Paul Brett, Managing Director, Landbay

Recently published data showing a record number of 47,000 property incorporations last year has reinforced the view among some commentators that the age of the amateur landlord is coming to an end. But is that really true?

Investors with up to three properties are often referred to, perhaps a little disparagingly, as ‘amateur’ landlords. And for regulatory purposes, they are classified as non-portfolio landlords, with the Prudential Regulatory Authority (PRA) defining a portfolio as comprising four or more mortgaged properties.

But buy-to-let investing remains a lucrative option for many so-called amateur landlords, despite tax changes that have put them at something of a disadvantage. Despite that, property investment remains an attractive opportunity for many of them, providing a good income stream, perhaps for some older borrowers to top up their pension income.

Long-term investing

Many of these older investors plan to continue to hold on to their properties for the longer term, thereby boosting their prospects of capital growth to augment the rental income stream. Some in this age group have already been owner-occupiers for decades, perhaps, therefore, seeing strong growth in their equity holding, which they may be able to draw on as a source of funding for investment in buy-to-let.

Perhaps not surprisingly, therefore, data released by UK Finance showed strong growth last year in the number of buy-to-let investors aged over 55. The figures showed there were 17,570 buy-to-let purchasers in this age group in 2021, an increase of more than 56% on the total of 11,240 in the preceding year. Within the over-55 age group, the percentage growth in the number of buy-to-let borrowers was stronger in the year than the increase in the numbers of both home movers (43%) and first-time buyers (38%).

There are other ways in which both property transaction costs and the acquisition of equity by existing owner-occupiers over a long period can encourage an increase in the number of ‘amateur’ landlords, operating small portfolios or perhaps even a single property.

With stamp duty land tax rates now ranging from 2% to 12%, many homeowners are perhaps reluctant to sell their homes and buy afresh if they find a job elsewhere in the country, particularly if they are likely to be working on a short-term contract. In those circumstances, they may prefer to hold on to their existing home but rent it out, particularly for those who want to live in their existing family home in the longer term.

Another reason why some older owner-occupiers might consider drawing on equity in their family home could be to help a son or daughter with living costs while studying at university. A survey completed by Trussle found that 66% of parents would consider purchasing a buy-to-let property in their offspring’s university town for this reason. More than half (53%) would even consider downsizing in order to do so.

Rental yields

With the money-saving website Save the Student estimating average student rental bills at £633 a month, accommodation costs make up a large part of the average student debt of £27,000 in 2020, according to Times Higher Education. For parents with student offspring in towns and cities where properties are less expensive, rental yields can be attractive. Trussle estimated that landlords with a student property in Newcastle, for example, could achieve a yield of almost 10%.

For a variety of reasons, then, it may be premature to predict the demise of the amateur landlord. A report published last year by the London School of Economics of behalf of the National Residential Landlords Association found that 64% of landlords had between one and three properties. This was split into 32% of landlords owning one unit, 19% with two and 13% with three properties.

Because Landbay is a specialist buy-to-let lender, some people may think we only lend to professional landlords but nothing could be further from the truth. We lend to all types of landlords, including those who are new to property investment but would always advise a landlord to take professional advice from a suitably qualified tax adviser who understands the rental market.

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