Is it a good time to invest into a rental property considering the cost-of-living crisis in the UK?

[jack234]

I am writing a blog and I think this would be an interesting piece to find out the opinions on landlords in this space. How have people found the rental property market in recent months.

[Melboy]

I wouldn't invest right now due to the instability of house prices and the forthcoming rises in interest rates. Some may think differently to that statement and I wish them all the luck in the World.

If you are looking for long term and by that I mean 10 years or more and can buy below market value a nice property then it may be given a consideration.

[Richlist]

This question really isn't suitable if you are looking for a yes OR no answer. There are so many variables that it looks like the questioner doesn't understand the subject. I would have to answer both good idea AND bad idea as the question doesn't contain enough detail for a definitive answer.

[Carryon Regardless]

As RL too many variables.

How much of the investment will be mortgaged?

Is the investment in a high employment area, include high quality of employment in that question?

Are we considering freehold or leasehold, what is the belief that legislation is coming to change leasehold situations? I realise that goes beyond the cost of living consideration but has relevance to an investment.

Self management or agent management makes a considerable difference to returns and understanding legislation. 

[kanrent]

I won't invest now due to the tory, Labour, and media, hatred and demonising of landlords anything could happen. Just wait and see what happens. 

[Grampa]

Never say never. I think if you are a cash buyer there are going to be some fantastic deals coming to market over the next 12 months. Rents are at a record high as well. There are always winners and losers when the market changes. 

[Melboy]

There was a time when this Landlords forum was buzzing with questions and answers on all aspects of being a landlord and buying suitable property but now weeks go by without any questions or helpful replies.

A sign of the times it certainly is. Is it actually even considering buying a BtL property anymore? Even for the long term investment of say 20 years? Personally I believe it is but just right now is not a good time to buy in my opinion. I speak from experience of at least 3 "boom and busts" property times over the past 30 plus years.

This article in the Money Mail makes interesting reading on the current situation and it's worth a read.

https://www.thisismoney.co.uk/money/buytolet/article-12743015/More-landlords-selling-properties-buying-mortgage-arrears-DOUBLE.html?ico=mol_desktop_home-newtab&molReferrerUrl=https%3A%2F%2Fwww.dailymail.co.uk%2Fhome%2Findex.html&_ga=2.170573344.1413607739.1699519440-293831135.1699519440&_gl=1*b9sme*_ga*MjkzODMxMTM1LjE2OTk1MTk0NDA.*_ga_XE0XLFFF16*MTY5OTk1MDI4OS4xNi4xLjE2OTk5NTE3NjIuMC4wLjA.

[Richlist]

The first question you need to ask yourself is why do YOU want to invest your money in a rental property ? Let's look at a few financial facts :-

* Borrowing costs are higher than they have been for many years and mortgage rates are likely to remain high for a few more years at least.

* Property price rises have slowed significantly due to affordability......driven by higher interest rates, cost of living crisis etc

* Adverse legislation making life more difficult & less profitable for landlords.

* Political uncertainty......Labour may win the next election and are not friendly to landlords ie things may get considerably worse. 

* When you can get a 6% risk free return on cash deposits why would you risk all to get 8% from a rental ?

* Etc,etc.

I'm struggling to identify ANY positives that would be attractive to a buyer.......do you know of any ?

[Melboy]

I'm with you on all your points RL.     👍  I wonder if anyone can come onto the forum and inform us that they have just bought a BtL property and their reasons for doing so. I would interested in reading what they have to say.

[bil8999]

Never thought id say this but, if any of the houses come empty, think I will sell, pay the CGT move on.

Personally I think tenants that have always paid there rent should be given at least 6 months notice.

 

[Carryon Regardless]

53 minutes ago, bil8999 said:

Personally I think tenants that have always paid there rent should be given at least 6 months notice.

I wouldn't disagree, aside from they just needing to give a months notice. The 6:1 ratio is a reasonable example of just how skewed the legislation has become, and is going.

But, to Mel's point. A mate has just bought to rent. I'll not term it as BTL as it's designed to become a holiday let. A clear advantage is that as that at the end of their excursion the responsibility is ended. Here in the High Peak there is a high probability of good clients, in Prestatyn not so.

It would need to be by design, but should a client refuse to leave then I guess they would be squatters, but with the complication that they were granted some exclusive tenure.

Will local and central Gov't set their sights on this market soon enough? In Wales additional properties such as these can attract an 'additional' 200% council tax already (up to local authority discretion that one).

 

[bil8999]

If local councils are so short of housing, then they can buy all mine  that come empty at a discount, as long as HMRC don't charge me CGT

[Melboy]

Going back to the point that "if the property becomes empty I would consider selling" by bil8999 I am of the same opinion but in my case it is very unlikely my rentals will become empty so that choice is not really an option for me. My tenants are all long term and well looked after and paying below local rental prices for similar properties.

   Speaking to an LA / EA this week regarding the local scene I am informed that demand is high and few rental properties coming to market now. They do have 3 properties on their books from established landlords selling up.

[bil8999]

11 hours ago, Melboy said:

Going back to the point that "if the property becomes empty I would consider selling" by bil8999 I am of the same opinion but in my case it is very unlikely my rentals will become empty so that choice is not really an option for me. My tenants are all long term and well looked after and paying below local rental prices for similar properties.

   Speaking to an LA / EA this week regarding the local scene I am informed that demand is high and few rental properties coming to market now. They do have 3 properties on their books from established landlords selling up.

Yes , I am the same, long term tenants, but when you have some properties that are now in the 300k bracket rented out at a yield of 3.5%, then it makes you think sell.

[Melboy]

12 hours ago, bil8999 said:

Yes , I am the same, long term tenants, but when you have some properties that are now in the 300k bracket rented out at a yield of 3.5%, then it makes you think sell.

Which is why Richlist has probably done the right thing in this current high interest climate by selling up and disposing of all his properties and has banked the proceeds. The returns of around 5% 'ish and no tenants to be looked after does look like a good prospect for the immediate future.

[bil8999]

I feel that the days of the small landlord are numbered.

[Melboy]

23 hours ago, bil8999 said:

I feel that the days of the small landlord are numbered.

They will be if Labour gain government next year. The awful Angela Raynor has made that quite clear recently. I can see a compulsory register of all private landlords being introduced and held by local government at a cost to the landlord of course to be on this register. That'll push rents up and will probably be the final condition for me to sell up.

[Carryon Regardless]

A bad few socialist local gov't's have introduced the selective licencing schemes. The effect of the Rent Smart in Wales isn't much different.

Hyndburn started theirs maybe 11 /12 years ago. Approx £800 for each 5 years. It was created by idiots that couldn't even design the questionnaire to ask the questions correctly so as to get an answer they needed.

"Each property shall be inspected within the first twelve months", they would then supposedly list the required improvements. My 1, or my brothers 5 never saw an inspection in all the years, thankfully.

It would improve lawlessness in the areas selected. "What action would you take if your tenant was acing in anti social ways?" I perceived that calling the police, or those affected calling the police, wasn't the right answer. Somehow I should deal with these low life's, while not harassing them, or affecting their quite enjoyment. Anyway there was no perceived improvement, surprise, surprise.

So this year they have dropped the scheme, w/o telling the ,000's they have taken the money from previously. Seemingly it has just dissolved. You gotta wonder if the prats are claiming a success.

Sorry for the told yer so, but some years ago I did suggest that this is no longer our business. We run it as dictated. We are no more than agents for the local / central authority. It has even evolved so that they decide what is a reasonable profit to enjoy, which is approximately nowt in the socialists tiny minds.

 

[Grampa]

Having done the number crunching on a couple of suitable priced properties recently it is a very borderline decision and is it better to leave the cash in the bank.?

Yes there is capital grown in the long term but unless there is a stamp duty holiday and a fantastic below market priced property I can snap up with a sub 4.5% mortgage I think I will hold off for now. 

Has anyone noticed how much the arrangement fees for mortgages has shot up. Where I would previously has paid about 1k it is now closer to 3k. 

[Richlist]

Yes, as a result of adverse legislation and the mounting costs eating away at profits they are gradually killing any GROWTH in the private rented sector. Those that already own BTL's and have done for some time can probably still get a healthy return.....their main problem is CGT on exit. Those that want to enter the market are faced with an additional 3% SDLT, fewer expense offsets & increased mortgage costs etc.

All this is happening whilst the Gov are building fewer council properties, whilst we have a cost of living crisis, a higher demand for affordable housing, lots of homelessness and immigration continuing at a rapid pace with no solution on the table.

The private rented sector has filled the enormous gap created by the Thatcher Government when they decided to sell off council housing stock to sitting tenants at a discount starting in the late 1970's. The private sector really took off in the early 1990's growing very quickly until now when more landlords are starting to call it a day. But, in killing off the PRS with nothing to replace it where are those people who cannot afford to buy going to live ? It's a mystery to me except..........

There are some very large organisations starting to build up enormous portfolios of rented property, Lloyds Banking Group are one that springs to mind, they have set up Citra Living to handle their PRS properties.  Perhaps they & others will eventually take up some of the slack we are beginning to see in the market.

[Melboy]

11 hours ago, Richlist said:

Those that already own BTL's and have done for some time can probably still get a healthy return.....their main problem is CGT on exit.

And that is where I am at. It gets worse with Chancellor Hunt reducing the CGT allowance from £12,500 to eventually £3,000 in 2025. My CGT bill if I were to sell up will be enormous and I am of a mind that I do not want to pay tens of thousands of £££'s in tax but at the moment there is no way around it is there?... is there?

[Richlist]

Yes there is, or at least there was......you would have to check wether it's still possible as I'm a bit out of touch these days......but if you think it's for you read on.

It does require a complete change of lifestyle. There are a few countries around the world who DON'T apply CGT on worldwide assets and to take advantage you would have to emigrate permanently to those countries. Some of those countries are not necessarily the best locations in the world but hey ho if you are about to save a few hundred thousand  pounds.......it's really a case of how much effort are you prepared to expend to avoid the tax !

As someone who has unwillingly paid ENORMOUS amounts of CGT for the past few years of property disposals I sympathise with your plight.

Good luck.....let others know the details if you decide to go for it. 😁😁

[Carryon Regardless]

17 hours ago, Richlist said:

There are some very large organisations starting to build up enormous portfolios of rented property, Lloyds Banking Group are one that springs to mind, they have set up Citra Living to handle their PRS properties.  Perhaps they & others will eventually take up some of the slack we are beginning to see in the market.

I recall reading, some years ago now, that some of the large new players were looking at using such property rental portfolios as pension investments. Akin to their playing with pension pots on the stock market I expect.

Do you think there may be a strategy to make the BTL investment so unattractive that us smaller (pension builders) so we leave the industry? As you say it may be that the larger players take up the slack, although not with the typical 2bed terrace scenario in my view. There's would be the Docklands new build type investment I would have thought. So there is still a place for those that a willing to provide for the tenants that are less financially capable.

Yesterday our latest experiment of a Chancellor announced an increase in benefits. Along with removing the lock on HB, to enable local authorities to now pay 30% of local market rents. Does anyone know where the lock was set % wise? As w/o that I 'aint a clue if this would be a significant increase or negligible. But it may be that this easing of benefit restrictions would encourage more to involve themselves in that market, thereby causing plebs like me to cater for plebs like them while leaving the upper market to the mates of the (present) Gov't.

For the avoidance of doubt (I use that term sarcastically, trying to sound like a politician that actually has little of relevance to say) I do recognise that while the massively corrupt Tories are squeezing the financial life (and increasing our legal risks) out of BTL, that the massively inept and pathetic Socialists will do us far worse.

[Richlist]

The Lloyds business called Citra Living have a good web site that's worth a look. They seem to have a good selection of property from small apartments to 4 bed houses......Kent, Derbyshire, Peterborough etc. They also seem to offer shared ownership.

[bil8999]

Keep inheritance tax scrap CGT, sorted