Meet the buy-to-let landlord who prefers to lease

Owning your individual house is a British obsession, and lots of view ‘getting on the ladder’ as considered one of life’s nice milestones.

Buying a property isn’t solely considered as a savvy funding, additionally it is thought-about by many to be a mark of independence, safety and success. 

The different is to pay seemingly ever-increasing rents to a landlord who may ask you to depart at any time, with simply two months’ discover. For most tenants, renting is not a selection however a necessity.

But there are those that select to lease, after they may afford to personal.

The landlord that grew to become a tenant: Rob Dix, co-founder of Property Hub and co-host of The Property Podcast is each an skilled buy-to-let landlord and renter

Of all of the folks on this camp, maybe the final individual one would possibly anticipate can be a buy-to-let landlord and property funding skilled.

Enter Rob Dix, co-founder of Property Hub and co-host of The Property Podcast. Rob is in his forties, and lives in London together with his spouse and youngsters. 

He is an skilled buy-to-let landlord, having purchased his first rental property greater than a decade in the past.

He can also be a profitable writer, publishing books together with How to be a landlord, The Complete Guide to Property Investment and most not too long ago, The Price of Money: How to prosper in a Financial World that is rigged in opposition to you.

Although he was a house owner up to now, he has been renting for the final 10 years. Plenty of individuals inform him he’s mad. So why does he do it? 

‘It all began when my spouse and I went touring a few years in the past,’ says Rob. ‘We liked the Airbnb way of life of chopping and altering each time we favored. 

‘So we determined to enter rental lodging once we returned to the UK, somewhat than purchase someplace new. We have by no means regarded again since.

‘Nobody appears to grasp why I select to lease,’ he says. ‘Everyone views renting as simply throwing cash away paying another person’s mortgage. 

‘Owning is taken because the default smartest thing to do if you happen to can afford it. But I simply do not consider it is as clear reduce as that.’

Why Rob thinks renting trumps proudly owning

Rob feels the pliability of renting trumps the safety of homeownership.

He argues renting provides him the flexibility to attempt new locations with out the fee, problem and time constraints that include transferring as a house owner.

Unlike so many who view their very own dwelling as a secure haven, Rob likens homeownership to feeling trapped.

‘I simply love the pliability that comes with renting,’ says Rob. ‘I do not need to be tied down by proudly owning and I do not need to fear about wanting to maneuver, however feeling trapped by all the prices required when shopping for and promoting.’

‘I do not like the sensation of not having the ability to transfer at quick discover, whether or not that be for my children’ education or simply to attempt someplace new. I do not need to be ready the place I can solely depend on having the ability to promote my dwelling. Who is aware of how lengthy that may take.’

While Rob is not transferring dwelling as a lot as he used to, he nonetheless desires to know he all the time can accomplish that as and when he pleases.

‘Knowing that you simply all the time have the choice of transferring shortly is extra vital to me than really doing it,’ he says.

‘Obviously, now that we now have a household, we do not need to be transferring yearly. But once we had been in a position to transfer to get my son into a special faculty, it wasn’t an enormous deal. Two months later it was accomplished with minimal prices.’

Expert: Rob Dix (proper) is co-host of the Property Podcast, which is widespread with landlords

Rob additionally highlights the stress of transferring dwelling, one thing he feels he avoids by renting.

‘It typically takes months to maneuver dwelling as a house owner,’ he says. ‘For some folks, it may well even take years.’

Between sellers, consumers, property brokers, solicitors, and surveyors, the promoting course of has so some ways it may be delayed or disintegrate.

This is exacerbated by chains of consumers and sellers all counting on one another to make sure they will full on their very own purchases. 

A delay or a change of coronary heart by only one individual within the chain could have knock-on results for everybody else.

‘I do not need to spend my weekends doing DIY’ 

Rob can also be cautious of the opposite stresses that include proudly owning – akin to having to pay up when one thing wants fixing.

He says: ‘Years in the past after I did personal a flat, there was all the time one thing to cope with, whether or not that was the gutter overflowing or a leak someplace. Some folks get a kick out of DIY. I’m not a kind of folks.

‘A beauty of renting is that upkeep is not my downside. If you possibly can’t stand the concept of spending your weekends doing home chores, then a beauty of renting is that the repairs are another person’s downside.

‘When I hear folks speaking about weekends spent fixing issues it simply seems like no enjoyable to me.

‘This is much more the case, whenever you hear about individuals who resolve to totally renovate their dwelling and dwell in a partial constructing web site for six months.

‘However, I settle for that in the case of property repairs, the draw back is you are counting on another person to come back and repair it. For some individuals who choose to be in charge of the method or who like DIY, they could take concern with that.’ 

Can renting be cheaper than proudly owning a house?

Perhaps probably the most shocking argument Rob makes use of in favour of renting is a monetary one. He says that relying on the world the place you reside, renting can really be cheaper in some instances.

‘Where home costs are excessive in comparison with common rents there’s a good monetary case for renting,’ he says. ‘That is especially the case in costly metropolis areas like London, the place on prime of paying a excessive rate of interest in your mortgage you might also have to deal with excessive service prices as effectively.

‘We have chosen to dwell in a reasonably costly flat in a reasonably costly space. I’d by no means have chosen to purchase the flat as an funding because the return on my funding can be surprising.

‘I’ve labored out that even when I used to be in a position to purchase my present flat with a ten per cent deposit, simply the curiosity alone on an interest-only mortgage would work out as greater than I’m paying every month in lease. And that is earlier than service cost, capital repayments and repairs.’

Rob Dix can also be co-founder of Property Hub, a web site that gives free training for landlords in addition to placing collectively multi-million pound property offers for its purchasers

But what concerning the dwelling as an asset? House costs usually all the time rise in the long term, and lots of Britons would somewhat pay the prices on their very own appreciating asset than pay lease on another person’s.

Unsurprisingly, Rob has a fast reply to this query.

‘Historically, shopping for your individual place and watching it go up and up in worth and getting the capital good points tax free and all the remaining, has been a successful method,’ he says. ‘I fully perceive why folks default to it. And for many individuals it is going to be the best choice.

‘I’m simply saying; think about the alternate options. You do not have to take a position all of your sources in your individual dwelling. You can make investments elsewhere and lease the house you reside in.

‘Yes, folks must have property, you simply do not need to dwell in your property.

‘I nonetheless profit from home costs going up by investing in areas the place I feel home worth development prospects are higher than the place I dwell.’

Rob says there are additionally typically appreciable transaction prices concerned when transferring as a house owner.

‘With renting, you simply pay the deposit and don’t be concerned about the rest aside from agreeing the move-in date, having given two months discover to your present landlord. This is so removed from the case when promoting and shopping for.

He provides: ‘If you intend to dwell in your house for fewer than 5 years, then it is exhausting to make the argument for getting since you’ll have fewer years to unfold all these transaction prices over.’

When a house owner decides to maneuver, they need to pay authorized charges and property agent charges. Then, to purchase the following property, they’re more likely to incur stamp responsibility prices on prime of an extra spherical of authorized charges.

The common excessive road property agent price is round 1.5 per cent of the ultimate promoting worth. Although they will usually vary between 1 and three per cent, not together with the extra 20 per cent VAT they could be required to pay on prime.

Currently, stamp responsibility kicks in for home movers on property purchases above £250,000. This is ready to fall to £125,000 from April 2025.

For somebody dwelling in London like Rob, the place home costs are excessive, these transferring prices can mount up.

Stamp responsibility land tax: Currently, stamp responsibility kicks in for home movers on property purchases above £250,000. This is ready to fall to £125,000 from April 2025

The common property worth in internal London is round £600,000, in accordance with the Land Registry.

Someone promoting their dwelling for £600,000 and paying the typical property agent fee of 1.5 per cent plus VAT (1.8 per cent.) can be dropping £10,800 in agent charges.

Meanwhile, in the event that they had been to purchase one other £600,000 dwelling they’d additionally then be charged £17,500 in stamp responsibility.

That’s £28,300 of transaction prices in whole – and that is earlier than factoring in authorized charges, surveyors, removing companies and potential mortgage prices, notably if you find yourself being hit by an early compensation cost.

Rob’s argument for renting might resonate with Londoners much more as a result of home costs in recent times have carried out so badly within the capital.

For instance the value of the typical internal London flat is precisely the identical now because it was in 2016, in accordance with Land Registry figures.

With the typical Londoner having fun with no capital appreciation throughout this time, people who have purchased and offered in the course of the previous seven years might view the price of transferring with much more disdain.

Struggling market: There has been little or no home worth development within the capital for 7 years

What would Rob change about renting?

Rob accepts there are apparent downsides to renting – the large one being that renting could be a horrible and hectic expertise in some instances.

‘The actuality is that renters could be kicked out on a whim with two months discover as a result of generally landlords must promote or take management of the property for different causes.

‘Two months’ discover does not enable sufficient time for renters. If you have got a household, that is actually too quick a timeframe to seek out another and I wish to see that made longer.

‘That’s why in precept, I’m pro-rental reform as a result of there’s a lack of safety, and the shoddiness of a few of the landlords and rental properties wants addressing.

‘That stated, the legislation nonetheless wants to guard landlords from the minority of dangerous tenants who trigger bother. It’s nearly placing a stability which is clearly exhausting.

‘Ultimately, there are a small variety of dangerous tenants and a small variety of dangerous landlords. For the massive majority of respectable tenants and landlords within the center, it ought to be a mutually useful factor.’

Rob provides: ‘I’m undoubtedly extra sympathetic to renters, given the actual fact I can see it from either side.

‘Perhaps this’ll imply no person likes me as a result of landlords assume I’m pro-rental reform, whereas renters will simply see me as one other landlord.’

Rob additionally says there are robust monetary benefits that include proudly owning, somewhat than renting.

This comes within the type of principal residence reduction which suggests when owners come to promote their property the capital good points are tax-free.

Eviction: Rob says two months’ discover does not enable sufficient time for renters. He says: ‘If you have got a household, that is actually too quick a timeframe to seek out another.’

This isn’t the case for somebody promoting a buy-to-let or second dwelling, the place capital good points tax is charged at 28 per cent of the acquire for increased charge taxpayers or 18 per cent of the acquire for primary charge taxpayers.

‘Financially, proudly owning your own home is extra tax environment friendly than investing elsewhere because of the capital good points tax reduction whenever you promote,’ he says. ‘Plus, as a buy-to-let investor, I get taxed on the revenue my rental properties are producing earlier than I pays my very own dwelling prices.’

What’s his recommendation for younger folks saving as much as purchase?

The actuality is that most individuals who do not personal, aspire to. They pour their life financial savings in the direction of reaching dwelling possession, even when it means sacrificing holidays, hobbies and their social life so as to take action.

Rob says he is not telling folks to essentially cease working in the direction of proudly owning a house in the future, he simply questions whether or not they should really feel it’s the solely possibility ahead.

‘I do not assume proudly owning ought to be a default place from the start,’ he says.

‘You may make the argument that if you happen to’re in your twenties, then having the pliability to maneuver for work or attempt new alternatives or to maneuver in with a accomplice, or to have children and get someplace greater as and when you could is a helpful factor. There is a time in life when renting could also be extra appropriate.’

Don’t do issues simply because everybody else does: Rob does not assume proudly owning ought to be a default place from the start, and that it’ll rely upon somebody’s scenario

However, his one stipulation for anybody selecting to be a renter is to make sure they make investments any spare cash in one thing else, in order that they’re nonetheless rising a nest egg.

‘Invest in one other property, or the inventory market, or no matter it’s – so long as you have got some asset base that is rising.

‘Lots of people simply assume that renting is merely paying cash down the drain – paying another person’s mortgage and many others. 

‘But that is not essentially all the time the case. What would your deposit do for you if somewhat than investing in your house, it was invested elsewhere?

Will he ever return to proudly owning?  

Ultimately, Rob believes all of it comes all the way down to what kind of individual somebody is. Some folks get itchy ft in the event that they’re in the identical place for too lengthy. 

Others choose to stay with what they know. The very considered transferring unsettles them. The upheaval, the muddle, the reminiscences. It’s not definitely worth the threat.

He says: ‘The common time somebody stays of their dwelling is nineteen years. That to me is loopy. But for some folks, the concept of transferring each two or three years may additionally appear loopy.’

‘There is nothing extra vital than being comfortable in your individual dwelling. It comes all the way down to the pliability of renting versus the safety of proudly owning. For me, the pliability of renting is the clear winner.

‘Buying and proudly owning takes up numerous time and I made a decision that wasn’t for me.

‘I’m not telling folks they’re doing the incorrect factor and so they cannot inform me that I’m doing the incorrect factor. 

‘I simply do not assume proudly owning your individual dwelling ought to be the default possibility for everybody.’

On the concept of ever in the future going again to proudly owning the house he lives in, Rob is pretty sure that renting is the life for him.

‘I feel it’s unlikely I’ll ever return to proudly owning. Even when rates of interest hit all-time low in 2021 and mortgage charges had been ridiculously low-cost, I did not take the leap. 

‘But who is aware of… perhaps one thing so egregious will occur whereas renting that I’ll assume “sod this” and return to being a house owner.’