The Landlord Demographic – Who Are Britain’s Landlords?
An Englishman's home is his castle, except sometimes, it's not his castle, it's his landlord's castle.
One in five families living in the UK now rents their home - and the number is rising. Recent estimates based on data from HM Revenue and Customs suggest that there are at least 1.75million landlords in the UK who collectively earned a net £14.2billion in rental income last year.
But who are Britain's landlords and how do they invest? We talk to some of those helping to house generation rent.
The 'flow' of money (and school fees)
Nick Johnstone, 46 and an energy healer, invests in property through online investment platform LendInvest.
‘I find that one of the key issues people have with money is not respecting the flow of it,' he asserts.
'So if we see money fundamentally as a form of energy, like any form of energy it needs to be curated and treated with respect.'
He lends to property developers over a short period - usually up to a year - and has found that the returns so far have been up to 9 per cent.
There is one crucial thing to remember here, however. Ultimately his capital is at risk of complete loss because peer-to-peer investments are not covered by the Financial Services Compensation Scheme, ‘I feel that I’m lending to a human being who’s in a position where they need to get that money together to do what they need to do. I think that’s worth doing, particularly in a country where there is a ridiculous amount of red tape around planning. I always feel for property entrepreneurs who want to do anything because it’s made very difficult in this country.'
The 'flow' of money theory to one side, Johnstone is one of many thousands of parents in the UK needing to find the money to pay for ever-increasing school fees.
'My wife and I have an 11-year old daughter who just started senior school,' he says. 'It’s private education so there are school fees to pay and I wanted to find a vehicle that would support some really solid growth towards paying the fees. The returns support that in a way that everything else I see in traditional banking - I’m not going to be getting anything other than a few weeks of school fees in return.'
The former royal marine who went from one property to seven
Holidays, school fees and saving for a deposit may be how it starts. How it progresses, most conventionally, is buying a property and becoming a landlord.
Richard Bowyer (pictured), 44 and a former royal marine in the British Army, is a more traditional landlord. He bought his first property in London in 2001 having saved a deposit from his salary.
He spent a summer renovating it and says it was then he realised he had an ambition to become a landlord.
'I'd made more money on that property in six weeks than I made in a year being a marine,' he says.
'I loved my job and I kept doing it until a year ago but it was back then that I decided to start building a portfolio of properties to let out.'
Bowyer now owns seven properties both in London and on the south coast of England. He is about to purchase his eighth but is circumspect about how tenable being a landlord is now.
The sector has suffered several blows in the past year, including a hike in the stamp duty payable by landlords since April this year. Next year tax relief on mortgage interest payments will be phased out as well as the removal of the wear and tear allowance.
'I've had to set up a company specifically for the purpose of buying and holding property in order to qualify for better rates of taxation,' he says.
'My existing seven properties are all in my name and not in a company and if I'm realistic, by the time we get to 2020 I'll be making a loss on those. I am hoping to find a way to transfer them into the company that won't wipe out the benefit by incurring even more tax.'
His advice for anyone thinking of becoming a landlord is to the point: 'Get yourself educated and take action.'
The step before the step onto the housing ladder
Josie Blanchard (pictured above) is 23 and a property manager from London. She's not a landlord herself - yet - but she has aspirations and is already putting her money into property.
She is one of thousands of Britons taking advantage of the returns on offer by lending their money to landlords and property developers through peer-to-peer platforms.
She also invests through platform LendInvest and may not provide the bricks and mortar directly but she is part of a growing number of landlords by proxy. While it's still early days for the sector, peer-to-peer lending - where individuals can lend directly to landlords or developers and be paid a return on that loan - is becoming increasingly popular and is funding more and more homes.
'Even though you’re young, it’s definitely important to think about your future and what your money can become if you invest it quite early on,' she says.
'It’s also a really good short-term way of topping up my holiday piggy bank to be honest. Longer term I’ll be looking at wanting to buy my first property and that is something I would look at saving for by investing.
'The returns are so much better than conventional savings rates and you can actually see what your money is going into, rather than just passing it onto the banks and not knowing where it’s going.'
I got the property bug and started aged just 23 - then prices fell
Robert Bence (pictured below) has been a landlord for 10 years after buying his first buy-to-let property on the Wirral at the age of 23.
'I was working for a developer in Warrington and talking to lots of property investors,' he says. 'It was 2006 and the market was in full boom time. It seemed exciting and talking to all of those people who were making a success of it really gave me the bug. That's when I bought my first investment property which I still own.'
It wasn't plain sailing however. Just a year later property prices started to fall as the banks faltered and the financial crisis hit.
This should serve as a lesson to all those considering investing property - prices go down as well as up.
'That was a little bit scary and it meant I couldn't invest in another property for a good few years, which I had been planning to,' says Bence. 'But by 2009 or 2010, I was back in business and bought a second property - in Leeds this time.'
Bence's passion for property has not stopped with his own portfolio - now more than 10 properties strong.
In 2011 he started a company, RMP Property, to provide would-be landlords and investors with help and advice on how to manage a portfolio of investment properties, where to purchase and how best to approach becoming a landlord.
That then developed into a podcast - The Property Podcast - which now has over 100,000 downloads every month.
'There are so many people interested in property investment but one of the things I've learned through investing in property is that it's not easy,' he says.
'It used to be, but the government definitely seems to want to move the sector away from casual investors who have maybe one or two properties they've bought on their doorstep.
'I've changed my model and now invest in properties through a limited company as a result of the tax changes that are coming in next year. Anyone thinking of becoming a landlord now really needs to educate themselves on what all of these things mean. It's not straightforward anymore.'
The institutional investors the Government wants
The government has been quite vocal about its desire to encourage larger institutions into the private rented sector.
Legal & General is perhaps the best example of so-called 'institutional investment' providing housing on a large scale.
'Across all of our exposure to housing, we have a pipeline of 70,000 homes and in terms of build-to-rent alone we have already committed £600million in a partnership with Dutch pension fund manager, PGGM,' says a spokesman for the firm.
'When the UK is only building half as many homes as it needs to annually, there is a huge requirement for more housing stock, so whether it’s homes to rent or buy, or improving the housing supply chain, L&G is committed for the long-term.
'A lot of our initial investment is funded from our own balance sheet using group capital as well alongside like-minded partners such as PGGM or the Homes and Communities Agency to deliver the right level of commitment. Over time, we also tap into other areas of L&G which need to deliver the right level of returns over a set period. And as one of the leading fund managers in the UK, we also manage investments on behalf of third party clients.'
Legal & General currently funds direct housing development for rent and for sale, including affordable homes, and has urban regeneration projects around the UK.
The firm also recently acquired around a 50 per cent stake in housebuilder CALA Homes and invests directly in student accommodation as well as funding a modular homes business to construct off-site homes from timber.
'Different investors will take different approaches but for us it’s all about taking a very long-term approach to building the best quality as we plan to invest in them for the long-term. We’re targeting a high quality of service to residents, aiming to establish a "service-led customer focused industry" in the residential rental market.