In these difficult times, every little helps. One trader in an investment bank in London has found a way of maximizing his depleted bonuses using a cunning investment strategy that involves young single mothers.
"We're all in awe of him," said a colleague, a fellow trader now working for a hedge fund who declined to be named. "He's spent the past five years building up a massive portfolio of flats which he only rents to young fertile women eligible for government benefits. He's got around 25 of them now. It's turned out to be a very good investment strategy."
Bankers have long invested their bonuses in property. Lucian Cook, residential research director at property company Savills, estimates that £23bn of bonuses from the financial sector have been channeled into London's housing market over the past decade. But as the buy to let boom reignites, bankers are specifically funneling their bonuses into properties to rent.
"In the past few years we've seen a big increase in the number of bankers putting their bonuses into investment property," said Lucy Morton, head of lettings at WA Ellis, a self-described 'boutique estate agent' in Kensington and Chelsea. She added: "I think that they see bricks and mortar as safe, which is ironic."
Morton said most of the bankers she deals with invest in properties for rental to the expat market - in other words, properties that are rented to other people in the banking industry. Tim Hyatt, head of lettings at Knight Frank, said young expat professionals tend to be his best tenants. "Our core tenants are guys from Continental Europe who are on graduate training schemes or secondment for six to 24 months," Hyatt said. "Sure, some of them lose their jobs, but if you have the right kind of product - neutral in style and close to public transport - another tenant will always come along and replace them."
Renting to young corporate professionals may be a good bet, but you will need a large deposit. Morton says her landlords typically put down around £275k on properties in Fulhanm and Kensington. Hyatt said that Battersea is the new growth area, but that landlords are advised to put down 20%-30% of a property's value, requiring an initial investment of £200k+ if you're renting to the corporate market.
Renting properties to young single mothers has several advantages. Properties are cheaper, meaning initial deposits are lower, and returns are assured for several years. Aki Ellahi, managing director of DSS Move, which specializes in renting properties to people on government housing benefit, said the British housing benefit system has been set up so that single mothers receive a stable level of housing benefit until their child is five years old. "From a landlord's perspective that's quite a long time," he pointed out. A 'young fertile woman' who has multiple children a few years apart could provide stable returns for a decade.