Despite a reduced demand by tenants for property in the second quarter of this year, investment by residential landlords has increased, as indicated by research from the Association of Residential Letting Agents. Even though only 54% of ARLA members now felt there were more tenants than rentals, those who felt landlords were increasing their overall investment in private properties increased from 30 to 39% between the first and second quarters of 2013; a reduction in landlords selling properties was also seen, down from 15 to 14% over the same period. However, landlords considering whether to add further properties to their portfolio are advised to seek expert advice to ensure that the investments they intend to make are financially sound; the property, area and price must all be right.
Student accommodation is one of the options that remain a lucrative investment for landlords, with demand by university students still growing and higher than average yields. According to Select Property, typically landlords renting to students can expect yields of 9.6% annually, which beats the yield offered by other forms of buy-to-let, which as a whole stands at 5.3%. It is therefore no surprise that a report by the property investment company showed that between 2011 and 2012 there had been a 125% increase in investment in student rentals. However, it appears for ex-pats that investment within new build homes in London is also very attractive, seeing it not just as a potential base for when they return, but as a way to supplement their income while living abroad. Modern properties offer an easier option to manage from overseas, but ex-pat landlords still need to remember that their rental income from these is taxed even though they live outside the country.
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Property investment no longer solely for retirement
Results from joint research by IBM Solutions and BDRC Continental Landlord Panel indicate that more landlords are now using private rentals as a means to top up their income. Indeed more than 40% of landlords surveyed reported using money from their rental properties to help meet their monthly outgoings. In 2011 most landlords were using rental opportunities to help build their finances in preparation for retirement, seeing this as providing the greatest return on their investment. However, by the first quarter of 2013 only 78% were landlords for this reason. That said, 70% of these respondents were planning to use the money from their tenants to live off and rental income was estimated to account for 62% of the financial provision for their retirement. While landlords can use rentals for short-term financial gains, they are advised to see property as a long-term investment.