Do you want to be a landlord or a property investor?
Before you pay out a single penny on an investment property, the question of what you want your future to look like should be your very first consideration. Your objectives and your dreams for tomorrow will dictate which investment philosophy you pursue. At the heart of property investment is a single question: do you want to be a landlord or a property investor? Your decision could prove to be the biggest lifestyle choice you’ll ever make.
In this property investment blog, we encourage you to explore what it is you want from property investment before discussing the main differences between being a property investor and a landlord.
The benefits of property investment
Property investment is number one for income investing and has consistently outperformed the sharemarket when it comes to capital gains. With demand always outstripping supply − and set to do so for years to come − the potential for investors who buy in the best places to invest in property UK to see both capital growth and long-term positive cash flow is almost set in stone. How you access those benefits is your choice.
Why do you want to invest?
Even the most experienced investors can’t tell you the real reason they invest. Most will say they make investments to make money. They want to buy that Ferrari or live in the country mansion they’ve always coveted. Perhaps to buy goods and services that will make their life easier.
But this is missing the point. You can have all the money in the world, but if you don’t have the time to enjoy it, then what is the point of buying an investment property?
Think about property investing like this: is your real underlying objective of your investment strategy to make money to buy time so you can enjoy that Ferrari, your country pad, and your yacht, or do you like baubles only to look at and brag about?
What is a landlord?
If you invest in property for income, you’ll become a buy-to-let landlord. But this doesn’t mean you have to be an active landlord. You may want to take on the day-to-day landlord responsibilities and duties:
- Tenancy agreements
- Arranging gas safety certificates and electricity checks
- Collecting rent and chasing up late payment
- Finding, controlling, and paying local maintenance and repairs specialists
- Fielding calls from tenants at times that suit them
If you have one property, then undertaking its day-to-day property management may not be overly taxing (apart from the disturbances at work). However, the likelihood is that one property won’t be enough to achieve your financial objectives. Every time you buy another property and take on the activities of property management, you increase the amount of work you undertake. More work equals less time.
What is a property investor?
As a property investor, you’ll be less concerned about getting your hands dirty with the day-to-day issues and problems of an investment property. You want to spend your time with family and friends, and doing the things you love doing. You’ll also put time and effort into researching new property investment opportunities.
To be a pure property investor, reaping the rewards of passive income, you’ll need to employ the services of a property management company. They’ll take care of all the day-to-day responsibilities that can take so much of your time, while you take advantage of property investment income.
Key differences between active property investors and active property landlords
By now you’ll have gotten the idea that there is quite a difference between being a property investor and a buy-to-let landlord. And you’ll be right. As an investor, you could make more profit over the long term. As a landlord, you’re more likely to replace your current job with your landlord duties. You’ll save money by not employing the services of a property manager, but the cost of saving that money will be your time.
Here are four key comparisons between investing in property and managing property:
1. Passive income vs. active income
As an investor, you don’t want to get involved in the hassle of property management. You want and need your property rented by great long-term tenants, but you’ll leave marketing your property and vetting tenants to the professionals. You don’t want to be bothered by having to write watertight tenancy agreements, chase rental payments, organise repairs and maintenance works, and keep on top of the best insurance products. You’re prepared to pay for all these day-to-day tasks of property management to be done for you because you know how to value your time as a buy-to-let landlord.
2. Focus on investment vs. multitasking
Property investors focus on the investment, while property landlords focus on managing the property. If you love getting your hands dirty and managing multiple relationships, then you’ll love filling your time with landlord tasks.
If you want to concentrate on improving your property investment knowledge, searching out the best places to investing property UK, and refining property investment strategies to meet your financial goals, then you are a natural property investor.
3. Avoiding tenants that pester vs. tenant hand-holding
An investor doesn’t want to get close to their tenants. They’re not interested in their tenants’ problems, and they don’t want to be troubled by complaints about dripping taps and oven fans that don’t work. They certainly don’t want to field calls at silly o’clock in the morning. It doesn’t mean they don’t care, nor that they don’t want their investment property to be well maintained. It’s simply that they don’t want the hassle.
If you’re the type of property investor who loves the daily hassle, being busy with maintenance and having a close business relationship with your tenants, then you’ll love the daily grind of managing your properties. You are cut out to be a full-time landlord.
4. Planning for investment vs. planning for property management
Property investors plan for property management costs in their cash flow projections. They keep finances flexible, taking into account that they want to enjoy holidays when they want. They don’t want their current jobs to be invaded by their private property investments.
A landlord has to be on hand. If there are problems, they’ll need to be there to sort things out. Holidays are an issue, with temporary cover needed. And they’ll probably still get that unwanted call while they’re sitting on the beach with their children.
Avoid emotional attachment to your property investment
Most property investors I know – myself included – make lousy active landlords. That’s because they’re concentrating on the numbers. They’re searching for the next deal. Focussed on investment.
Those property investors that become landlords tend to surround themselves with a network of professionals who do the work for them. They spend most of their time coordinating and checking work done, speaking to tenants, chasing payments, and updating paperwork. In other words, they become the property manager that property investors hire. The difference being that property investors benefit from hiring professional property management services companies with plenty of experience and satisfied clients behind them.
Amateur property managers (aka landlords) very often become emotionally attached to their property and tenants. They find it increasingly difficult to take the hard decisions (such as eviction), and this can easily lead to underperformance of an investment property portfolio: another reason to be a property investor and not a landlord.
To discuss your financial goals and how property investment can best meet them, contact us today on +44 (0)207 923 6100.
Live with passion
Brett Alegre-Wood
