"Landlords require support in navigating the complexities of the market, whether that is how they finance their portfolio and purchases, or keeping pace with tax and regulatory reform."
- Paresh Raja - Market Financial Solutions
There are some 2.8 million landlords in the UK, according to recent estimates.
That represents a vast, diverse collection of people and businesses, ranging from seasoned landlords with large portfolios right down to first-time landlords and those with just one or two buy-to-let properties.
Broadly speaking, landlords are specialists; it’s their full-time job, and they are both skilled and experienced at sourcing and managing the assets. In fact, the average UK landlord has nine properties in their portfolio, and 40% have been operating lettings for between 11 and 20 years.
But there is a sub-group of landlords who are very often overlooked: the accidental landlords.
What is an accidental landlord?
Simply put, an accidental landlord is someone who unexpectedly stumbles into the BTL market. Without having planned to invest in a rental property, people readily find themselves in a situation wherein they own a house or flat that they do not want or need to live in, and so let it out to tenants.
There are several common scenarios in which this happens:
Inheritance
Inheriting property is very common across the UK. A study by Zoopla, for instance, revealed that Britons expect to receive £195,687 from their parents’ inheritance, with a property (£182,621) accounting for the vast majority of it.
Crucially, only 12% of people who inherit a property go on to live in it – the remaining 88% either sell the asset or rent it out.
Moving in with a partner
Another common occurrence is when two people, both of whom own their own homes, choose to cohabitate. One will move into the other’s property, or sometimes they will rent or buy a new place – the end result is that one or both of the already-owned homes is let out.
Relocation
Whether within the UK or abroad, relocating for work or family life is something many people have to do, and it’s sometimes not planned. If they already own a property, they may opt to let it out as they go on to rent or buy in the new location – this might be because they expect to return to their previous property one day, or they see it as an attractive option for a BTL asset.
Downsizing
63% of landlords in the UK are aged 55 or over, data suggests. Again, many of those are full-time, professional landlords, but there are some in this older age bracket who end up becoming a landlord as part of the downsizing process.
Some couples or individuals will choose to move to a smaller home once their children have flown the nest – while many will sell their existing property to finance the move, others will be in a position to buy a new smaller property while being able to keep hold of their existing one, which they then let out to receive an additional income (those in or nearing retirement might choose to do this to top up their pension income, for example).
Supporting these accidental landlords
Whether planned or accidental, the enduring appeal of owning a BTL asset, which combines the potential for rental income with capital growth, remains strong in Britain. However, landlords require support in navigating the complexities of the market, whether that is how they finance their portfolio and purchases, or keeping pace with tax and regulatory reform.
No brokers or experienced landlords need to be told that the past decade has seen significant shifts in the BTL market and private rental sector. For those who have fallen into being a landlord for one of the reasons above, it’s clearly important that they are suitably supported.
Indeed, once they have developed some experience of letting a single property, it’s not uncommon that accidental landlords then look to expand their portfolio – but having not actively invested in a BTL asset before, and therefore not having gone through the process of securing a BTL mortgage, they will likely require more hand-holding from brokers.
More generally, in order to comply with ever-evolving standards and regulations in the PRS – incoming EPC rules are a good example – millions of landlords will need to be actively investing in their portfolios. Again, securing finance for renovating properties or reconfiguring their portfolios could prove challenging.
Just as with first-time landlords, accidental landlords might come across difficulties in securing the loans they require to start, expand or manage their BTL portfolios. There remains a reticence among some lenders to work with less experienced investors – this is where specialist lenders and brokers can assist in helping them navigate the market with confidence.
Ultimately, it’s always important that as lenders and brokers we recognise just how diverse the UK’s collection of 2.8 million landlords is. Different people with different goals and requirements – being able to tailor products and services according to the needs of an individual is essential if we are to celebrate and support diversity in the BTL space, rather than allowing it to become a closed shop.
