Buy-to-let: Who, why and how
A new study has looked into buy-to-let investors, to find out who they are, what they do, and why.
Landlords are mostly middle-aged (35 to 55), investing in buy-to-let as a second income source, and own some 10.6 properties, research from specialist buy-to-let lenders Paragon Mortgages and Mortgage Trust reveals.
"Landlords invest in property in order to generate a combination of capital appreciation and rental income, and certainly share none of the characteristics of the short term speculator who may seek to purchase properties and sell them quickly, making a quick 'turn' in a rising market," said John Heron, director of mortgages at Paragon.
"The landlord takes a professional approach, although property investment is most likely not his sole or even his main business activity."
Research shows that the average buy-to-let investor is 49 years-old with ten years of experience. Close to three landlords in four (71 per cent) have another source of income to go with their properties - with public administration, education and health, construction, and banking, finance and insurance the most common other professions.
And in keeping with this picture of a sensible investor, landlords take few risks with their mortgages.
More than three rental properties in four are mortgaged, but with an average loan value ratio of just 50 per cent. Additionally, property investors take out mortgages from 2.4 different lenders on average.
When buying a new investment property, the deposit is most often funded from savings or by raising funds using their existing buy-to-let properties.
Only rarely do landlords remortgage their own home or use money from a house sale.
And mortgages are more than covered by rents.
More than three landlords in four receive rent covering more than 115 per cent of their mortgage payments, with the average proportion of mortgage payments covered by rent at 130 per cent.
"Financially, landlords are cautious," said Paragon's Mr Heron.
"They typically mortgage only half of the value of their property portfolio, and tend to use the equity in the portfolio to raise the deposit for new property acquisitions or otherwise draw this from savings.
"On average, they have a comfortable cushion in their ongoing finances, with rental income exceeding mortgage payments by 30 per cent on average."
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