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Do you want to become a landlord?

Do you want to become a landlord?

Category: Buy To Let

Updated: 09/09/2015
First Published: 09/09/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Have you ever thought of becoming a landlord? If so, you're not alone: not only is activity in the market booming, but a growing number of people are thinking of giving it a go.

The future's looking bright

Bank of Ireland UK has taken a closer look at the area and found that almost 50% of property owners surveyed had aspirations to become a landlord. London continues to be the area that's the most aspirational, with 72% of respondents in the capital saying they'd become landlords if they could afford it, a figure that's understandable when you consider the rents that can be achieved in the city.

But just why is the future looking so bright for the buy-to-let (BTL) sector? Well, much of the overall figure has been driven by the change to inheritance tax (IHT) rules and the recent pension freedoms, which have given retirees unfettered access to their pension savings – and the chance to spend it on property should they wish. In fact, 20% of property owners said that they're more likely to invest in BTL as a result of the pension reforms, and 22% said the same about the IHT changes.

It could also be attributed to the belief that BTL is a better long-term investment than some alternatives, with a net balance of 45% of respondents believing that it will outperform cash. This is another figure that's perhaps unsurprising – average rents have hit a record high (£804/month) and the returns that can be achieved are impressive, with research from Reeds Rains and Your Move estate agents showing that the typical landlord saw an annual return of 8.7% in the year ending July 2015.

Compare this with the average rate for a one-year fixed rate bond, which currently stands at just 1.45%, and you can see why property is becoming such an attractive investment. The benefits appear to have hit home with landlords, too, with mortgage lending in the sector clearly being on the rise. Official data from the Bank of England shows that the value of buy-to-let mortgages advanced stood at £8.3bn in the second quarter of the year, up from £7bn the year previously, showing that the sector is becoming increasingly attractive.

"Our survey shows that buy-to-let continues to be popular among homeowners and landlords alike," said Mark Howell of Bank of Ireland UK Mortgages. "With the recent pension freedoms many investors are taking personal responsibility for their finances and are turning to familiar investment vehicles such as buy-to-let, and we expect this trend to continue."

Time to get in on the action?

Given its burgeoning popularity, not to mention the fact that mortgage rates are at exceptionally low levels – and that there are more buy-to-let mortgages available than there's been in seven years – you may be considering your options. You may be even more tempted if you've withdrawn cash from your pension pot, but as with any investment, it's important to think it through carefully.

You'll want to get professional financial advice before you take the plunge and will need to make sure you're getting the best buy-to-let mortgage possible, and don't forget to consider things like landlord insurance and your tax liabilities. But, if you've thought it through and have decided it's for you, now could be a great time to get in on the action!

"The mortgage market has stabilised after a post-election bounce, and the current political stability makes for clear sailing in the buy-to-let market," said Adrian Gill, director of estate agents Reeds Rains and Your Move. "With mortgage repayment rates so low and returns still remarkably enticing, there's rarely been a better time to get investing in rental properties." So, check out our buy-to-let best buys and see if you can take the first step towards becoming a landlord.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.