Can we say that a landlord with three mortgaged properties is any less ‘professional’ than someone with four?
George Gee is commercial director at Foundation Home Loans
“That was amateur hour.”
With the football season back up and running – after what seemed like a five-minute break – there’s every chance that you’ll have already heard one of the many pundits or commentators using the above phrase to describe some shocking display.
However, the footballers on show are likely to be anything but amateur – we might all like to believe we could ‘do it at the top level’ or that those on the pitch every Saturday are somehow not head and shoulders above us, but consider what they have been through to get where they are, and you’ll soon understand that the difference between ‘amateurs’ and ‘professionals’ – in a football sense – is huge.
We cannot however say the same thing about our own working lives, in particular the oft-used labelling of ‘amateur’ and ‘professional’ when it comes to buy-to-let landlords.
In fact, before the regulator introduced its definition of what a portfolio (akin to professional) landlord was, I remember a long debate about whether it was actually possible to distinguish between landlords in such a way.
Now, that we have that definition, whereby a portfolio landlord is one that has four or more mortgaged properties, not including their own main residence, I’m not so sure that this truly gives us the right picture, and truly reflects the landlord community.
After all, can we say that a landlord with three mortgaged properties is any less ‘professional’ than someone with four, or indeed that those with fewer buy-to-let investments are somehow ‘amateur’ in their approach and the running of those properties?
From my perspective, the notion of being an ‘amateur landlord’ is something of a misnomer anyway. Pretty much every landlord I know that has one/two/three properties to their name, understands exactly what they doing, why they are doing it, what is required of them, and what they want to get out of the property in the long-term.
They are also just as likely to use a lettings agent or to be on top of the management of their property, even if it is not their full-time job.
Indeed, without the army of so-called ‘amateur landlords’ active, the UK’s private rental sector space would look very different. These landlords have stuck around, they are vital, and there is some data to suggest that their number is growing.
Recent statistics from UK Finance which, admittedly only cover the year up to the end of July, show that of the purchase business completed during that time, 61% was by non-portfolio landlords, while this figure was 65% for remortgage business.
And they are putting down significant sums of money in making these purchases – 54% of all transactions had an LTV up to 70%. You don’t put down thousands upon
thousands of pounds in the form of deposits if you are not confident about the choice you are making, and comfortable in terms of securing buy-to-let property.
We’ve certainly seen an increase in individual landlord mortgage business at Foundation recently and, perhaps fuelled by the stamp duty savings available, this group looks more than ready to either make a first entry into property investment, or to add to the small number of properties they already own.
The sector has talked a lot about the increasing numbers of professional landlords in the past five years, and that’s undoubtedly correct, but it does not mean that the notion of ‘amateur landlords’ has gone away.
In fact, given the current circumstances, there may be far more interest from ‘amateurs’ now than over that period. Perhaps they have secured a sizeable redundancy payout and want to invest or they are seeing the stamp duty savings available, the demand for property, and the rising rents.
Whatever has drawn them to the market, they need mortgage advice more than ever. The UK Finance stats also show that 85% of purchase buy-to-lets and 90% of remortgage buy-to-lets came via intermediaries – a fantastic vote of confidence in advisers. Long may that continue, and long may you seek to secure the business of ‘amateurs’ who fundamentally make the PRS what it is today, and without whom, the housing gap would be a chasm.
