This is the second instalment of our mini-series: Beyond buy-to-let, where we look at property investment deals that could appeal to landlords looking for a new challenge.
Finding tenants, managing a property and absorbing losses from vacant periods between tenancies all come with the territory of being a landlord.
But there is an alternative letting strategy – one that offers stability of income and the opportunity to provide a home for those most in need.
Letting your property to a local authority, social housing provider, charity or government contractor has been singled out as a “growth area” of landlord investment, given the shortage of affordable housing in the UK.
Family homes, houses in multiple occupation (HMO), blocks of flats of varying sizes and even former hotels converted into housing are all eligible property types for landlords looking to strike a deal with a housing provider. But experts say the success of the venture hangs on the landlord’s due diligence and the terms of the lease granted, which makes legal advice essential.
How to do it
Instead of letting your property, rooms or flats directly to private renters, you let to an organisation or public authority instead.
These include:
- Local authorities or social housing providers directly. This is possible but not common.
- Middlemen operators – companies that work on behalf of local authorities to source the housing they need. A more typical route for landlords to take.
- Charities. While they may have their own stock of housing, they work with landlords to boost their volumes.
- Government contractors specialising in emergency shelter for asylum seekers.
Daryl Norkett, director of real estate proposition at Shawbrook Bank, said: “There’s a genuine need for more social housing in the UK, whether that’s affordable homes or council houses.
“I think this is a good example, when done well, of landlords meeting a clear social need.”
Attempting to forge relationships with your local council housing department is one way to find opportunities. But an easier path for landlords is to speak to local letting agents.
Intermediary operators are in frequent contact with agents looking for rental stock that fulfils their housing needs, so get networking and let the agents know you’re interested.
A critical part of your strategy should be to research the housing needs of the area, explained Mr Norkett. “Some local authorities have long council housing waiting lists, because they don’t have enough stock or there might be emergency accommodation needs.
“There may also be a need for homes that provide basic care for young adults with mental health issues or challenges.”
If you’re considering buying a new investment property, the area you choose should also have strong private tenant demand. To secure a mortgage, your property must be a viable buy-to-let. A mortgage lender will base its decision to lend on the rent you can achieve on the open market.
