Landlords

Why are so many wanting to leave  the rental market when on paper it looks like the returns are still good?

The main reasons for landlords wanting out are increased mortgage costs, increased regulations and potential tax changes.

Mortgage costs- Interest rates are high and have been high for some time. for many of people on fixed rates this wasnt too much of a problem, but now they are coming to the end of their fixed term finding a new mortgage deal is proving costly. for many they are faced with the mortgage doubling, and now that it is no longer tax deductible it is making profits from rent much smaller and in some cases non existent and actually costing the landlord money.

Leasehold properties exacerbate the problem with costly annual maintenance charges which eat into the profit even further. We often hear from our landlords, when appraising rental value the phrase; "I need to get x a month so that it pays for itself" and we often have to say "just because that is what you need, doesnt mean that is what its worth or what a tenant will be willing to pay for it"

Increased Legislation- New legislation and regulations, such as the Renters Reform Bill, are placing additional burdens on landlords, the abolishment of the section 21 is also causing many landlords to jump ship. More regular health and safety checks and certificates are needed all of which cost money. The responsibilities for the landlord is being outweighed by the rights of the tenant.

Potential tax changes- the worry that capital gains tax will increase is pushing landlords to try and sell sooner rather than later to avoid increase in tax. The second home stamp duty tax has discouraged mew landlords from entering the market. Increases to income tax will also act as a deterrent as poeple dont from to be pushed into a higher tax bracket as a result of their rental income.

The main changes being proposed are as follows:

Abolition of Section 21 (“No-Fault” Evictions)

This reform means landlords will no longer be able to end tenancies without providing a valid, legally defined reason, such as rent arrears, anti-social behaviour, or a desire to sell the property.

This has led for landlords to have concern regarding gaining possession of their property, however we have been led to believe that there will be stronger grounds for possession such as selling the property or wanting to move back in.

We are also hoping that the lack of no fault evictions will lead to a more efficient court system dealing with section 8 evictions far more efficiently.

Simplified Tenancy Structure

The bill introduces a single system of periodic tenancies, removing fixed-term contracts. Tenants can give two months’ notice to leave at any time, creating a more flexible and tenant-friendly approach.

Rent Increases and Bidding Wars

The bill introduces stricter regulations on rent increases. Landlords will only be permitted to raise rents once a year, and any increase must align with market rates.

Bidding wars will also be banned, landlords will not be able to accept higher than the marketed rent.

Awaab’s Law and the Decent Homes Standard

The tragic death of Awaab Ishak due to mould exposure has led to the introduction of Awaab’s Law, which will now extend to private rentals. Under this law, landlords must address serious health hazards, such as mould or damp, within a set timeframe to avoid penalties.

He was found to have continued to rent out his premieses despite safety risks and leaving tenants to live in dangerous conditions.  After ignoring the notices sent by the council, the council carried out an inspection and found that no remedial work had been carried out and took the landlord in question.

At Polecat properties we take the health and safety of our tenants very importantly and ensure that all safety certificates are up to date. This is both for the benefit of the tenant but also the landlord. We carry out regular inspections so that any safety issues can be dealt with quickly and at the minimum cost to the landlord. problems that are not reported or left can quickly become much more expensive problems.

The council take safety standards in the private rental sector very seriously, so if you do have a letter from the coucnil demanding remedial action, then we recommend attending to it as they will follow up and check that the work has been done. 

Its now very easy to advertise your property as a holiday let online via online portal sites such as booking.com or air bandb.

The rate per night works out as significantly more than a standard rental, although obviously it wont be occupied all the time. It is believed that a good occupancy rate for a holiday let is 40%. A one bed flat in Bodiam rents for £700 a month buut a one bed flat rented as a holiday lets rents at £110 a night so at a 40% occupancy it is a far better return.

Obviously the initial layout is more as they need to be fully equipped for somone to just turn up and use it and be as comfortable as they would be in their own home. 

The success of a holiday let also depends on location and type of property and it can be very seasonal depending on location and what the surrounding area offers at any given time of year.

There is of course the big bonus that you will not get stuck with a bad tenant that you cannot get rid of. Even if they turn out to be holiday makers from hell there is a clear end point, although there is the danger that they might leave the property in a right state but you can always request a good behaviour bond at the beginning.

There are obviously other cots involved such as cleaning after every guest and general day to day management.

If you would like more information about converting your rental property into a holiday let then please contact us at L and M Holiday homes.

As a letting agent we find this a worrying trend, the councils are stretched enough without offering services which they are not specifically trained in.

As cited on Letting Agent today Broxbourne Council have been quoted as “The Simple Lets Scheme simplifies the property letting process, making it more streamlined, effective and efficient for landlords.

“Simple Lets will pay the deposit (up to five weeks’ rent) and the first month’s rent directly to the landlord on behalf of the tenant. This payment is a loan provided by the council to the tenant.”

Landlords will receive a free legally compliant Assured Shorthold Tenancy agreement “to help ensure all rental agreements are secure and clearly defined.”

However they are not proposing on offering any management so after this scheme has taken effect a landlord is just left on their own with no assistance.

Rother Council offer a similar scheme, which we have used before on behalf of our landlords, and our experience was not a positive one. The Tenants are not vetted properly and in our experience the tenants were not aware that the first months rent and the deposit were a loan and this lead to financial complications down the line.

"