“Investors Who Don’t Give Up the Day Job”
There are around 800,000 landlords in the UK, many of whom let property whilst doing a full time or part time job. Non-landlords often ask how easy or difficult it is to do this and whether they could do it too.
The attractions seem obvious. With property, unlike many other kinds of investments, you’re the one in control of your investment, not some anonymous fund manager in the city. And unlike shares it’s possible to actually see the investment too.
Not only that, but since we all need shelter there should also always be demand for property. Unlike a pension a house can be sold at any time, which you can’t do with a pension plus you can bequeath it to your heirs when you die.
Your Property Empire
By combining letting property with the day job and building a property empire, there is also the satisfaction of knowing that if your boss suddenly decides your face no longer fits there is still the rental income to fall back on.
It all sounds great in theory. But what about the downsides – tenants ringing you at all hours and the like. I decided to talk to 4 part time landlords to see how they did it, what the downsides are and what their tips are for people looking to become landlords now.
Buying and Letting Property
John Parton is a part time landlord based in Rochdale who combines buying and letting property with running his textile company. He bought his first rental property following a drink with a letting agent at his local squash club.
He says, “It just kind of snowballed from there really. I only bought my first one in 2001 but it worked really well, so I just kept going. I now have forty places each with an average value of about £90,000 and I’d like to get more. My houses are close to where I live which means I can manage them myself. “
Andy sticks to older terraced properties as he thinks they offer better value than new-build. “Some need refurbishing” he says “though usually nothing major."
Although he has re-mortgaged existing properties to finance new ones, he advises people to keep a cushion of cash “because sometimes big expenses come up unexpectedly.”
Letting to Tenants
He likes the fact that his property empire gives an income that’s reliable and he’s had few problems with tenants. His advice to new landlords, “Be flexible, be hands-on and know the area you are buying in. Also have reliable tradesmen you can call to get things fixed quickly.”
He has no desire to retire yet, though his success with property could make that a possibility.
Alex Drew from London also bought his first investment property in 2001. He mainly specialises in “one bed flats with something extra.” Like Andy Parton he lets close to areas he knows well and he too now has over 40 properties. With average flat prices in those areas at about £200,000 they must be worth about £8m in total.
Amateur Landlords
He’s quite clear why some amateur landlords go wrong. “Too many buy property for which there’s little tenant demand and they don’t take account of all the costs - things like service charges, maintenance and periods when the property is empty - known as the viod periods.”
He goes on to say, “People are often unrealistically optimistic about the kinds of rent they think they can get so their properties end up sitting empty for ages. It’s vital to ask realistic rents to prevent void periods.”
I asked him if there are too many people letting now or if the market is due to crash. He says, “There’s still huge demand from tenants for the right kind of properties.” But he cautions, “You’ve got to do your own sums and walk away if it doesn’t stack up as an investment.”
Nick Smith is another part time landlord who started back in 1992 with a London property. At the time he had wanted to sell, but prices were too low and so he decided to let instead.
Buying Investment Properties
He then moved to Manchester and in 1998 bought another property there. He now has 5 in the North West. With average prices at about £150,000 that’s about £750,000. He says, “Get to know the area well. Even 5 miles down the road there are different issues which can mean that what seems very good value is actually cheap for a reason.”
I ask if tenants can be a pain. He says, “It’s vital to reiterate the ground rules at the start of a tenancy. If you do all this you won’t have a problem. Treat tenants professionally but make it clear you expect them to pay rent on time every time and look after the property well.”
Buy to Let in the London Area
John Coyne lives in London. He and his partner started letting properties in 1998 after they ended up with a flat to spare. They bought others and kept re-mortgaging and he now has 20 properties of which 6 were bought this year. With typical London properties at about £250,000 that’s roughly £5m.
He readily admits that when he started he “didn’t have a clue” but has since read up a lot. He advises new landlords to read some books on letting first.
Whilst John has re-mortgaged, he has been careful not to over-stretch himself financially. He says he often hears of amateur landlords who aren’t even aware that they have a duty to maintain their properties and keep things in working order.
“All my properties are in London, and less than 30 minutes away so I can get there if I need to.”
Whilst he is hopeless at DIY it doesn’t matter because he knows people he can trust to fix things properly.
Investing in Overseas Property Lettings
John is very wary of venturing into areas he doesn’t know and is worried about the large numbers of people investing in property overseas in Europe. “It’s risky - they could lose a lot of money.”
He has no plans to retire soon and fully expects to buy more in the future.
If you are a part time investor in buy to let, it can be hard to manage your properties, keep up to date with the law and do your day job all at the same time.
About David Lawrenson and LettingFocus
I’m David Lawrenson from property mentors LettingFocus.com.
LettingFocus.com offer unbiased landlord advice because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer or bridging loan financier.
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