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Purchasing real estate with the aim of renting it out to tenants is a tried and tested method of generating an income stream. Not only do tenants provide a steady income, but if you choose the correct property then it’s also likely to increase in value over time. The term ‘landlord’ applies to anyone owning property who subsequently rents it to another individual (or business) in return for payment. As per recent statistics, the total number of landlords in the UK is 2,594,720 – with the majority of which (2,266,770) living in England. Current government figures indicate that around 5.45 million homes in the UK are ‘buy to lets’ or shared accommodation (of which 4.85 million are in England). Almost 50% of landlords own just one property, while 6.4% own more than 10 properties for the purpose of renting.
A large investment such as purchasing property can be a very daunting decision. Before considering your real estate options, it’s important to be aware of the difference between residential and commercial properties. The distinctions between residential and commercial properties are as follows;
Residential property – These are buildings that are designed to be lived in, examples of such would be; detached homes, townhouses, condominiums, blocks of flats, self contained flats, bungalows, cottages, villas and apartments. Larger scale apartment complexes would be classed under commercial leasing. The owner of a property can reside in the property, or they can rent to generate an income. Typically families and individuals let residential properties.
Commercial property – These properties are used solely for business activities such as; hospitals, shopping centres, office spaces, storage warehouses, etc. Just as can be seen with residential property, the owner of a commercial property can use it for business or may lease the space to someone else. Commercial property can be a lucrative investment as tenants are business owners who typically sign a longer lease.
Leasing your property can potentially have extra costs associated, that may not be easy to predict. Accidents may occur and wear and tear may add up to significant costs, so it’s important that your property is adequately insured with appropriate landlord insurance, protecting you from unforeseen liabilities.