Nearly a third of buy to let investors would love to give up their day job to become full time landlords, according to research for one of Britain’s biggest landlord lenders.
The Mortgage Works (TMW), the buy to let arm of the Nationwide, reckons 29% of property investors would like to see their properties become their main source of income.
So how many properties does a buy to let investor need to make the switch from part time to professional?
The TMW study suggests 10 is the magic number.
The figures reveal buy to let investors with between five and 10 homes rises from 14% to 37%, while those with 11 to 19 properties sees the number surge to 55%.
But the number of properties is not necessarily enough to make that passive property income dream come true, argues the Nationwide.
Gearing, the society says, is one of the secrets to unlocking the potential of a letting portfolio.
- Gearing spreads the risk of the business over several properties
- Allows landlords to buy more than one property by letting them split their cash as deposits over several rather than buying a single home outright
- Offers property price appreciation over a portfolio instead of a single home
“Splitting an investment over multiple properties through buy to let mortgages has the potential to increase rental yield when rents and interest rates align in the right way. Since mortgage payments are tax deductible, it also increases the net rental income that a landlord receives,” says TMW.
“But bear in mind though, that using gearing to expand a buy to let portfolio leaves landlords more vulnerable to both interest rate rises and void periods. Longer term, fixed rate mortgages are one means of managing this risk, and building potential void periods into rental projections should form an important part of investment planning.”
TMW suggests buy to let investors should discuss gearing and expanding their portfolios with an independent mortgage advisor.