A new strategy for a new economy
Buy-to-let has been an increasingly popular form of property investment, creating wealth for many over the last two decades as reliance on the social rented sector has declined, and the importance of the private rented sector has grown. This evolution of the property market is continuing, with a let-to-rent strategy now growing in popularity. This strategy could yet define the property market over the coming 20 or 30 years or even longer.
The evolution of the property market
The evolution of the property market has been dictated by many factors over the last 100 years and more. The industrial revolution created great conurbations, and villages developed and run by business owners, as people moved out of isolated rural areas to where the work was available.
Families that used to live together became fractured as children first moved out upon marriage, and then before marriage.
The introduction of the welfare state introduced the concept of mass social housing, and the concept of wider home ownership sold off swathes of social housing. With this, the strategy of buy-to-let grew as a viable investment proposition.
Children have moved out of homes earlier, as jobs became more secure, and higher education became more necessary. Now, with house prices and mortgages extending beyond the reach of most first jobbers or those fresh out of university, young adults are more likely to either stay at home longer or move into private rented accommodation.
Both economic and socio-economic factors have contributed to this property market evolution, and a new wave has recently begun: the let-to-rent strategy.
Why let-to-rent, and why now?
The job market is more fluid than it has ever been, and people are more likely to relocate to find work to further their careers. The world of work, and how people work, is also evolving rapidly: not only are people more willing to move to work, but they are more able to take work with them. According to a 2014 Accenture report, The Rise of the Extended Workforce, between 20% and 33% of workers are now independent contractors and freelancers: many of these work remotely.
Whereas a relocation of work used to lead to the need to sell the family home and buy where the work was, the growth of the private rented sector (now over 20% of the entire UK property market) is promoting a new and more cost-effective strategy: let-to-rent.
What is let-to-rent?
The idea is simple: instead of selling a home to relocate, the homeowner lets his or her home and uses the income to service the mortgage or even subsidise rental payments on his or her new home in the new location. The benefits of this strategy are many and varied, providing:
- A clean and simple way to relocate, reducing the costs of doing so (estate agents fees, legal costs, even furniture removal, etc.)
- The option for relocation for lifestyle or health reasons
- The potential to benefit from greater rental income than rental expense
Short-term work contracts, a career that takes someone around the world, extended sabbaticals, and the need to take the time to find the new perfect property are all circumstances in which a let-to-rent strategy benefits the homeowner.
For maximum benefit, especially for those moving long distances, homeowners who let-to-rent are taking advantage of professional property management. This relieves the let-to-renter of the time-consuming responsibility of vetting tenants, collecting rent, and maintaining the rental property.
Yours in Effortless property Management,