Amateur landlords are looking to drop the day job and become full-fledged property investors, working on their portfolios on a full time basis.
Although a very difficult and risky business to be in, the buy-to-let market can provide significant rewards and make landlords extremely rich.
Well-known landlord couple Judith and Fergus Wilson are currently seeking to sell their huge property empire of 1,000 houses, for £200m. They are proof that a lot of money can be made from this sector.
Within the UK, there are currently over one million buy-to-let landlords, predominantly well off investors who own one or two properties, as well as their home. In lots of cases, these landlords did not desire being property investors. A house may have been inherited, or they chose to keep a previous property when they bought another.
Banks and mortgage brokers, however, say the amount of amateur buy-to-let investors is on the rise, as they go professional and quit their jobs to become full-time landlords.
An increase in house prices around the country, paired with a demand for accommodation, makes a captivating proposal. Landlord mortgage lending has also grown, after the economic crisis.
Before the risk is taken, however, there are a number of things to take into account:
Money
A full-time 9-5 provides a steady, constant and assured income. If this is given up, a buy-to-let property must begin making a yearly profit, before salary is even considered. This does not relate to the yield a property makes upon sale. Within a property portfolio, strong excess needs to be made on rents, which exceed mortgage repayments and emergency funds. This back up may be formed through house sales, but the strength of wages depends on the earnings of rents.
Credit
There are certain periods that are negative in the property market, and depending upon this for income means that a good amount of financial support is required. This could be in the form of savings, investments, or a helpful bank manager. The ability to get out of any difficult situations is vital, and living costs should be secure
Economies of Scale
The cost advantages that can be obtained through a large property business include: agency fees, landlord insurance, and management charges being reduced when a property portfolio expands. With more houses comes more work to suppliers.
The life of a property investor is idealistic to many, but becoming a full-time landlord can pose risks. Suddenly, your income is dependent on the occasionally unsteady property market. Ability, entrepreneurship and even luck can lead to success.