Could you make a career out of buy to let?

In what is a sign of the times, more and more people are now looking to rent their property as opposed to purchasing outright, which has created a very interesting opportunity for those looking towards the property market. Since 1999 the number of people renting property from a private landlord has risen from 2 million to just over 3.8 million. When you bear in mind that this equates to around 17% of the UK population this is a phenomenal change in trend.

This now begs the question, is it possible to make a career of out of a buy to let property portfolio?

Who is renting property in the UK?

If you asked somebody 10 years ago who were the main components of the private landlord rental market they would quite rightly have suggested single individuals or those who have parted company with their partners. The situation has changed dramatically over the last 10 years and a phenomenal 874,000 families now rent their properties in the UK which is an enormous increase from the 274,000 in 1999. There are many reasons why more and more people are now looking towards rental rather than outright purchase and this trend seems set to continue, at least in the short to medium term.

Quote from PropertyForum.com : “New funding will help councils in the UK take on the rogue landlords who make tenants’ lives a misery, Housing Minister Mark Prisk has announced.”

A recent report suggested that over 33% of families living in Blackpool and Bournemouth rent their property from a private landlord. While these are extremes in the UK, there are many other areas where rental arrangements are growing in number and will potentially dwarf outright property ownership in the future.

Does buy to let still work?

If you look back towards the 2008 economic downturn which impacted every corner of the globe, this had a monumental impact upon property prices. The UK had always been a very interesting market for the buy to let investor and indeed many private landlords, as opposed to institutional investors, began to try their hand. As the economy continued to grow, property prices continued to rise and mortgages were easier to obtain, many private buy to let landlords used their older properties to extend their investment debt and acquire new properties.

The idea was that as the economic upturn continued this would create safe income streams of rent from their properties which would earn more than enough to pay off ongoing mortgages. In principle the idea was workable, if not risky, but once the economy turned, the cracks began to appear and the buy to let industry imploded.

Falling like dominoes

Many private buy to let landlords acquired a number of properties in the boom times and when the financial and economic pinch came they were left high and dry. In what became akin to the collapse of a house of cards, a default on one property led to further problems with the properties and many buy to let landlords disappeared never to return again. This left many of the U.K.’s leading banks with buy to let properties on their books often housing tenants who were struggling to pay their rent because of the economic downturn.

The fire sale of buy to let assets meant that many buy to let landlords never saw the true value of their properties and many were left high and dry with large debts.

Conclusion

A slow steady approach to buy to let properties can and has been a success for many people over the years, even in the most difficult of economic times. The fact is that you cannot afford to extend yourself financially, these things take time, and you must view each property as an individual investment and not put at risk your whole portfolio property if one was to fall. Many of the private buy to let landlords simply took too many chances, paid over the odds for property and were looking to expand too quickly.

For those willing to build up a strong business with good foundations over many years, there is the opportunity at some point to make this a full-time career. The fact that 77% of private landlords in the UK have “second jobs” perfectly illustrates this point.