A majority of new buy-to-let landlords see property as a short-term investment, according to new research.
A poll by the Association of Residential Letting Agents (ARLA) has found that the objectives of new entrants to the buy-to-let market are based around short-term gains rather than the long term.
While over three-quarters of buy-to-let investors (76%) see property as a fully-fledged investment, over half of new landlords (56%) see investing in a buy-to-let property as a short-term investment.
Investors are keen to exploit the higher availability of mortgages and lower rates that have arisen as a result of the government’s Funding for Lending Scheme.
There has also been a rise in the number of landlords who have decided to rent out their home because of difficulties in selling.
But the ARLA has warned new ‘novice’ entrants to the buy-to-let market that they need to "do their due diligence".
"The economic downturn has brought new entrants to the buy-to-let market and has also had an impact on the way in which existing players invest," said ARLA President, Susan Fitz-Gibbon.
"With more landlords entering the industry, less experienced individuals need to ensure they have thoroughly researched and fully understand that there are risks and responsibilities associated with the role."
Buy-to-let lenders usually prefer that rental income on the property exceeds the mortgage repayment by around 25%. This accounts for costs such as maintenance, insurance, and periods of vacancy between tenants. (See our brief guide to buy-to-let rent and costs for more details).
The negotiation for landlords is whether the amount of rent required to secure the property is feasible for the property type in the location of their search.
"It is important to have realistic expectations of what returns you are likely to receive from your property," Ms Fitz-gibbon added.
"It is also important to remember the significant responsibility in adhering to regulatory requirements."
ARLA’s list of recommendations to investors includes factoring in periods of vacancy, which has increased slightly in recent weeks, and tailoring their property to a specific category of tenant.
Keith McDonald
Which4U Editor
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