tenants and likely to demonstrate reasonable property price appreciation; local amenities and facilities; property type (which will depend upon your target tenant types); and your other responsibilities.
Landlord Responsibilities
In addition to financial responsibilities you will need to gain a solid appreciation of landlord and tenant law; your duties in terms of gas and electrical safely checks and certification, both of which are covered by legislation; together with taxation and insurance commitments.
Conclusion
Even recent increases in interest rates, have not had much of an impact on the buy to let market as yet. Historically, the effects of rate rises have taken some time to manifest themselves. Since a wise investor will look at buy to let as a long term investment, a short term slow down in property prices rises is unlikely to unduly dampen the market. Demand for rental properties remains solid. You should however be sure that your wallet can bridge any potential gap between rental income and increased monthly mortgage payments resulting from potential rate rises over the next couple of years. That said, the buy to let market has remained robust for over a decade and becoming a landlord remains an attractive option for many.
Leo R Johnson is an independent writer with a focus on consumer, financial and business subjects.
You can find impartial advice and further information on buy to let mortgages at www.1000mortgages.co.uk - where whole of market mortgage brokers do the searching for you.
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