National Rent Rise Day 5 April 2017

National Rent Rise Day 5 April 2017

12:32 PM, 10th October 2016, About 8 years ago 94

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Unless the government confirms a U-turn on section 24, I suggest ALL LANDLORDS make it widely publicised that as of 5th April 2017 they will in unison apply a Tenant Tax to their passing rents. i.e. current rent plus X% tenant tax. (The actual % applied will probably be circa 8% but should be independently forecast by a respected national firm of accountants in conjunction with RLA and NLA)april 5th

A similar tax rise should also be applied in April 2018 and April 2019 depending on the forecast tax impact of prevailing interest rates.

Once the hard reality of THE TENANT TAX is nationally recognised especially by tenants, then the Government and Local Councils will have to make plans for the colossal impact in six months time.

I am not proposing to inflate rent for profit, but purely for my business to stand still. I suspect like many other landlords, I have never increased a rent to a sitting tenant, and only increase to the current market rent upon a natural change of tenant.

Likewise I am not proposing some form of price fixing, just merely to keep the status quo for the property business I started in 1989.

Once the NATIONAL RENT RISE DAY is widely publicised, one would hope that the Government can see the folly of their proposed tax grab, and realise the direct consequences of their actions on tenants.

Like the utility firms or any other business in the UK, when costs are rising the consequent impact has to be passed on to the consumer if the business is to remain viable.

My biggest bug bear is that as an industry with a national average yield of 5% we are portrayed as “greedy landlords” by the media and politicians. The country fails to realise that 5% yield is turnover not the profit margin, and that in reality the army of “cottage industry” landlords make a tiny rental profit and that is only because they are doing the work unpaid in their own time. Also that without the effect of some mortgage gearing or hope of long term capital growth the PRS business model is utterly futile.

Jason


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Comments

terry sullivan

16:51 PM, 12th October 2016, About 8 years ago

Reply to the comment left by "Tony Atkins" at "12/10/2016 - 14:16":

HMOs with 2 storeys already need a licence?

Jon Pipllman

18:30 PM, 12th October 2016, About 8 years ago

A property investor owes it to herself to know what the maximum achievable rent for her properties is.

If she chooses to let at a discount from that rate, it is her choice.

When considering rents, do look at large corporates as a guide. Grainger, for instance, is pushing up rents faster than inflation, planning to continue to do so and proudly stating so it's its annual and half yearly reports, plus its published strategy documents. Indeed, it's property managers are incentivised on rent increases achieved.

I am not one for participating in co ordinated action, but I will continue to review rents more regularly than only when letting to new tenants.

terry sullivan

19:44 PM, 12th October 2016, About 8 years ago

Reply to the comment left by "Mark Alexander" at "12/10/2016 - 16:27":

HA, RSL, Council tenancies--rents increase annually--so should PRS

2:51 AM, 13th October 2016, About 8 years ago

Well, it looks as though LL are playing into the hands of their opponents by putting rents up. The govt have introduced c.24 because they want to assist multi billion pound new entrants into the market by putting small LL at an unfair disadvantage. This is a dirty tactic but is not enough to beat determined LL. The only thing that could do that is a 'Mugabe' approach but that will not happen in the UK.

C.24 is bound to provoke anger but taking it out on T by hiking rent is not the answer. It is exactly what the govt expect and want and is in many ways counter productive.

Retaining market share and creating entry barriers + instability and risks for new entrants is the name of the game.

Do not upset your tenants. Do the opposite. It costs nothing to give a nice personal service with a smile. They are not interested in your problems as they have their own to worry about. They are not the bad guys so don't be bitter towards them. They are your valuable customers that you need to retain.

There are various strategies for dealing with competitors outlined in the book "Competitive Strategy" by Michael E Porter. I can guarantee the chancellor and his predecessor read that book many times over, so you need to read it too if you haven't already.

The difficulty is that small LL are fragmented and in competition with each other.

Small LL need a unified strategy. The Goliaths have yet to make significant inroads into the market. Now is the most efficient time to take action to fend them off before they get established.

En masse cutting rents/tying good tenants into long term loyalty deals would be better than rent hikes. The threat of a price war or difficulty finding tenants may be enough to deter investment in BTR. Also, consider which market segment the BTR want and make your properties the best to attract them. E.g. wealthy professionals are attracted by quality furnishings.

The following page gives a good summary into some ideas:

https://en.wikipedia.org/wiki/Strategic_entry_deterrence

I hate to say it, but enforced rent controls and secure tenancies may actually work to unify small LL against a bigger threat as both those things make for a more hostile environment for BTR.

Jon Pipllman

7:37 AM, 13th October 2016, About 8 years ago

BTR has an advantage when land & house prices are high and when planning skews to denser accommodation

I have seen claims that more land in the U.K. is used for golf courses than for housing

The BTR model of high density housing, rather than nicely spread out family houses with a bit of garden, almost automatically gives a better roi given that land cost is such a significant part of overall development cost

In the long term, many BTR developments will become the sink estates, but for now they are well placed to benefit from supply / deman imbalance and government favours

As Joel says, there will be a place for good private LLs that can offer something BTR can't: a nicely presented, well looked after house with garden, garage & close to schools etc.

Just as very good butchers & greengrocers can thrive in a town with a Waitrose, Tesco, JS, Asda, Morrisons, Aldi & Lidl, there is no reason a good LL can't thrive in a town with HA, Grainger, Mountview, L&G et al

Lots will not be able to compete and will exit one way or another, but plenty will.

S24 & PRA highlight one area of competition: cost and availability of capital. Note the leverage levels employed by corporates and think seriously about going much higher than that for prolonged periods without a better reason than 'that is the most the bank would lend me'. The bank is not your friend. If in doubt, read about RBS, GRG, West Register

Dr Rosalind Beck

9:16 AM, 13th October 2016, About 8 years ago

The two previous comments illustrate a complete lack of understanding and/or consideration of what Section 24 means for many landlords with high finance costs. In fact, there is a large resemblance to what Mugabe did - he had the State seize private property; Section 24 has the same result for many albeit spread out over a few years. If you strangle someone slowly to death then there is a resemblance to someone who strangles them quickly. The idea also that when one's costs are going through the roof because of this confiscatory piece of legislation, that landlords can be 'nice' and not put up the rent is ridiculous.

Jon Pipllman

9:59 AM, 13th October 2016, About 8 years ago

I have a 100% clear & comprehensive understanding of what S24 means for LLs with high finance costs. It will finish some in a quite brutal way.

There will be some spectacular cases involving many £, many properties, many displaced tenants and bankruptcies of the LL and their family. Moreover, PRA & Basel III will finish some more too.

There is no doubt that some of those affected by S24 will be able to mitigate by raising rents. Whether rents in any particular portfolio have enough headroom to cover all the costs or not remains to be seen and will be on a case by case basis.

High leverage, MEW to the hilt, IO debt funded BTL is on its way out and it will take some of the most ferverent participants of that model with it.

It is a market that was an artificial construct and it is being ended by an unusual tax change & government interference in private lenders' affairs.

Residential Property Investment will continue, returning to something more closely resembling the market pre 1996.

Dr Rosalind Beck

10:53 AM, 13th October 2016, About 8 years ago

I wrote : and/ or consideration.' You have no consideration. You relish the ruination of people' s businesses and lives.

Jon Pipllman

11:16 AM, 13th October 2016, About 8 years ago

Reply to the comment left by "Dr Rosalind Beck" at "13/10/2016 - 10:53":

I neither relish nor dislike the impacts of S24.

At a personal level, I have sympathy for people affected (displaced tenants > affected LLs), but in the grand scheme of things, I am quite indifferent to it.

You may find some solace in the recent Irish Budget: it has reversed the Irish equivalent of S24 (enacted in 2009) and introduced a Help to Buy scheme too.

terry sullivan

11:18 AM, 13th October 2016, About 8 years ago

tenants can move to cheaper areas if cannot afford rent rise

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