He’s some timely advice for landlords and letting agents from a finance broker on how to stay ahead of the curve with buy-to-let in 2019.
Recent years have shown that the government is tightening up on buy-to-let throughout the country. A lot of changes have already taken place, such as the introduction of Stamp Duty. Further changes are yet to come, such as the expenditures landlords can include on their property tax bill and also talks about making EICR electrical reports mandatory for landlords, similar to gas safety certificates now.
With an increase in legislation and a shift on how UK landlords can purchase and run their portfolios, how can investors look to stay ahead?
Depending on where you’re based, landlords may look to increase their rents. This has always been the general consensus, that ultimately the tenant would foot the additional costs that landlords will now have to pay. Furthermore, the ban on letting agent fees will be implemented in 2019.
Some letting agents will be forced to close down and the remaining agents will have to increase fees charged to landlords in order to keep afloat. This will then have a chain reaction, where the landlord will simply increase rent. If this is implemented on a large enough scale throughout the UK, then we will see rental prices higher than ever before. As a tenant, it leaves little other choice.
Buy-to-let has changed drastically, especially when compared to ten years ago. It’s now harder to evict tenants, deposits need to be protected, tenants need to be given How-to-Rent guides, and so on. Although some legislation is great for both landlords and tenants, the increased administrative work from a letting agent’s perspective will warrant an increase in landlord fees (regardless of the tenant fees ban).
I know I’ve said it already, but yes, landlord legislation has increased and will only increase further. Whether you use a letting agent or not, as a reputable landlord, you should stay up to date with everything to do with landlord rules and regulations. Fines are being imposed now and even custodial sentences for landlords who don’t abide by the rules.
Even if you do use a letting agent, always check that the deposit is protected, check that the how to rent guide has been served. Ask for a copy of your gas safety certificate (if you don’t organise them yourself). The reason being, irrespective of whether landlords use letting agents, it is still the landlord’s responsibility to ensure that guidelines are being met.
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Rent Guarantee Insurance
We speak to many landlords who aren’t aware of rent guarantee insurance. Policies all vary; however the insurance is taken to cover any rent arrears and some policies also cover the entire eviction process, including legal fees.
With the New Year on the horizon, I can only see an increase in this protection being used. If rents do increase but salaries don’t, then some tenants will feel a financial strain and may fall into rent arrears. Protection is relatively cheap for the entire year with the majority of policies being between £75 – £150 per annum.
Don’t Ditch Your Letting Agent
Your letting agent will more than likely increase fees in 2019, however, it’s probably not advisable to stop using an agent. You do get what you pay for and a great letting agent can be invaluable. If you’re an enthusiastic landlord and have a lot of spare time, then it may make sense to manage your portfolio yourself. Nonetheless, you will have to learn about the latest rules and regulations and ensure that you stay ahead of them. Furthermore, if your tenant starts causing you problems, you may need to approach a letting agent will probably charge you extra as you’re not an existing managed client.
Managing a property isn’t about simply collecting the rent. Reputable letting agents will inspect properties, carry out inventories, handle deposit disputes and aim to ensure their landlords are up to date with legislation. Landlords can lose a lot of money trying to save monthly letting agent fees but find that they simply can’t manage their property effectively and losing money in the process.
With Brexit on the horizon, many landlords are in two minds of whether or not house prices will drop. Although there might be a dip in house prices, I can’t imagine the market to crash as it did ten years ago. If the market did drop quite drastically, then there may be opportunities to purchase properties at reduced prices. Either way, the majority of landlords are on 20-25 fixed-term interest only mortgages.
House prices will also depend on the location of where you currently own properties. London will perhaps be affected the most when compared to the rest of the country, however the London property market is still a heavyweight on a global scale. I wouldn’t think there’s any need to panic. The majority of landlords understand that property is a marathon and not a sprint and although there may be a couple of stumbles on the way, you’ll get to the finish line in one peace.
By Robert Bailey, Mortgage Advisor: https://expertmortgageadvisor.co.uk