You can become a landlord…and here’s how

Unlike other investment strategies – complex pensions, scary stocks and shares or crazy crypto currencies – many of us have a head start when it comes to investing in property, as most of us are familiar with the concept of renting.

If you’re planning for your financial future or are looking for better short-term returns, property looks set to be the star performer in 2021. Even for the uninitiated, the inexperienced and those with insubstantial amounts of immediate funds, investing in property is more attainable than you would imagine. Here’s how you could dip your toes into property investment this year.

Make the most of money saved

With restaurants, bars and leisure facilities shut, and international travel off limits for most, it will come as no surprise that 85% of UK adults spent less money during lockdown. In fact, the results of a study by AA Financial Services, released in December 2020, revealed that the average Brit still receiving their full income had saved an average of £617 a month. If you’re fortunate enough to find yourself flush, you may start thinking about investing any saved money in property.

Get better returns than savings accounts

The same AA Financial Services study also found 31% of people with savings accounts increased their monthly deposits at some point during lockdown – a stat backed up by the Bank of England, whose own data showed personal bank deposits had grown by three times the recent average.

If you have a stash of money in a savings account, now is a good time to review how much interest you’re earning, if anything at all. The Bank of England’s data showed a record £215.3billion sitting in instant access accounts that paid zero interest, when analysed at the end of October 2020, and it’s common for even the best ISAs available today to only reward savers with interest around the 1% mark. In comparison, SevenCapital puts the UK’s average rental yield at 3.53% – dwarfing the return offered by most banks.

Rent out your current property

If you thought becoming a landlord required access to pots of cash, think again. If you own your own home, it is highly likely that you can turn your current residence into a buy-to-let. Some vendors choose to become a landlord if they can’t sell their property as quickly as they’d like, or if they’d like to retain ownership of a home (perhaps if they have inherited a dwelling with family ties). Instead of selling, they swap the open market for advertising their home as available to rent.

It’s usually a case of switching their current mortgage for a specific buy-to-let one, making it possible to free equity during the process so they can put a deposit down on an onwards purchase (what’s known as rent-to-buy). Some homeowners even choose the rent-to-rent path – renting out their current property in order to go and rent elsewhere. In either case, choosing to rent a property out instead of selling means the owner becomes chain-free behind them – a perk in itself – and they benefit from retaining an asset for the future.

Cash in your pension

Since April 2015, it has been possible for those over 55 to take a proportion of or their entire pension pot as cash, giving millions of people access to a lump sum that would have previously been tied up for years. There are some tax and future income implications that a financial adviser can assist you with, but an increasing number of people are choosing a property investment over a pension as a source of short and long-term funds, using their ‘pot’ to fund a purchase.

Ask about a ‘hands off’ property investment

If it’s the involvement, and not the cash investment, that’s stopping you becoming a landlord, ask about our lettings-focused management services. Did you know your participation could be as minimal as checking your bank account? We can take on the running of a rental property on your behalf – making sure the property is legally compliant, handling enquiries from your tenant and collecting the rent.