However, The Landlord Syndicate, a network of companies providing a complete and free support centre for landlords, is urging new and existing landlords to take a more cautious approach this time, focusing on affordability, location, and commitment in order to avoid past mistakes.
Simon Thompson, Chairman of The Landlord Syndicate comments:
“Before the recession, rising house prices fuelled investors, who were really speculators, to buy ‘discounted’ flats. The resulting house price crash left many of them holding property that would never pay for itself by rents because too many similar properties were grouped in a development, pushing down yields and prices.”
There has been much debate on whether capital appreciation or rental yields are more significant when investing in property. Whilst any new landlord will look for security on their savings, according to The Landlord Syndicate, investing for capital appreciation is not the market driver, it’s holding on long term for yields that is key.
This is exemplified by those landlords who bought into buy to let for the long term with sensible mortgages and low costs, and are now profiting from rising rents, increasing yields and profits.
Simon continues:
“For the foreseeable future, capital growth will be negligible and hence rental yields are crucial, demonstrated by the fact that lenders view rental yields more critically than in the past."
In terms of what to invest in and where, The Landlord Syndicate says the share of houses is increasing more than ever and landlords seem to be buying and developing three or more bedroom properties as they increase in popularity, particularly outside of London.
Kesh Thukaram, member of The Landlord Syndicate and Managing Director of Best Insurance says:
“Today 25% of the new-buy properties we reference are houses compared to two years ago. These are mainly traditional three bedroom semi-detached or terraced properties and HMOs, subsequently the number of tenants we reference with children has also increased by 30% in the last 12 months.”
Location, when making any type of property purchase, remains paramount. The focus is areas with high owner occupier status and an emphasis on safety, family orientated with decent transport links and good schools.
Nick Lyons, another member of the syndicate and Managing Director of specialist inventory firm, NoLettingGo, said:
“This is the best strategy for long term growth, as it makes for an easier exit (sale) and retains long term tenants."
Simon concludes
“Buy to let in the next 10 years will be increasingly regulated with more laws and rules to consider such as Tenancy Deposit Protection. So whilst the boom may be back, many inexperienced landlords or would be investors need to understand the sector more than they did in the 90's/2000's.
"Fines for things like failing to protect or failing to licence HMO properties are onerous and can wipe out any short term gains. And that's without considering tax implications”.
