Rise of the Hands-Off Landlord
With the UK rental market growing in popularity, it’s no surprise that we’re seeing more and more landlords enter the market. Property remains a cornerstone investment asset that can offer longevity and international investors are looking to the market to find returns.
That said, we’re seeing broad differences in how landlords are approaching their investments, whether they’re taking complete control or using partners to handle the day-to-day. There’s no right or wrong way but for many investors – especially those overseas – hands-off management is a much more feasible way of building a portfolio.
What’s a hands-on landlord?
When we describe a ‘hands-on’ investor or landlord, we’re typically talking about people that consider investment a full-time job. Hands-on investors will generally want to be involved in each and every aspect of their investment, from initial research to maintaining the property.
These types of investors will typically find new properties, source tenants and conduct viewings, collect rent, deal with property administration and even be a point of contact. As you’d probably expect, landlords following a hands-on approach should be absolutely clear that it’s not a 9 – 5 role, it’s a 24/7 role.
Problems can occur at any time and it’s part and parcel of the job to be awoken with leaking pipes or temperamental appliances at the weekend or even in the middle of the night. While being hands-on allows the investor to be in complete control of their investment, it does come with some caveats.
What’s a hands-off landlord?
This is the alternative to hands-on investing. ‘Hands-off landlords’ will generally be more interested in the hard numbers than working on a passion project, reaping the financial benefits without the associated stress.
These types of landlords will instead choose trusted partners to help them at each stage of the process, such as letting agents and property managers that can collect rent payments, perform inspections and maintain a consistent tenant pool throughout the investment.
What are the advantages of being a hands-off landlord?
Despite accruing additional costs thanks to agents or management teams, hands-off investment opportunities continue to draw huge demand because of the flexibility they can offer. A hands-off investment in a prime location with high rental yields will still deliver substantial returns, even with extra costs factored in.
This flexibility and accessibility is a major bonus for many investors. In most cases, hands-off landlords will generally have an existing career that takes up too much time or, as is increasingly the case, be an overseas investor.
Investing in the UK from abroad is not a new trend but it is growing. UK property continues to deliver as a robust and stable asset and for many investors in regions such as the UAE and the US, maintaining a property in a different time zone just isn’t feasible. This is where having a trusted partner network can be vital.
It’s not a stretch to say that in 2020, landlords can quite easily benefit from a substantial and consistent stream of income from a location that is halfway across the world. When foreign exchange rates are factored in, this can be much more viable than investing in a domestic market that may be facing challenges.
While control will typically be handed off to a third party, this is almost certainly a major advantage. Having a letting agent based in your chosen market means you’ll have an expert that is; knowledgeable in the area, understands how to help maximise the returns of your investment and can source tenants quickly and effectively.
Many lettings agents also offer varying levels of control for landlords, allowing them to be as involved as much or as little as they prefer.
Being a hands-off landlord and working with a property manager also means that you’ll be better placed to assist with tenant requests or issues. Obviously, this is useful for international investors that may be 8 hours behind but even for those based in the UK, having a team on hand to help is much less stressful than performing the work yourself.
For hands-off investors that may be more interested in the investment rather than the day-to-day of the average landlord, working with a partner can also offer legal security. From staying on top of legislation changes to ensuring compliance with safety measures and certifications, being a hands-off landlord means not having to deal with any of the complications that can arise.
Arguably the most important aspect of a landlord’s due diligence, ensuring rent is paid on time and arrears are dealt with quickly is vital. This can be incredibly stressful for investors, especially those that may speak a different language or have little time to work through issues with tenants. That said, being hands-off generally means a third party can do this for you, ensuring a timely collection and return returns exactly when you expect them.
What do you need to do to be the ideal hands-off landlord?
Getting started as a landlord involves initial work. There’s no escaping due diligence and for those interested in being hands-off, this applies doubly so. While you need to think about where your investment is going to be and the strategy you’ll utilise, you also need to consider who you’re working with.
Sitting down with your partners to discuss your needs is vital, especially when it comes to a letting agent or property manager. They need to understand your goals and your motivations so you can work together to make the most of your investment.
You also need to make sure you’re in a safe pair of hands. Check that they’re a reputable company with a good track record, especially if you’re looking to ‘hand-off’ from the very beginning. Having a local, physical presence in your investment location is clearly a huge bonus and don’t be afraid to ask questions – you need to make sure that you’re comfortable with your partner network before you consider making any investments.
Don’t forget to educate yourself during the entire process. While it’s obviously a benefit to have a third party to work with, understanding the market and the process can be an excellent way of measuring the success of your letting agents or property managers, ensuring you get the most out of your purchase.
Why are people choosing to be ‘hands-off’ investors in the UK?
As mentioned, UK property continues to be a prime investment vehicle for any portfolio. As an asset, property is inherently stable and tangible compared to other vehicles while the UK continues to demonstrate above average returns across the entire market.
While the sector has certainly shifted after an eventful decade, there’s still plenty of investment potential to be found – it’s just not all in London anymore. From regional cities such as Birmingham to the South East region surrounding the capital, these emerging and established markets are stepping into the limelight, delivering above-average yields for both domestic and international investors.
Global trends are also pushing international investment into the UK. From political unrest in areas such as Hong Kong to economic difficulties plaguing markets such as South Africa, the UK continues to be a beacon of investment that is relatively affordable thanks to favourable exchange rates.
This is why hands-off investing and the UK market go hand-in-hand. With strong rental performance and a market that is set to be the majority by 2039, a hands-off investment in the UK can equal flexibility, accessibility and robust results for investors across the globe.