For a lot of parents in London, the challenge of raising family income is becoming a priority due to the rising mortgage payments, childcare costs, and the overall increase in the cost of living. So, many families are thinking about other financial options beyond traditional savings accounts or side jobs for better financial security. Freelance work, online businesses, and part-time jobs are still very popular methods of raising money but more and more parents are thinking, “What if I make property a second source of income?” Rental property has been one of London’s less volatile investments over time.
It offers the potential for getting a lease rent regularly and at the same time a possible increase in the value of the property over time. Besides, owning a rental property does not equal instant money. It needs foresight, a monetary investment, and constant work. Yet, for many London parents who desire a means of increasing their net worth but still managing their family lives, it can be a second-income source that is flexible and which other options may not be able to offer them.
Property is a Big Pull Factor for Busy Parents
One of the major reasons people get into rental property is that it is not as demanding on time as other businesses are.
Parents are time-starved between school runs, work, after-school activities, and family time. Another job that takes evenings and weekends is simply out of the question for most families.
In reality, running a property rental business is less time-consuming and more flexible is a big advantage for parents. If they really want, they can even delegate the major part of the maintenance of the property to someone else and use their time for their family. Even though there will still be a few issues that need to be resolved and occasional decisions that need to be made, landlords don’t really have to work at set hours.
Thinking about the future, property can be a part of a family’s financial plan. In addition to getting some extra cash flow, the property owner can also benefit from the property’s potential appreciation in a few years.
What Do You Actually Pay When You Decide To Become a Landlord?
One major factor behind the many landlords becoming priced out of the market is their lack of budgeting and proper planning.
Aside from the mortgage payments, there are some hidden costs to becoming a landlord. Standards for buy-to-let mortgages deem that a larger deposit is required when compared to that of a residential mortgage, usually 25% or more of the property value. Aside from the deposit, some of the fees that you will have to account for are solicitor’s fees, the survey, Stamp Duty (where applicable), mortgage arrangement fees, and the cost of physically moving into the property.
As soon as you have tenants in the property, these ongoing expenses will probably be: Mortgage payments
- General upkeep and repairs
- Service charges or ground rent (for leasehold properties)
- Letting agent fees, safety inspections and obtaining certificates
- Tax on rental income
There will be times when the property will be empty. Achieving those calculations to work into your scenario helps you to prevent a major letdown later.
What Is The Duration of a Tenancy?
But first-time landlords are concerned about being stuck trying to fix incessantly leaking taps or chasing up rent payments. The truth is it really depends on you and how much you want to get involved.
Some landlords do all the work, like advertising the property, arranging repairs and going to inspections. Then again, some get a fully managed service through a letting agent who takes care of tenant communication, maintenance coordination, rent collection, and many other everyday landlord responsibilities.
Since parents who have to work and look after their children have very little time, they quite often find buying a professional management service worth their money if it greatly lowers their stress and at the same time gives them free time for the family.
Even so, a managing agent should be used as landlords still have to make major financial decisions and comply with their legal requirements.
What the Rental Market in London Signifies for New Landlords
Demand for rental properties in London is still very strong. It is mainly coming from a mix of professionals, students, international workers, and families who all want to live in good-quality homes.
Even though the price of houses in London is still one of the highest in the UK, at the same time, the rental market has not lost its strength in quite a few boroughs. This can offer landlords a relatively steady occupancy if their property is presented well and priced competitively.
Parents who are thinking about investing in property would do well to dedicate some time to local market research rather than looking at London as one single market.
Places that get the benefits of transport upgrades, regeneration schemes, good schools, or new job opportunities can be good long-term prospects. It is just as important to get rental yields right, which can be quite different based on location and property type.
Instead of going for the highest advertised yields, a lot of experienced property investors buy properties that will probably attract good-quality tenants who will stay for a long time and will continue to provide the investor with a steady income for many years.
Landlords must comply with the law and deal with the financial implications
As a landlord, apart from providing safe environments (gas safety checks, electrical safety checks, smoke detectors, energy efficiency, etc. you are also responsible for clarifying the agreements with the tenants (tenancy agreements, deposit protection rules, right-to-rent checks, etc.
Often landlords find themselves regretting the decision of leasing the property to the tenants they did not verify their references at first. Employment, landlord checks, and affordability are all factors that can make landlords confident that tenants not only will look after the property but also will regularly pay rent in a timely manner.
Besides these tangible measures, getting landlord insurance is probably one of the best protection tools for a parent landlord. It safeguards the main property and the landlord’s belongings, covers them against liabilities, and gives peace of mind so that a rewarding second source of income doesn’t turn into a financial nightmare.
Is Property the Right Second Income Stream?
Property isn’t always the right fit for every family. In reality, initial capital can be huge, mortgage regulations have been changed to more complicated one and landlords should always be ready for the cost of maintenance, changing regulations and even unexpected expenses.
But when compared with many side hustles that require your constant attention, a rental property is a totally different type of opportunity. Once you have established the right systems, most of the regular property management can be handed over, letting parents carry on with the focus on their work and family life.
The important thing is to graduate in the real estate market with a sober mind. Rental income should not be considered as an easy source of passive income; on the contrary, it must be regarded as a business that demands thorough planning and efficient administration.
Many London parents who want to secure their financial situation more deeply, give priority to finances as the cost of living goes up in the city. They still look at property as a medium that will allow them to make extra money and at the same time, they get to put their money in a physical asset that will increase in value over the years.
The fact is, the real work lies beyond simply buying real estate. To make the most out of the investment, one must also budget properly, have a good knowledge of the rental market at a local level, be compliant with all legal requirements, pick tenants wisely and set up proper security measures. In fact, with due deliberation, becoming a landlord may give one an opportunity of earning a second income which may even go hand in hand with family life and not be at odds with it.
Those parents who lovingly put in their due diligence and methodically chart their course of action can see property as an integral part of their long-term financial plan. It will not only help them be more stable today but also set them financially strong in the years to come.
Monica Costa founded London Mums in September 2006 after her son Diego’s birth together with a group of mothers who felt the need of meeting up regularly to share the challenges and joys of motherhood in metropolitan and multicultural London. London Mums is the FREE and independent peer support group for mums and mumpreneurs based in London https://www.londonmumsmagazine.com and you can connect on Twitter @londonmums
