Simon Thompson, Chairman of The Landlord Syndicate said: "Before the recession, rising house prices fuelled investors, who were really speculators, to buy ‘discounted’ flats. The resulting house price crash left many of them holding property that would never pay for itself by rents because too many similar properties were grouped in a development, pushing down yields and prices."
There has been much debate on whether capital appreciation or rental yields are more significant when investing in property.
While any new landlord will look for security on their savings, according to The Landlord Syndicate, investing for capital appreciation is not the market driver, it’s holding on long term for yields that is key.
This is exemplified by those landlords who bought into buy to let for the long term with sensible mortgages and low costs, and are now profiting from rising rents, increasing yields and profits.
"For the foreseeable future, capital growth will be negligible and hence rental yields are crucial, demonstrated by the fact that lenders view rental yields more critically than in the past," Thompson said.
In terms of what to invest in and where, The Landlord Syndicate said the share of houses was increasing more than ever and landlords seemed to be buying and developing three or more bedroom properties as they increased in popularity, particularly outside of London.
Kesh Thukaram, member of The Landlord Syndicate and Managing Director of Best Insurance said: "Today 25% of the new-buy properties we reference are houses compared to two years ago. These are mainly traditional three bedroom semi-detached or terraced properties and HMOs, subsequently the number of tenants we reference with children has also increased by 30% in the last 12 months."
Location, when making any type of property purchase, remains paramount. The focus is areas with high owner-occupier status and an emphasis on safety, family-orientated with decent transport links and good schools.
"This is the best strategy for long-term growth, as it makes for an easier exit (sale) and retains long-term tenants," said Nick Lyons, another member of the syndicate and Managing Director of specialist inventory firm, NoLettingGo.
Thompson said: "Buy to let in the next 10 years will be increasingly regulated with more laws and rules to consider such as Tenancy Deposit Protection. So whilst the boom may be back, many inexperienced landlords or would-be investors need to understand the sector more than they did in the 90s/2000s. Fines for things like failing to protect or failing to licence HMO properties are onerous and can wipe out any short-term gains. And that’s without considering tax implications."
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