Is being a landlord worth it anymore?

Due to a raft of legislation in the last few years, not forgetting some adverse tax changes for landlords, many landlords are wondering if being a landlord is worth it.

Due to COVID-19, the massive government debt, the Gaza and Ukraine wars, and a new front opening in the China Sea, not to mention the acceleration of de-dollarisation, confidence in the UK is dwindling fast.

When the UK government scrambles to find more money to service the government debt, landlords are at the top of the hit list.

Landlords’ commercial and residential landlords can expect further taxes for the property investment sector.

Suppose you have one landlord for every 200 tenants. Keeping the renters happy and taxing them is a vote winner.

We have many organisations to help tenants, but landlords must pay for any help.

The British Landlords Association would like to sound upbeat. Still, the only positive thing we can say is that being a landlord is better than having money in the bank and earning extraordinarily little.

Becoming a landlord is not a route to get rich quickly.

Investing in commercial or residential property for letting purposes is not a route to getting rich quickly.

Investing in Buy to Let is better than leaving money in your bank account or other investment options; however, it is not a route to quick riches.

With rental income and property value appreciation combined, it may be an attractive option if you are considering the buy-to-let market.

It is vital to buy a property at a good price. Since a buy-to-let property is not for your personal use, you should have a broader area to source a property below market value.

Ideally, you want to buy near your home so it is easy to manage. Visit our property auction Guide page.

Some investors are attracted to high-yield properties in the Northeast and Northwest, such as Liverpool, Grimsby, etc.

Although the yields look good on paper, in practice, some of these deprived areas tend to leave some landlords with high rates of voids and, in some cases, damage to the property and rent arrears.

This is due to the generally poor quality of tenants in these areas.

There is a lack of interest in this area for the Buy to Let investors for good reason.

Becoming a landlord does not give you a passive income.

Some people think being a landlord is easy, and buying and renting out property is easy.

This is not true for residential property; for commercial landlords, life seems much easier, especially if the property is in a prime location.

Being a landlord requires effort, sometimes leading to stress due to issues like rent arrears, property damage, or dealing with eviction.

Your investment will eventually require repairs and refurbishment, and you will also have to manage the tenancy.

The work needed to manage your residential properties will be ongoing and time-consuming and will not provide you with a passive income.

Time is money when you are a landlord.

As a landlord with one property or a hundred properties, you will have to invest time in managing your investment. It is time-efficient if your properties are close to where you live.

Before becoming a landlord, you must consider whether you have the time to deal with all aspects of the letting managing process.

Using a letting agent will reduce the time required to manage the properties.

However, ultimately, the letting decisions rest with you. Having a letting agent on board does not mean you will be free from all the associated letting headaches.

Do your research before you become a landlord.

Research the tax implications and how they may affect you. Consider using a limited company as an investment vehicle. Seek professional advice from an accountant on this subject.

Some landlords buy a property in their name, which may mean their income from employment and the rental income take them above an unattractive tax bracket.

The government has recently introduced tax changes for landlords and other new legislation directly affecting landlords.

You should consider all of these before entering the buy-to-let market.

Some of these changes drive landlords away from the residential letting sector; they feel it’s no longer worth being a landlord.

Can you charge enough rent to break even?

You have a few factors to consider, ensuring that all the figures stack up to your financial advantage.

If you are taking out a mortgage, you must consider void periods, rent arrears, and tax liability.

It is not worth considering becoming a landlord unless you have at least 30% left after your operating expenses. Operating expenses are all expenses, including any loan or mortgage repayment.

You will need to put aside money for repairs and refurbishment. Refurbishment may include in an unlikely case where the tenant damages your property.

Sometimes, the insurer may not pay, and you must pay the repair or refurbishment bill.

Landlords are responsible for knowing the law.

Ignorance is not a defence; landlords must know their legal responsibilities.

Some of the main things landlords need to be aware of are:

• A smoke alarm must be installed on each floor of the property.
  • carbon monoxide detectors must be placed in rooms with a coal fire or wood-burning stove.
  • A valid, current EPC
  • A gas safety certificate for each gas appliance must be available.
  • If you took a deposit, you must comply with the deposit legislation
  • To reduce the fire risk, all furniture must meet safety standards and display the appropriate labels.
  • Any electrical devices must be safe for use, and we recommend an Installation Survey or Portable Appliance Testing (PAT) to ensure compliance.
• EICR Electrical inspection condition report
  Right to rent
  • the water supply must be working correctly to protect tenants from Legionella.
• Licensing, if applicable, in your area

Must allow costing for repairs and refurbishment.

We have already touched on this subject above. Some landlords fail to factor in potential finances required for repairs, decoration, refurbishment, and legal fees.

Let residential properties frequently need repairs, replacements, decoration, and refurbishment at some stage.

Most tenants will not look after the property like it was their own home, so wear and tear are more frequent for let properties.

For HMOs, wear and tear are even more frequent.

Void periods

Landlords should seek to reduce voids, keep the rent reasonable, and consider taking tenants that are likely to be long-term.

An empty property is likely to mean you are responsible for the council tax on the property for the vacant period.

Each time a tenant leaves, the property will likely need some work, even general cleaning, etc., which means losing money and time.

Is it worth using a letting agent?

Using a good letting agent will reduce stress and save you time. Especially if the property is not near where you live.

Do your homework when selecting a good letting agent, and ensure they conduct regular property inspections. A good letting agent should mean:

1. Efficient rent collection
   Your legal requirements are taken care of
   3. The most suitable tenants will be found for your property
   4. A professional inventory will be conducted
   5. A regular property inspection will be conducted
   6. Repairs needed will be efficiently dealt with
   7. Save you time and stress of managing the let property.

Check the letting agent reviews on Google and how long the agent has been trading. Also, check companies’ house records.

Booms and bust

Is it worth becoming a landlord in these uncertain times? Where will our economy be by the end of 2024? Seasoned landlords see recessions as opportunities to make money.

Even professional investors are spooked and stay on the sidelines until the property market reaches the bottom. Identifying the bottom is not easy.

Boom and bust is a cycle; it is nothing new. The wise can make money from both boom and bust. If you are considering buying a property for letting purposes, consider the economy and buy at the right time of the economy.

The world economy is in trouble, which directly impacts the UK economy.

Should I invest in a residential property or commercial property?

This question was easy; without a doubt, commercial property landlords have less stress in managing commercial property.

The advantage of commercial property is that the repair obligations can legally lay with the tenant. You do not have the legal responsibilities residential landlords have under the housing law.

Commercial property generally has been a better option than investing in residential property.

Residential property has been less attractive in recent years, especially due to recent legislation that has had a greater impact on residential property than commercial property.

Even before the Coronavirus, our high streets saw an increasing number of empty units.

Some landlords with commercial property in secondary locations struggle to let, and when they get a tenant on the hook, the tenants frequently ask for a rent-free period.

An empty commercial property attracts full business rates.

Not only does the landlord not have any rent coming in, but the landlord is also hit with full business rates.

Commercial retail property in a good location is probably the best option for commercial property investment.

Is it worth being a landlord?

To answer the question directly, no, not at the moment. There are wars and rumours of war and the acceleration of de-dollarisation.

If you don’t understand the implications of de-dollarisation, consider that it could lead to hyperinflation, high interest rates, and the collapse of high-street banks.  

Wait for a few months and try to identify the bottom once the economy starts faltering. The wait could be as long as a year.

Cash or gold under these uncertain times is king.

Join the British Landlords Association for only £79.95 for full membership for a year.

Source: British Landlords Association

Author: Amanda Goldsmith

Email: [email protected]

Date: 29th of May 2024