What’s in it for me? Why become a landlord?

On paper it seems like a no-brainer. Get a property, rent it out, earn an income, job done. Sounds so simple, doesn’t it? But becoming a landlord is something that requires thought and evaluation and should be given careful consideration before you start collating your rental portfolio.

Is there a market for rental properties?

Let’s start with whether there is a demand for good rental properties. According to Statista, in 2022, 35.7% of the UK population rented, with the majority of these properties being owned and managed by private landlords. It’s safe to say that there is a need for good accommodation. Demand does seem to be outstripping supply. According to Propertymark, their findings suggest that an average of 11 prospective tenants registered for every property in 2022. So what should you consider when looking to buy a property to rent?

  • Location, location, location – this is key as it will dictate what you can charge and to whom. Consider areas that are near to local amenities and transport links, also areas where students and medical staff live are also good prospects as they can help ensure a steady stream of tenants.
  • What to buy? The more bedrooms you have, the more tenants you can let to. Perhaps a HMO is the best option as it can help spread the risk of assuring your rent is received. Read our HMO article here https://rekaproperty.co.uk/hmos-what-are-they-how-do-you-manage-them/
  • What are your responsibilities? Letting out a property is not an undertaking that should be taken lightly. You will be legally responsible for certain aspects. Read our article on what these are here. https://rekaproperty.co.uk/its-not-me-its-you-what-are-your-landlords-responsibilities/

How have recent government developments affected the rental market?

Higher interest rates on buy-to-let mortgages have increased since 2021. For example, at the beginning of this year, an average two year buy to let residential mortgage rate was around the 5.9% mark, this is in stark comparison with three years earlier when the rate sat around 2.9%. This subsequently means that you will see an increase in your monthly repayments. You should be mindful of this when purchasing a property, and whether you cover this increase yourself, or pass it on to your tenant. There is a strong suggestion that this will taper off and that interest rates may drop. We will have to wait and see, but in the interim it’s worth pointing out that tenants will be paying towards your mortgage, for a property that you own, and which is likely to increase in value over time.

Buy-to-let Mortgages

Also, buy-to-let mortgages on average require a minimum deposit of 25% and are mainly provided on an interest-only

 basis. This means that, for each month of the mortgage term, you’ll only pay the interest on the loan, rather than the capital. You should speak to a qualified mortgage broker about this, to assess its affordability before you begin to invest.

The Renters Reform Bill

This piece of legislation aims to reform the private sector and set minimum standards for social housing. It is currently still being dealt with in parliament however the main proposal is the banning of Section 21 ‘no-fault’ eviction. This will mean that legally landlords will not be able to discriminate against tenants with children or on benefits. As the name suggests, currently a no-fault eviction allows landlords to evict tenants without a reason. They are able to do this if a no-fault eviction clause is in a contract and the tenant is on a periodic, fixed-term or converted standard contract. 

Stamp Duty

Landlords pay stamp duty when they purchase a buy-to-let property. Since April 2016, this has been an extra three percentage points in stamp duty on each band. It is applicable regardless of size or type of buy-to-let property.

Information about stamp duty rates can be found here. https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

We can help.
Reka has decades of experience in property management and HMO conversions. We can help convert your property, but also let and manage it for you.

We are trusted by our clients who work with us to  ensure safe accommodation for tenants, whilst adding value to property portfolios. This may be why we have score 4.9 out of 5 on Google.

Email us at   admin@RekaProperty.co.uk or call us on 020 3286 6468

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