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Forget buy to let! A share I’d buy to profit from the rental boom

Christopher Ruane
·3-min read
Home key with house keyring with calculator.
Home key with house keyring with calculator.

Buy to let is a popular way to earn some extra income. As well as regular income, a lot of properties also increase in value over time. But owning and renting a property can involve a lot of hassle. From agency fees to repair costs, even buying a cheap property to rent out can involve additional expenses.

I like the idea of owning and renting property to earn some extra cash each month. But I don’t want the hassle of buy to let. That is why buying shares in companies that rent properties is so attractive to me. That way, I can benefit from property rentals without needing to do it myself.

Why I’d pick Britain’s leading listed residential landlord

A lot of property companies are listed on the stock market. But many focus on office buildings or shopping centres. The pandemic has shown that falls in demand can affect these types of properties. Whatever happens with the pandemic, though, people will need a place to live. That is why I would be looking for a landlord of residential properties.

The biggest listed residential landlord is Grainger (LSE: GRI). The size alone attracts my interest. I think larger residential landlords with diversified portfolios benefit from less exposure to problems in any one geographical area.

Grainger’s size is only one part of its appeal for me, however. I also like the fact that it consistently rents its properties and collect payments on time. One of the difficulties in owning a buy-to-let property can be finding reliable tenants, or getting tenants to pay their rent when the economy is weak. Grainger recently revealed in its annual results that its average occupancy level was 95% and it managed 97% average rent collection. I find those high occupancy and rental collection rates reassuring.

To me, Grainger is better than buy to let

Another reason I like Grainger is that the company has ambitious growth plans. Its existing portfolio should keep on earning money for decades. But the company also has a number of large newbuild projects underway. The company expects its ‘private rented sector’ building stock – homes it builds to let – will double in the coming five years.

One of the attractions of buy to let is that as an investor, an increase in house prices could lead to capital gains. As Grainger expands its portfolio, I expect that any long-term movement in property values will also be reflected in its share price. But unlike getting involved in property management myself, I can benefit from a housing market improvement without needing to worry about mortgage repayments or negative equity.

Renting out property isn’t always as easy as it seems, especially when things go wrong. I would rather leave it to the professionals, such as Grainger. Doing that, I can benefit from the home rental market without the hassles of getting involved myself.

The post Forget buy to let! A share I’d buy to profit from the rental boom appeared first on The Motley Fool UK.

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chris231 has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2020