The buy to let market has grown dramatically in recent years. But what are the financial considerations of buying a second property as an investment and being a landlord?
By Sarah Jagger
4Homes Essentials
Property Search
UK Region Ratings
Two million people in Britain - 5 per cent - now own a second home according to the Office of National Statistics. The number of second homes is 2.6 million, an increase of 300,000 in five years. As a result the number of buy to let mortgages taken out has increased by a staggering 98 per cent since 1994, says Sainsbury's Finance. A recent Mortgage Express buy to let survey showed that the typical landlord is male, aged between 36 and 55, and with another job apart from property investment. And the majority regard their buy to let portfolios as a retirement nest egg.
So buy to let is a popular investment choice in the UK, but is it for you? You should start by considering your financial position. It's worth speaking to an independent financial adviser who can look over all your financial commitments before you take the plunge. You can find one in your local area at www.unbiased.co.uk. Ask yourself, can you afford to tie up money in a property long term? If the worst happened, could you afford to lose money? And if the property needs work, how will you finance a development? 'Buy to let is highly unlikely to make you a quick profit but should be viewed as a long-term investment; after all it may take months to sell your property and release your capital,' advises Malcolm Tarling from ARLA (Association of Rental Letting Agents).
That said, the current jittery house market and the slowdown in house prices may be good news for budding landlords as uncertainty among potential house buyers pushes up demand for rented accommodation and as house prices fall there could be potential buy to let bargains to be snapped up.
Before you buy a property it's important to research the existing rental market in an up and coming area, and know the market you'll be targeting. 'Speak to a local letting agent who will advise on the demand for rental properties and the level of rent you can expect,' says Malcolm Tarling. Have a look at homes to rent in your town on portals including the 4Homes property search. You may find properties are cheaper on websites that cut out estate agents altogether.
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