A new report suggests that over a quarter of UK Buy-to-Let (BTL) landlords are planning to sell one or more of their properties in the next 12 months. That’s up from the previous study and almost three times higher than the proportion of landlords considering selling up in 2015.
The BVA BDRC second quarter Landlords Panel report shows that 26% of Private Rental Sector, BTL landlords said they will sell at least one property in the coming year. That’s up from 18% in the first quarter study and highlights that continued legislation changes that have affected landlord’s tax treatment and their ability to remove uncooperative tenants, is taking its toll and beginning to erode profitability.
However, BTL landlords play an important part in the PRS and provision of much needed homes across the UK. That means this development could see rents rise further as demand for homes keeps rising, but the number of new BTL rental properties available declines.
BTL profit no longer worth the ‘hassle’
The report, which shows landlords expectations for a variety of aspects of the UK’s rental market have fallen, states that a number of details have compounded to encourage more landlords to leave the sector. They include:
- The phasing out of tax relief.
- Stamp duty tax surcharge on property purchases that aren’t your main residence.
- The planned removal of Sector 21, no fault eviction process.
While these aren’t the only reasons for landlords’ loss of commitment to BTL investment, they are among the main drivers. Indeed, according to the report the changes in legislation and increased demands on BTL landlords has led to “too much hassle and stress for too little return.”
After all, even though PRS BTL landlords provide an important service, from their perspective, they’re running a business. That means it must be profitable and work for them, to encourage continued investment.
How can landlords minimise the investment risk and maximise profit?
Although it’s not good news that more BTL landlords are losing confidence in the industry, it can still be a profitable and manageable investment. Of course, there are some additional steps landlords may have to take to safeguard the return on their investment but in most cases it will likely be worth it.
Among the ways landlords can limit the risks of ensuring they will receive an acceptable rental return, is to ensure they always exercise caution, do their research and buy in the right place at the right price. Yes, we know, lots of landlords do this, but not all of them and not always. Going back to basics with your approach to buying BTL property is something that could help.
Use a rent guarantor service, like the one offered by RentGuarantor.com. If you think a new tenant has a blip in their financial background checks or you’re concerned their employment isn’t as secure as they think it is, then requesting a rent guarantor is one way to secure the rent will always be paid, no matter what transpires with your tenant.
Focus your target tenant more narrowly and only cater to that market. This way you’ll gain a good reputation and begin to understand the needs of that market very well. By specialising you can become an expert property provider in that niche and be the go-to landlord for those specific types of tenants – be they students, professional couples, families – in your area.
Even if it feels as though the future isn’t looking as bright as it did in the past, by making some changes you could improve your profitability and enjoy the financial rewards you’re targeting.
You might also find that where you’ve stayed put in the BTL industry and others have left, you’re well-placed to snap up a bargain and reap the rewards by being able to provide homes for even more tenants. That’s something that should benefit your finances and those searching for their perfect rental home.
