THE economic downturn has prompted a wave of new entrants into the buy-to-let (BTL) market and these learner landlords need to do their due diligence, claims the National Association of Residential Letting Agents (ARLA).
The YouGov SixthSense Buy-to-let: Landlords and Mortgages report reveals that the BTL market has shifted somewhat from long-term investors to more novice players with three distinct profiles emerging: Investors, Good Parents and Reluctant Landlords.
These remain the predominant type of landlord – more than three quarters (76 per cent) of all landlords own a rental property with the main motivation being investment – but the profile of this group has moved towards shorter-term gain. The findings reveal that, in 2013, more than half (56 per cent) of new landlords consider their buy-to-let property as a short-term investment as they look to capitalise on low interest rates and schemes such as the Government's Funding for Lending programme.
In this case we have homeowners forced to rent out their homes because they've had difficulty selling. This sector has also grown in size since the downturn. Almost three in 10 (28 per cent) of landlords who entered the market in 2012 did so reluctantly with at least one of the properties they owned.
Their move into BTL has been prompted by the need to offer financial support or provide a financial legacy for their children – and Good Parents now account for more than a quarter (29 per cent) of the market.
Susan Fitz-Gibbon, president of ARLA said: "The economic downturn has brought new entrants to the BTL market and has also had an impact on the way in which existing players invest.
"With more landlords entering the industry, less experienced individuals need to ensure they have done their research and fully understand that there are risks and responsibilities associated with the role.
"It is important to have realistic expectations of what returns you are likely to receive from your property; it is also important to remember the significant responsibility in adhering to regulatory requirements.
"Speaking to an ARLA agent should be a vital part in the research process. This will provide individuals with expert insight into the risks and responsibilities involved and they will receive important information and guidance on the process."
With this in mind ARLA has prepared these top-tip panels for each of the landlord categories.