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Category: Howsy Guides

Reasons for new landlords to join the buy-to-let market

by Alysha Taylor SmithPosted on

The rental market is experiencing continued demand, with indications pointing to this trend continuing in the long term. With lower numbers of rental properties than potential renters on the market, the rental market is set to become even more competitive causing difficulties for young renters looking for suitable accommodation.

What do landlords have to gain from the current rental supply imbalance? 

Reduced Vacancy Periods

With a higher demand for rental properties, landlords can enjoy shorter vacancy periods. Properties are more likely to be rented out sooner, minimising the time properties remain unoccupied. This ensures a steady stream of rental income and mitigates the financial strain associated with prolonged vacancies.

Selective Tenant Screening

The growing demand for rental properties allows landlords to be more discerning in their tenant selection process. Landlords can carefully screen potential tenants, choosing those with excellent rental histories, stable incomes, and responsible behaviour. By selecting reliable tenants, landlords can minimise the risks associated with property damage and unpaid rent, ensuring a smoother and more profitable rental experience.

Increased Rental Prices

The competitive rental market resulting from rising demand empowers landlords to charge higher rental prices. As demand surpasses supply, landlords gain leverage to adjust rental rates to match market conditions. Higher rental prices enable landlords to maximise their return on investment and boost their profit margins, leading to increased financial stability and growth.

Expanded Profit Margins

The combination of shorter vacancy periods and higher rental prices contributes to expanded profit margins for landlords. By reducing the time a property remains unoccupied and optimising rental rates, landlords can achieve a more favourable return on their investment. These improved profit margins create opportunities for further property investment, property maintenance, and enhancement of rental offerings.

The increasing rental demand in the market has a positive impact on landlords in various ways. Landlords benefit from shorter vacancy periods, enabling them to generate consistent rental income. They can also be more selective with tenants, reducing the likelihood of property damage and rent arrears. Additionally, the competitive market allows landlords to charge higher rental prices, leading to improved profit margins. With careful management and adaptation to market trends, landlords can thrive in the evolving rental landscape. Additionally, as more landlords enter the market the supply and demand crisis will inevitably level out, causing positive knock-on effects for tenants. 

6 steps to becoming a landlord in 2023

by Alysha Taylor SmithPosted on

Are you considering taking the step towards becoming a buy-to-let landlord? Despite the challenges and changes in the rental market, there are some promising opportunities for success. In this guide, we’ll take you through the key steps and considerations to help you make an informed decision about becoming a landlord in 2023.

Step 1: Assessing the Financial Landscape.

While rising interest rates may impact mortgage costs, it’s essential to remember that rental income can still provide a steady source of revenue. Evaluate your financial situation and determine if you can cover mortgage repayments if rates increase. Additionally, research tax implications and potential changes in legislation to fully understand the financial landscape.

Step 2: Understanding Eviction Laws

Changes in eviction laws can affect landlords’ ability to regain possession of their properties. Familiarise yourself with upcoming reforms, such as the Renters Reform Bill in England, which proposes a ban on no-fault evictions. While the changes aim to protect tenants, they may also impact landlords’ flexibility. Stay informed about exceptions to eviction bans and the process for removing tenants for legitimate reasons.

Step 3: Exploring Tenancy Arrangements

Be aware of changes regarding fixed-term tenancies. Under proposed rental reforms, fixed-term tenancies may be replaced by rolling tenancies, making it harder to plan for the future of your rental property. This change may impact student lettings, as students may choose to extend their stay beyond the academic term. Stay updated on potential modifications to these policies to ensure your rental arrangements align with your goals.

Step 4: Compliance with Regulations

Ensure your property meets the necessary standards and regulations. The Decent Homes Standard, which currently applies to social housing, may be enforced for private landlords as well. Non-compliance with these standards could be listed on a property portal, affecting your reputation as a landlord. Stay proactive in maintaining a safe and habitable living environment for your tenants.

Step 5: Consider Business Structure

Evaluate the pros and cons of setting up a limited company to purchase your buy-to-let property. While it can offer tax benefits for higher-rate taxpayers, keep in mind that the availability of buy-to-let mortgages for limited companies may be limited compared to private individuals. Research the implications and consult with professionals to determine if this structure suits your situation.

Step 6: Stay Informed and Adapt

As a landlord, it’s crucial to stay updated on industry changes, market trends, and government policies. Monitor news sources, industry publications, and reputable websites for the latest information. Join landlord associations or forums to connect with experienced landlords who can provide valuable insights and advice. By staying informed and adapting to changes, you can navigate the evolving landscape of property rental successfully.

Becoming a landlord in 2023 can still be a viable and rewarding endeavour. By carefully considering the financial aspects, understanding eviction laws, adapting to tenancy arrangements, complying with regulations, choosing an appropriate business structure, and staying informed, you can navigate the rental market effectively.

Working with an agency can help you to navigate the ever-changing laws and regulations in the buy-to-let space and avoid potential fines. 

Why Landlords are holding onto their investments – A positive outlook for Landlords in the UK Housing Market

by Asif AliPosted on

The UK property market has been unpredictable for some time now, it’s important for Landlords to carefully consider the pros and cons of selling up versus holding onto their investments. While there are certainly challenges to be faced in the current housing market, there are also reasons to be optimistic about the future.

The current housing crisis in the UK has been a highly talked about topic through the property investor communities over the last year. The crisis, caused by a lack of Landlords and an increasing demand for rentals, has caused significant impact to both property investors and individuals seeking suitable rental accommodation. 

The Guardian reported on the top challenges faced by current Landlords and buy-to-let investors:

  • Recent stamp duty increases have made buying new properties more expensive, reducing the amount of new landlords entering the market
  • The phased reduction of mortgage interest tax relief has reduced landlords’ profits, making it less financially viable to continue renting out properties
  • Proposed changes to the eviction process (For example, abolishing section 21 evictions) could mean that landlords may have to give tenants longer notice before evicting them

However, despite these challenges Landlords are holding onto their property investments and here’s why:

  • Yields – Rental yields in the UK are still high compared to other countries, providing a strong income stream for Landlords. Landlords have justifiable reason to raise rental prices in the current market, maintaining profits in the short term and potentially leading to high-yields in the long-term when financial strains ease again.
  • Demand – The demand for rental properties is likely to remain high, as many people continue to struggle to get onto the property ladder due to rising house prices. This creates a pool of tenants willing to pay higher monthly rent, and provides landlords with a wider choice of higher-quality tenants who are less likely to miss rental payments.
  • Long-term investment – While the market currently presents some concerning challenges and instability, it’s important to remember that it will stabilise again. When that happens, Landlords who hold onto their investments might benefit from increased yields in the future. 

As a Landlord, you should ensure that you are well-informed about changes to the rental landscape in the UK and how your investments will be affected. It’s best to take time to properly research the potential implications the changes have on your investments and weigh up the risks vs benefits. Whilst it is tempting to sell up when there are challenges in the market, impulse decisions can lead to large losses and potentially missing out on opportunities in the future. 

How to protect revenue during the rental crisis

by Asif AliPosted on

It’s no secret that the UK is moving towards a serious supply and demand crisis. In addition to the growing cost of living and energy prices, what can landlords do to protect their revenues?

  1. Tenant Screening: One of the most effective ways for landlords to protect rental income is by carefully screening tenants by conducting credit checks, verifying employment, and checking references. By selecting tenants who have a stable income and good rental history, landlords can reduce the risk of rent arrears and therefore protect their income.
  2. Being informed: Landlords must stay up to date with all relevant regulations and guidelines. Including significant policy changes, such as The Renter’s Reform Bill. Understanding and properly preparing for policy changes will help landlords to avoid potentially large fines for non compliance.
  3. Rental insurance: Rental insurance can provide an extra layer of protection for landlords in the event of rent arrears or property damage.
  4. Re-evaluate rental prices: With rising costs, it is only reasonable for landlords to raise the monthly rent of their private lettings. Landlords are responsible for ensuring that rent increases are carried out legally by following Government guidelines and ensuring that rental increases comply with their current tenant contracts.
  5. Reviewing Investments: Landlords should schedule regular intervals to review their property portfolio and ensure that their investments are working as cost-effectively as possible. The profitability of an investment can change drastically depending on location demand and property type, landlords should continually be reviewing their existing investments and changing their strategy to meet the current market needs.

This year will be a tough period financially for UK landlords, however by staying informed and planning ahead, landlords will be able to protect their investments and consequently their profits. 

How to avoid EPC penalties

by Asif AliPosted on

What is an EPC?
An EPC (Energy Performance Certificate) is necessary for providing insight into the energy efficiency and emissions from a property.

The gov.uk website sets out clear rules for ordering EPC’s: 

  • When selling a property, you must order an EPC for potential buyers and tenants before you market your property to sell or rent.
  • In Scotland, you must display the EPC somewhere in the property, for example in the meter cupboard or next to the boiler.

An EPC will provide an energy efficiency rating for the reviewed property from A (most efficient) to G (least efficient), this rating will then be valid for 10 years. 

Changes to EPC policies

In April 2020 the government introduced the current rules for property EPC’s which apply to all existing tenancies. These changes prohibited letting properties which scored an F or G efficiency rating, landlords who failed to comply with these regulations were faced with fines up to £5000.

After a consultation in December 2020, the Government announced new standards for England and Wales which are set to come into law by 2025.

The change signifies a large-scale shift towards the prioritisation of environmental considerations in the UK property market. From the activation date of the new law, all rental properties will be required to have an EPC rating of between A and C. The regulations will apply to all new tenancies in 2025 and all existing tenancies by 2028.

Not complying with the new law after 2025 will result in a significantly higher penalty of £30,000. 

What can landlords do to avoid EPC charges? 

Landlords should now review the EPC ratings of the properties within their portfolios. For landlords whose properties have a rating of lower than C, it’s advised to start taking action now to prepare for the upcoming law changes in 2025.

The energy provider EDF outlines some of the most effective ways to improve the EPC rating of a property:

  • Adding/ improving loft insulation 
  • Adding/ improving wall insulation 
  • Replacing boilers 
  • Installing solar panels
  • Double glazing windows

The changes will inevitably be costly to landlords whose homes do not have existing energy efficiency measures in place. Landlords are advised to start implementing measures to improve property EPC ratings early in order to spread the cost over a longer period of time, making the home improvements more manageable. 

How to guarantee rental payments as cost of living increases

by Asif AliPosted on

Cost of living prices in the UK have been steadily increasing over recent years, having serious consequences for renters. A study in August 2022 revealed that food prices had risen by 12.5% compared to one year earlier. Additionally, rising gas and electric prices are putting huge strains on renters across the UK trying to keep up with the rising prices without compromising on their quality of living. 

Many renters are now facing difficulties being able to pay their monthly rent, due to no fault of their own. Long-term renters chose rental properties which fitted their budgets given the average cost of living prices at the time of entering their rental contract. However, renters who have been in their property for 2+ years are now finding their financial circumstances drastically changed, despite having stayed in the same property. 

Whilst a lot of renters have developed plans to cope with the rising costs, the significant increase in cost of living is inevitably causing serious problems for some renters, with knock-on consequences for landlords as tenants struggle to pay rent each month. 

What can landlords do to guarantee rental payments? 

When entering into new rental contracts, landlords should now pay more attention than ever to the average cost-of-living in the local area, and account for this when bringing in new tenants. Ensuring that your potential new tenants can provide proof of yearly income 30 times the rental cost will create a safety-net which should guarantee timely rental payments each month, whilst leaving space for cost of living prices to increase further throughout the next year. 

In addition to this, the most effective way to ensure timely rental payments is to enter into a “Rent Guarantee Scheme”. For a small monthly payment, this insurance will guarantee rental payments when a tenant does not pay their rent within 10 days of it being due – meaning that landlords will receive the rental payments each month even when their tenant is unable to pay. 

In summary, the cost of living crisis in the UK continues to cause serious challenges for both tenants and landlords. However, by developing an informed plan, landlords can limit the impact these challenges have on their monthly profits and gain more security with their investments.

Housing supply targets

by Asif AliPosted on

The UK is facing an urgent need for new and affordable housing across the country caused by an increasing population and lack of new builds. 

Housing supply issues have a significant effect on quality of living for renters, and potential renters, across the country. Lack of suitable housing can lead to: 

  • Overcrowding in houses as people work together to save costs 
  • Unstable living circumstances caused by increasing numbers of landlords selling up, or not being able to secure long-term rentals 
  • Increase in homelessness 
  • Impaired labour mobility 

According to research by the National Housing Federation, to minimise this crisis the UK must build an estimated 340,000 per year, with 145,000 fitting into the affordable housing category.

Additionally, it comes as no surprise that the supply challenges are creating a competitive housing landscape, raising prices and making it increasingly difficult for first time buyers to enter the market.  In August 2012, the average house price in England was £180,000, since then, house prices have increased by an astonishing 76%. 

As part of the Renters Reform white paper, the UK government pledged to build 300,000 new houses per year to work towards this goal.

Housing targets scrapped

Nearly 60 conservative rebels pledged to back-up plans to ban mandatory housing targets. Rishi Sunak has responded to this by easing measures and setting them as “advisory” instead of mandatory. 

In response to the surprising shift, Michael Gove stated “there is no truly objective way of calculating how many new homes are needed in an area” but the “plan-making process for housing has to start with a number”. 

Looking back to when Rishi became Prime Minister in October, there were already doubts surrounding these housing targets. In October (2022) statements, Rishi had claimed that he “did not believe in arbitrary, top-down numbers”. Whilst committed to building more suitable homes across the country the new Prime Minister doubted the achievability and accuracy of the targets.

The conservative rebels took issue with the effects the targets might have on specific constituencies, with concerns of over-building in more rural areas. The government has claimed that they will now consult on how the new guidelines can take local density into account. 

Whilst housing targets of 300,000 new homes per year will be advisory and not mandatory, the Government has stated their commitment to plan high numbers of new builds across the country. Additionally, new measures are being put in place to better control the short-term letting market in the hopes that this can create opportunities for higher numbers of suitable residential homes. 

The best property investment opportunities for next year

by Asif AliPosted on

As 2022 draws to a close, many landlords will be casting their eyes to 2023 and the rental opportunities that lie ahead for those seeking to expand their portfolios.

Despite ongoing economic challenges, property investment remains strong across the UK with rental demand and yields increasing across the country.

However, as the economic landscape changes, London is no longer taking centre-stage as a desired location for rental properties. Rising student demands and growing industry in northern cities is presenting new and exciting opportunities for landlords which might present more cost-efficient investments.

Where are the leading property investment opportunities in 2023?

1. Birmingham

As the largest professional hub outside of London, Birmingham presents an affordable opportunity for landlords wanting to expand their portfolios elsewhere.

The city benefits from a consistently high demand of both relocating professionals and students. This means buy-to-let landlords can find some exciting choices for investment in this city.

With 40% of the population in Birmingham being under 25, we can only expect demand for rentals in this city to continue growing over the coming years.

2. Bristol

In 2022, Bristol took top spot in Aldermore Bank’s buy-to-let city tracker, which ranks the UK’s best areas for buy-to-let investments. The research takes into account average rental prices, rental yield, short-term returns, long-term returns and percentage of the city population who are in the rental market.

Its top ranking was mainly due to long-term property growth; with an annual average growth of 5.1%, along with the lowest number of long-term property vacancies (0.6%).

This thriving city in the South West presents a research-backed solid investment that will likely appeal to landlords in the south looking to expand their property portfolios.

3. (any) Student Cities

As mentioned in our previous article, demand for student accommodation across the uk is at an all time high, presenting many investment opportunities for landlords who are interested in short-term student lets.

By nature student lets provide higher yields for landlords, due to charging rent per student. With the current demand crisis for student accommodation, now might be the right time to invest.

Landlord guide to avoiding winter mould damage

by Asif AliPosted on

During the colder winter months, the risk of property damage such as mould increases. Property mould is one of the most disputed types of property damage between tenants and landlords, with both building structure and tenant lifestyle contributing to these damages.

Property mould can cause structural issues, dry rot and leaks, which can all escalate into more significant damage. Additionally, the presence of mould can have a big impact on tenant health, with mould causing colds, allergies and worsening existing health issues such as asthma.

Can mould damage be prevented?

Both structural building issues and tenant lifestyle can contribute to property mould. We’ve put together some guidance below to help landlords better communicate with tenants during winter to prevent damage to properties.

1. Don’t let the property temperature drop too much

Rising energy prices are contributing to colder properties as tenants strive to save money. But unfortunately these cut-backs can cause mould build-up, which affects both tenants and landlords. Tenants should be properly informed of the ways they can be cost-efficient in their energy usage, whilst maintaining an acceptable temperature in the property.

Some preventative actions tenants can take include having the heating on for just one hour a day, making use of off-peak energy times to reduce costs, or maintaining a consistent minimum temperature in the household which can be more cost-efficient than an off-on approach.

2. Remove mould immediately

Early-stage mould is easily wiped away. Tenants should be encouraged to keep look-out for property mould and remove the mould immediately with mould remover spray to prevent spreading.

3. Ventilate when drying clothes inside the property

When tenants use drying racks inside properties to dry their laundry, they release large amounts of moisture into the air. Inside a cold apartment, this moisture builds up on walls and surfaces and can quickly turn into mould.

Tenants should be advised to always dry their clothes in a well-ventilated space (or preferably outdoors where possible). Having the heating on whilst clothes dry will speed up the drying process and reduce the risk of damp and mould.

4. Make sure ventilation is not covered

If property vents are covered by furniture, or extraction fans are not used in damp rooms, the restricted air flow will increase the likelihood of damp.

Tenants should be encouraged to open windows in bathrooms for a short period to avoid a build up of moisture and to avoid blocking air vents.

5. Reduce condensation when cooking

Boiling pans, frying and using ovens, can all contribute to additional condensation and moisture build-up. Tenants should be advised to keep windows open whilst cooking to increase ventilation and help to regulate the temperature. Where there are no windows in the kitchen, using the extraction hood when cooking will help to reduce condensation.

6. Avoid gutter blockages

At this time of year gutters can easily get clogged with falling leaves and debris from trees as well as moss from the roof. Overflowing gutters can damage walls and create damp issues inside the property. Landlords and tenants should ensure that gutters are cleaned before the worst of the winter months to avoid blockages.

Summary

It is important not to ignore mould, condensation and damp issues within a property. They often start off small but can grow quickly and cause lasting damage when ignored.

Many modern properties are so well insulated that it is difficult to stop condensation from building up so it is important that tenants are aware of the need to ventilate the property even when it is cold outside.

Be vigilant when carrying out property inspections and act quickly when tenants report damp, condensation or mould in the property and where necessary ensure repairs are made.