'Learner landlords' change face of buy-to-let

Reluctant landlords have been a bit of a buzz word over the last few years and to mark the trend away from traditional property investors the Association of Residential Letting Agents (ARLA) has now divided landlords into three groups - investors, good parents and reluctant landlords. 

We thought we'd share their thoughts and let you decide whether you think you fall into one of those groups. Within each group, ARLA describes a sub group of those new to buy-to-let (BTL) as 'learner landlords', which is possibly quite an apt description?

But let's take a look at the three groups:

(1) Investors

The majority of all BTL investors own a rental property as an investment. The main change in this group has been a move towards expecting a shorter term gain. While many investors used to look at property as a long term investment, this year, over half of new landlords were looking to "capitalise on low interest rates and schemes such as the Government's Funding for Lending programme".

(2) Good parents

Bearing in mind some members of this group will also be genuine investors interested in a profit, they have moved in to BTL to provide financial support or a legacy for their children. Over a quarter of landlords now cite this as one of the reasons for their investment.

Looking at Edinburgh student property, there has always been a group of parents who bought a flat when their first child went to uni and rented the other rooms to the child's friends. Once their course finished they became bonafide investor landlords, renting to the student market.

(3) Reluctant landlords

Probably the best-publicised group of the three, the number of reluctant landlords has grown since the recession started with those unable to sell their homes renting them out for the time being. Whilst generally looked at negatively, entering the market reluctantly does not necessarily mean a landlord is 'bad' or unsuccessful. 

What is important for any landlords is to work out their figures, ensure the rent generated by the property in question covers its outgoings and to also plan for void periods - most of which can be taken care of by a reliable letting agent. 

Rental market activity soars

Over the past couple of weeks, we've talked about the property market picking up in general. A Bedfordshire-based lettings company has now released their latest research, showing tenancies have increased in the UK by 22% last year and 20% in London.

How did that come about? While mortgage finance has become more widely available and 95% mortgages are back (we blogged about it a few times), many would-be first time buyers continue to struggle to take that first step onto the property ladder.

At the same time, property prices have remained relatively low for a few years and are still well below those achieved at the peak of the market in 2007, which has enabled investors to grab a number of property bargains.

Edinburgh students queuing to view a Marchmont property

Whilst a good choice of affordable buy-to-let finance took longer to become available, tenant demand continued to rise. Prospective investors and landlords are now in a position to choose between both desirable mortgage deals and great properties with high net yields. Take the months of may and June as an example: Over the space of three weeks, the Cullen Property team bought over £1 million worth of investment properties on behalf of our clients.

Looking back a little further, at what we consider 'student rental season' between February and April it's clear to see why residential property in Edinburgh, especially that aimed at the student market, remains so popular - all flats that became available for the coming academic year were rented out to new tenants within a number of weeks.

Good news keep rolling in for property market

Last week, we blogged about property sales across the UK rising. Taking a look at Edinburgh itself, the Edinburgh Solicitors and Property Centre (ESPC) has published its quarterly report showing that the last two months' house sales in Edinburgh and the Lothians have reached their highest level in five years.

Some commentators have rightfully pointed out that this increase has a 'catch': while sales numbers are up, house prices are still falling, especially in the city centre. However, in some Edinburgh suburbs, house prices are increasing by as much as 15% over the last twelve months.

Whilst this large increase may be a one-off, it has encouraged additional sellers into the market, giving buyers - including investors - more of a choice. And with house prices remaining stable it's a good time to look for great deals.

Add to this the Bank of England's announcement that interest rates are not going up for a number of months, and it's easy to see why confidence is returning to the property market.

At Cullen Property, we regularly source promising investment properties such as the ones in the picture. Click here for a list of our most recent opportunities. If you'd like to be the first to know about them, drop us a line with your email address and we will add you to our mailing list.

Property sales are up - good news for investors, too

Property sales in Edinburgh and the Lothians are increasing with both the Edinburgh Solicitors Property Centre (ESPC) and the Royal Institute for Chartered Surveyors (RICS) reporting continuously increasing demand during the second quarter of 2013.

After a number of months of displaying 'green shoots' the property market certainly seems to be on the up. And the trend is not just restricted to the east of Scotland - estate agents and solicitors in Glasgow and on the west coast are seeing equally promising developments.

Why is it good news for property investors? Faster sale times and generally increased activity will encourage more potential sellers to put their property on the market. At the same time, prices continue to remain in the 'sensible' bracket, with average house prices in Edinburgh over 4% lower than they were at the same time last year.

Whilst it wouldn't be wise to look at the figures only without taking into account the types of properties sold it's certainly an indication that great value properties continue to be available. At the same time, despite increasing property sales the rental market remains buoyant, especially in a city like Edinburgh where a growing affluent student population makes up a large percentage of potential tenants. 

We'll keep a close eye on further developments and will keep you posted on this blog. In the meantime, feel free to contact us for more detailed information.

Green shoots for landlords?

The last couple of days have seen a host of stories about landlords, buy-to-let mortgages - and often the main messages have been contradictory.

Research from the Association of Residential Landlords, ARLA, is claiming that tenant demand is decreasing  whilst landlords are increasingly willing to buy new investment properties. At the same time, a third of landlords questioned by Paragon Mortgages found that buy-to-let finance is becoming more readily available.

So, are we facing a situation where landlords will be struggling to fill their flats? Far from it. Taking a closer look at the ARLA survey, tenant demand is based on members stating whether they believe there are more tenants than properties. This quarter, 54% said they felt demand outstripped supply, down from 57% last quarter. So, more than half of the landlords asked feel that demand continues to outstrip supply.

This will remain the same for the foreseeable future, especially in a city like Edinburgh. Here, demand continues to grow because the number of students coming to the city grows (and is forecast to grow) year on year.

At the same time, recent graduates are no longer in a position to buy a property immediately after they finish university which has lead to growth in the professional lets market. Combine these developments with researching the property you're interested in and investing in a sought-after area and property remains a solid investment.

Changes afoot for BTL mortgages

Similar to their residential counterparts, buy-to-let mortgages require applicants to tick a number of boxes before money changes hands.

Traditionally, requirements for BTL mortgages are based on both the property's potential as an investment and the buyer's financial background, including their annual income.

BTL mortgage provider BM Solutions, which is owned by Lloyds has now changed its criteria and removed the minimum annual income requirement of £25,000. The lender's reason behind the change? They believe that the affordability of a BTL property depends more on the actual property and the rental income it is likely to achieve than the buyer's finances.

Buyers are still required to state their annual income on the application, though. A step in the right direction? We're undecided. Whilst we agree with the notion that the success of a BTL investment is largely down to the selected property, there is an argument to check the buyers finances on a more general basis to ensure they can afford the property in the long term.

On a different note, Prime Minister David Cameron used this week's Prime Minister's Questions to clarify that the government's Help to Buy scheme will not extend to BTL mortgages, but is squarely aimed at owner-occupiers. Also excluded are those without a UK credit history to avoid foreign buyers benefitting from the scheme.

Property investment is back - with a vengeance!

Over the last three weeks, the Cullen Property team has bought just over £1 million's worth of prime Edinburgh residential property on behalf of investor clients.

Whilst you could argue this recent activity is a fluke, we're convinced that it's a lot more than that: proof that the buy-to-let property sector is once again growing, both in size and popularity with investors. If you've been following property news - or our blog - you'll find that the writing has been on the wall for a little while.

For several months now, finance has been easier to arrange with the range of products available to prospective landlords growing and better deals becoming available. At the same time, investor confidence in the (recovering) property market has grown and, with interest rates remaining at record lows, property is once more becoming an attractive option to prepare for retirement.

The latest figures from the Nationwide also show that property prices across the UK are consistently growing - a definite sign of returning confidence.

So, what did our team source for our investors? We hand-picked traditional tenement flats with at least three, but more often four+ bedrooms in areas that are popular with students. Whilst a couple of the properties selected require some refurbishment, all have high net rental yields which is essential for successful property investment.