It is becoming increasingly attractive to become a hands off property investor after recent figures suggest the number of portfolio landlords making a loss has risen from 1% to 8%, it is claimed.
Figures from the BDRC Landlord Panel Research report show a big rise in the number of portfolio landlords making a loss and researchers at property investment company Colordarcy believe that many of the pitfalls experienced by landlords can be avoided by investing in fully managed properties with guaranteed rental.
‘Many buy to let investors prefer to do it hands on, however, it is worth remembering that property investing is a business and trying to do everything yourself is actually counter productive in the end, as this recent survey shows,’ said Loxley McKenzie, Colordarcy managing director.
He pointed out that the more time you spend on maintaining properties and dealing with tenant issues, which can happen at any time of the week, day or night, the less time you will have spare to source properties and grow your portfolio.
He believes that hands off property investment has been gaining in popularity because it offers a low risk, low maintenance alternative to traditional buy to let.
‘Hands off should mean just that for investors. That way investors can concentrate on building their portfolio,’ explained McKenzie.
One option is investment in student accommodation. The best properties come fully managed with a strong supply of tenants ready to fill units each year. Security maintenance and safety issues are all taken care of by experienced property management companies, therefore avoiding any issues with tenants.
Another is hotel investment. The Royal Institution of Chartered Surveyors recently valued the London Excel Hotel investment opportunity at £161,000, compared to the sale price of just £135,000 per room.
‘It offers investors an anticipated net yield of 7.5% per annum rising to 10.5% by year five. This coupled with the initial saving of £26,000 being the difference between the sale price and RICS valuation is tempting to say the least, but in addition investors will have the VAT deferred by the developer saving a capital outlay of some £25.000,’ said McKenzie.
‘If your investment is truly hands off, you probably won’t even need to see a tenant particularly if it’s a hotel investment where it is up to those who manage it to deal with any day to day issues. Yields on these properties can often be higher, with low voids and guaranteed rental,’ he added.