The number of first-time landlords is continuing to grow according to Paragon Mortgages. The mortgage specialist says that 22% of the mortgages it issues now go to new landlords. The figure has been growing since 2009, when the buy-to-let industry began to recover from the 2008 crash.
Finance
Paragon’s Director, John Heron, says that first time landlords now have easier access to finance. They tend to be looking to make an investment, and may often have other investments already. While house prices are fairly static in most areas, rising rents mean high yields. That makes property an attractive investment, with returns comparing very favourably with other options. Low interest rates mean many other forms of investment, such as bank bonds, are much less attractive than they once were.
Paragon says that they have seen an increase in the number of small-scale, private investor landlords recently. They tend to own between one and five properties, and are looking to make the most of good market conditions. Because they tend to be experienced investors, these landlords are in a good position to be successful in the buy-to-let market. If prices or rents drop, they will often have other investments in their portfolio that will mean they can ride it out. And they will usually have the investment knowledge to make sound decisions.
First-time landlord tips
If you want to become a landlord for the first time, but don’t have that investment background, make sure you do plenty of research before taking the plunge. While the returns on offer in buy-to-let are appealing, they start to be less appealing if you make bad decisions.
Follow these tips and you’ll be on the road to buy-to-let success:
– Make a solid financial plan before you buy. You need to make sure that your rental income will be enough for you to make a profit. Talk to local agents to find out what the average rent for properties similar to yours is. Remember that you are likely to have at least one month per year without any tenants, and that your tenants may end up in arrears. Think about costs such as landlords insurance and maintenance. If your rent only just covers your mortgage, your property won’t be an investment: it will cost you money.
– Remember that you have legal responsibilities as a landlord. While the buy-to-let industry is relatively unregulated in the UK, landlords must still make sure they comply with relevant legislation. You’ll need to get gas and electrical safety checks, and you may need to register with your local authority. Talk to them for advice on what you need to do.
– Keep the property in good condition. Cutting corners with maintenance and repairs only adds up to bigger bills later on, and is bad for tenant relations. Good landlords tend to get good tenants.