Why do people become landlords? - Lets Manage North East

20th April 2016 No Comments

Why do people become landlords?

Posted by Susan Edwards in General

I often think about the reasons people buy investment properties and in the areas they do. Well, there isn’t an easy answer. It depends on many variables but most importantly, it depends on your circumstances. Everyone’s circumstances are different and require different things out of an investment property. The variables are:

  • Long-term investment
  • Proximity to property
  • Preference of areas
  • Budget

The long-term investment is a strategy to use if you don’t have a pension. In this case it is crucial to invest in an area where the properties will consistently rent and appreciate. These landlords often use interest-only mortgages and bank on the fact there is a high probability that houses prices will increase over 10, 20 or 30 years. However, I recently spoke to a landlord who banked on a 10 year increase and his properties have reduced in value as he bought at the height of the property boom. My advice is to take the 20 or 30 year option. It’s highly likely the return will be better than you would get from an interest account or good old-fashioned premium bonds.

Proximity to the property is an important issue for some landlords who have made a hobby out of their investment. This is common with recently retired folks and people involved in the building industry. They choose houses close to them to they can be on hand to carry out any maintenance as and when needed. These people take enjoyment in being involved with their properties and are hands-on. It’s a lifestyle choice for them.

Preference of areas is an important choice if you want to make life a little easier. People choose areas they know – often a neighbouring village or town. The advantage of this is that they know the market intimately and know the sort of people they can attract to the property.

Budget is vitally important after all the point of an investment property is to make money and you’re probably not investing in property for the good of health. Sensible people stick to their budget and don’t get over-excited and buy a too cheap or too expensive property. Properties that seem too good to be true generally are and will ultimately cause you a mountain of hassle in the long-term.

In conclusion, you need to think carefully before buying and look at your budget.

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