Long-term demand from tenants, creating secure rental income, and the desire to supplement their retirement income remain the main reasons why landlords are looking to expand their property portfolio.
In its Next Generation Landlord Report, Paragon Bank identified the key factors motivating ambitious buy-to-let investors. The report surveyed 500 landlords who currently owned up to three properties but were looking to make further purchases.
It found that six in 10 of these investors cited continued demand for rental properties as a key factor in their decision to expand their portfolio. More than half of these landlords (54%) said they wanted to expand their portfolio to supplement their future retirement income.
Capital appreciation was also a key driver for investment, but was seen as less important than income. However, almost half of respondents (47%) said that long-term growth in property prices influenced their investment decisions.
The report found that a third of these landlords (34%) prefer real estate as an investment asset over other options.
The report not only examined the reasons why landlords expanded their portfolios, but also attempted to identify the factors that motivated them to invest in the rental market in the first place.
Friends and family played an important role for many: 43% cited them as their main motivation. However A large proportion of landlords (39%) started renting out their first property by chance – often as a result of buying a second home or inheriting a property.
When asked why they prefer real estate to other investments, landlords highlighted its tangible nature (67%), its potential for wealth creation (54%) and the ability to pass it on as an inheritance (53%).
Louisa Sedgwick, Managing Director of Mortgage at Paragon Bank, says: “The rental market will continue to grow due to the forecast population increase of around 10% over the next decade. This favourable market outlook underpins the investment decisions of aspiring landlords.”
“The study also shows a clear focus on long-term planning, with over half of landlords building portfolios to fund their retirement. This indicates a strong commitment to the rental sector and is vital to the overall health of the private rental market.”
She adds: “The rental market is attracting a growing number of landlords, often inspired by friends and family or who have discovered the benefits of owning property through other circumstances.
“These emerging landlords want to continue to provide rental housing in the future and need a supportive regulatory and tax environment to continue their investment activities.”
