Record Number of Landlords Making Rental Losses

Record Number of Landlords Making Rental Losses

16:49 PM, 16th February 2012, About 11 years ago 16

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Landlords are starting to feel a squeeze on rental profits despite rising rents, according to a new study.

The number of buy to let landlords with large portfolios of 20 or more rental homes making a loss soared to 8%, says the research for the National Landlords Association.

The findings for the last three months of 2011 showed the biggest rise in portfolio landlords making a loss since records started in 2006. Only 1% reported a loss in the third quarter of the year.

While portfolio landlords enjoyed higher rental yields than other landlords, at 7%, average rental yields for all landlords fell in the last quarter of 2011to 5.9% from 6.7% in the previous three months.

The end of 2011 saw rental yields for all landlords fall to their lowest level in the year despite almost half (46%) of landlords increasing rents in the year and a third (34%) planning rent hikes in the first six months of 2012.

Voids – the time rental properties stood empty – fell five points – from 41% in the third quarter of 2011 to 36% in the fourth quarter.

Mark Long, director of BDRC Continental, the firm conducting the research, said: “In a difficult economy a larger portfolio of property brings greater exposure to risk and those landlords are clearly feeling the impact of rising costs and a decline in profitability.

“This is the highest level we have seen of landlords with 20-plus properties making a loss, and the biggest increase between one quarter and another. In previous waves of the research the highest figure of loss making for this group was 4% in the third quarter of 2009. Some landlords are clearly feeling the pinch.”

Despite a drop in profits, landlord sentiment remains upbeat, with 80% reporting that they feel positive about the prospects for buy to let.

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11:00 AM, 17th February 2012, About 11 years ago

With so much uncertainty with the economy, employment and house prices, all landlords should be looking very carefully at their income & expenditure.  Gone are the days when rising house prices would shield even the most amateur investor - buy to let is a business.

Landlords should think very carefully about all of their expenses:

Mortgage fees & interest - funding is difficult but is there a cheaper mortgage deal out there?

Letting / management - consider using an online letting agent such as ours, to keep costs low.

Maintenance - always shop around when getting quotes.  Sites such as checkatrade give you access to a number of recommended trade people.

Make sure you are tax efficient e.g. using allowances for wear and tear and energy efficiency.

Be very careful with tenant referencing to avoid arrears and bad debts in the future.

Despite any current difficulties, prospects for rental growth are bright, hang in there!

David - the online letting agent, find a tenant for £79.

Mary Latham

11:19 AM, 17th February 2012, About 11 years ago

If rents are up and voids are down these losses can only be rent arrears and overheads.  If landlords are making a loss with the current interest rates its very worrying to think what will happen when they go back to more normal levels?

One of the things that I am seeing in the West Midlands is an increase in overheads because of increases in the cost of HMO licenses, many of which are up for renewal for those landlords who came forward early.  There is also a wave of Selective licensing across the country and this will impact on returns in the coming months.  Many authorities are still tinkering with their licence fees and any landlord who has a renewal due soon should apply early and pay the exisiting fee before increases begin in the new financial year.  Landlords should make sure that they are getting every discount possible to reduce these fees, membership of landlords associations, early application, multiple properties, accreditation can reduce the fees by up to 40% in many areas and with fees touching £2k in many parts of the country these discounts can make a huge difference. In addition to the fees landlords may need to spend money on their properites to meet their licence conditions and it is worth checking out what your local authority expect in HMO's

Rent arrears is a whole new discussion and reductions in benefits will no doubt increase arrears and reduce returns further as the number of tenents who are unemployed grows.  There is a lot of good advice in discussions on 118 about rent guarantee insurance, credit checks, life style references we all need to do everything possible to cover our backs and survive.

0:04 AM, 18th February 2012, About 11 years ago

I think your 1st paragraph encapsulates exactly what the reality is for a vast amount of LL.
Should increases in interest rates occur there will be mass repossessions unless the banks exercise extreme forbearance.
It is for this issue with the housing market that the BoE has not increased rates as they know there is this particuar elephant in the room.
If people are struggling now; what is hiding beneath the surface
Using the iceberg analogy the BoE knows there is a massive debt issue below the surface and they do not wish it to collide with increased interest rates.
They therefore are hoping that low onterest rates will assist the debt iceberg to melt away in inflation and once that has gone maybe they can consider increasing rates.
It could take 20 years for this to occur.
Look at Japan!
The increase in petty regulations could well see LL departing certain segments of the market as it will be seen as not worth a candle to have to continually comply with costly and ultimately pointless regulation.
It has been pointed out by many posters; you included I think, that if the existing laws were enforced there would be no need to introduce more self serving and ultimately useless regulation.
The effects of these regs could well reduce rental supply, increasing rents and making life even more awkward for prospective and existing tenants.
The old law of unintended consequences crops up again I think!?


7:46 AM, 21st February 2012, About 11 years ago

I don't think these are unintended consequences: many councils appear to want to kill off houseshares - it runs well with the local public, landlords have very few defenders (we are exploiters of tenants, not providers of affordable shared housing), licenses are a fat new source of income, and it gives councils new powers and controls without any new responsibilities, which they generally love. The fact that it will drive good HMO landlords away into bedsits and letting to couples, and the bad ones every further underground, appears to be a price worth paying in exchange for public popularity, the fees, and the extra control over evil, rapacious landlords.

13:08 PM, 21st February 2012, About 11 years ago

It might be vote winning but for the council tax payer it ends up costing more to house now former HMO occupants in B & B as that will be all that is available.

Anne Brown

14:31 PM, 21st February 2012, About 11 years ago

Mary, can you advise your best approach to providing white goods in a let propoerty.  I seem to be paying out all the time and am looking for best way of designing the tenancy so I do not have to pay to replace waching machines in particular for long-term tenants.  any advice much appreciated.

Mark Alexander - Founder of Property118

16:26 PM, 21st February 2012, About 11 years ago

I'm not Mary but I'll happily add my two penneth. Option one is to let without white goods from the outset. I find that if tenants buy their own white goods they tend to stay longer. Option two is to buy lifetime warranties. Recently I've been using one of the advertisers on this site. See the Appliances Online advert on the right of the home page. They offer extremely good prices and believe me I do check. It's really easy to check prices these days, simply find the product you want to buy from any retailer, find the make and model number and enter it into Google. All the suppliers and their prices will come up. Appliances Online are usually within a few pounds of the cheapest but they also have a deal where they deliver, unpack, install and remove the old good. This is very handy. They also have a deal where they will fix or replace any item for an ongoing monthly fee. It's a bit like a warranty but it lasts for as long as you pay the monthly premium and it's very cheap. I've been very impressed with it and I can assure you I'm not just saying that because they advertise here.

16:51 PM, 21st February 2012, About 11 years ago

I have a problem with integrated appliances in my flats and it has cost me a fair bit in replacing those items.
You can't really rent out these flats without appliances.
I will look at your suggested warranty situation as it may be a cost effective solution.
The issue does occur though if the warranty company knows the property is tenanted.
Does your suggested warranty provider cover rented property or are you just economical with the truth when you obtain a warranty on the appliances!

Mark Alexander - Founder of Property118

16:53 PM, 21st February 2012, About 11 years ago

Hi Paul

I'm totally honest with them. They know I'm a landlord, they actually target landlord business, hence their decision to advertise with us.

18:20 PM, 21st February 2012, About 11 years ago

Have you sourced a good lifetime warranty provider; not taking into account the monthly plan with appliances direct.

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