There are things we make a conscious effort to engage in, and then there are others we just seem to fall into doing almost by sheer chance. In the private rented sector of the housing market, it is this difference which might separate the professional landlord from the so-called accidental landlord.
So, putting aside for the moment the individual who consciously acquires property as part of a long-term business strategy to make a livelihood, how does a different type of property owner become such an accidental landlord?
It might be helpful to look at a few examples, and offer a few tips on what might lie in store if you decide to become a landlord “accidentally”:
- it is by no means unusual for a property to be inherited;
- in such an event, it may take a while for probate to be determined and the home lies empty until its longer-term future is decided;
- during this period both the structure and fabric of the building, plus any contents, need to be safeguarded and this is typically achieved through a niche product appropriately enough called unoccupied property insurance;
- if you are the fortunate individual eventually to become the owner of the property, however, you still need to decide its fate – to keep or to sell;
- a compelling reason for keeping the property and letting it out to tenants lies in the current profitability of investments in the private rented sector – a report in the Guardian newspaper (April 2015), for instance, suggests that returns from an investment in the average let property is seven times the amount you might earn from a cash savings account and four times the return on stocks, shares or commercial property;
- inheritance is not the only way of coming into a windfall of course;
- there may be any number of other ways by which you come into some extra cash, but perhaps not enough for that windfall itself to fund the purchase of a buy to let property;
- that is where a buy to let mortgage may come in more than useful and is a route being chosen by more and more investors, according to the Council of Mortgage Lenders – which has reported an increase yet another year of double-figure increases in buy to let mortgages and remortgages;
A spare room
- you might even become an accidental landlord by renting out an unused bedroom in your own home;
- according to the Office of National Statistics (ONS), the last general census in England and Wales discovered that a staggering 16.1 million homes (7 out of every 10) are under-occupied – that is to say that they have at least one spare bedroom and of this total, more than 8 million had just one spare bedroom, but an equal number had more than one unoccupied bedroom;
- the overwhelming majority (82.7%) of such under-occupied homes are owner occupied;
- in short, there is tremendous potential for owner occupiers to stay living in their own home but to become accidental landlords as they turn that unused bedroom into a money spinning concern;
- the government has put its weight behind greater use of spare room in private homes by introducing the Rent a Room Scheme – essentially, this grants a tax-free allowance of £4,250 a year on what you earn from rents;
- if this is your route to becoming an accidental landlord, you might want to give extra consideration to the insurance that safeguards your home;
- in the first instance, this means letting your standard home building and contents insurer what you are planning to do;
- depending on your insurer, the response might be acceptance, an increase in the premiums you pay, or a flat refusal to continue insurance cover – especially with respect to cover for your contents;
- in the interests of caution and prudence – and for the avoidance of any doubt – you might therefore want to consider the more general benefits of comprehensive landlord insurance.
There may be any number of reasons why your circumstances change, and you find yourself making the most of a valuable housing resource – or part of that resource – in order to make a little more income. In this way, and as the owner of that valuable piece of property you may consider it to have been an especially happy accident to have become a landlord.