Let-to-rent as the property investor’s springboard
When first thinking about investing in property, you might consider how to release capital from the equity in your existing home in order to fund your first purchase. But if you haven’t yet taken the decision, you might consider taking a small step first to ‘dip your toe in the water’. Increasing numbers of people are acting like a property investor without realising it, thanks to the popularity of let-to-rent.
Let-to-rent: for work, lifestyle, and property investment
Let-to-rent is the act of letting your home and renting another. It’s gaining in popularity as an option for people moving away from their home for work or lifestyle reasons. A let-to-rent landlord benefits from retaining control over their home, and also the same tax and cash flow benefits experienced by a property investor.
In fact, as a first step to building a 3+1 property portfolio, let-to-rent is a great strategy in itself. For a start, you’ll benefit from some immediate cash flow benefits that include:
- No need to arrange a mortgage, so there’s no arrangement fees
- If you’ve maintained your home well, there will be little maintenance to do before finding a tenant
- You’re likely to have paid a chunk off the mortgage, and already be benefitting from some capital growth
But that’s not where the benefits of starting off your property portfolio with a let-to-rent stops.
Positive cash flow immediately
The majority of let-to-rent landlords have moved away from the area where they own their home. They have owned their home for some time, and have a stored value in it that is difficult to release in its entirety. When thinking about why let-to-rent is better for relocating homeowners, the immediate savings of not selling and buying a new home amounts to an average of more than £12,000.
On top of this, the rent received is most commonly more than the new rent paid on the new rental home. This excess rent can be used in a number of ways: paying the rent on the new family home, for example, or using to buy a second investment property as other property investors would. This second purchase could also be aided by utilising part of the equity in the home.
A ready-made property investment opportunity
Let’s take the example of a let-to-rent homeowner, John, who moved to the North East for work. His home in London fetched around £1400 per month as against his new rental of £475 per month. For ease of administration, he used a property manager to source and vet tenants, collect rent, and maintain the day-to-day tasks of property management.
His new role easily paid his rent, so instead of using the excess rental income to increase his personal income John decided to investigate property investment and use his home as a property investor’s piggy bank. By releasing some of the equity in his home, he discovered that he could buy an off-plan property at a substantial discount to market value. He did his homework and researched different areas, deciding on a new development in London.
Now John has two properties (plus his rented home in which he lives) and a substantial income from rentals. The mortgages are easily serviced from the rental income, and he has built up a contingency fund for repairs as well as a pot of cash to act as a cushion should interest rates rise. He’s already well on the way to hitting the 3+1 mark, but intends to go further – and all because he took a let-to-rent route to becoming a property investor.
Join me – What the future holds for property investors
There are a few shifts in market dynamics on the horizon, and I’m going to discuss these and all the risks that I see at this time. I’ll also provide rock-solid methods to make money after the recent tax changes – while others are fretting about George Osbourne’s attack on property investment it doesn’t worry me.
I base all my property investment decisions on a tried-and-tested research process, and I’ll also be helping participants understand how we do this.
There’s a bunch more stuff I’ll be covering, such as how never to get knocked back on a mortgage application again and identifying your 6 best friends in property investment. And none of this matters if you then find yourself booged down in the day-to- day tasks of property management. I don’t know about you, but I didn’t begin a life in property investment to work hard and miss out on family, friends, and the other things that really matter to me. I’ve learned how to manage my properties effortlessly, and I’ll show you how to, as well.
Live with passion and fun,
Brett Alegre-Wood
