Malcolm Cannon: The rental sector is enjoying an upsurge

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INVESTING in stocks, shares or bonds may not offer the same level of investment return that can be achieved from property and with stocks and shares you can sit back and (hopefully) relax, whereas the responsibilities for landlords go beyond the duty of regular repayments to the mortgage lender.

Despite this, property investment is becoming a more popular choice, with the Finance & Leasing Association’s latest figures showing second mortgages are up 11 per cent on the year to November 2012.

With changes in the property market, we are seeing a knock-on effect within the rental sector.

Firstly, property investors are returning to the market as the reduction in house prices over the last few years, combined with higher rents, makes an appealing investment opportunity. The fact that lenders are offering better deals on buy-to-let mortgages and preparing for a larger proportion of their total lending going to landlords indicates this trend is only likely to gain further momentum.

Secondly, more homeowners are electing to forsake the traditional route of “sell before buy” for the “rent before buy” option. The rental income potential for their existing property alongside additional savings enables them to make their move to a new home without the need to find a buyer. The demand for rental properties is giving homeowners the confidence to take on the responsibility for a second mortgage and still hold on to a long-term investment.

At the same time, the rental market has never been so regulated in terms of protection for the tenant and landlord. So while many years ago it might simply have meant all you had to do was put an advert in the local paper, now the legal responsibilities on landlords have increased considerably.

It is important that anyone thinking of becoming a landlord takes advice prior to venturing down this route. There are different options in terms of how involved the owner of the property is in managing it. How the following question is answered is an indicator of what option is best: “If there is a problem with the property at 2am, who do you want the tenant to phone?”

• Malcolm Cannon is chief executive of ESPC.

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