Helping landlords navigate the challenges of the Private Rented Sector

Published: 15/02/2023 By Ricky Sodha

Currently, the rental sector makes up about 35% of all homes in the UK and although there are increasing pressures on the property sector from higher interest rates, maintenance costs and tighter regulations, recent data indicates landlords selling up make up only 16% of the total number of sales.

While this is the highest level for four years, the demand for rental properties is on the increase as first time buyers hold off on their purchases waiting for mortgage rates to stabilise or drop.So, on the one hand supply is falling as landlords sell and demand is increasing as the pool of renters increases, leading to higher rents.  At some point, this push and pull will reach a point when letting becomes a favourable option for property investors. In this situation, there are three scenarios where BTC’s expertise comes into play; we can advise:
  1. Landlords looking to buy a vacant property,
  2. Landlords looking to sell a tenanted property, where we can seek out a landlord on your behalf,
  3. Landlords worried about tenants not paying due to the cost of living crisis, where we recommend our Guaranteed Rent scheme.

Why Landlords Sell Up

It is worth considering the wider reasons landlords decide to sell their rental properties. Every sale of a rented property provides an opportunity for a new landlord to enter the market, particularly when prices are falling and when demand from owner occupiers is weak.

Financial Reasons:

  1. Retirement: Many landlords sell their properties when they reach retirement age and are looking to downsize or use the proceeds from the sale to support their retirement lifestyle.
  2. Need for Liquidity: Landlords may sell their properties if they need to raise cash for unexpected expenses or to invest in other opportunities.
  3. High Maintenance Costs: If a property requires significant maintenance or renovations, landlords may sell it to avoid the cost and hassle of these repairs.
  4. Poor Cash Flow: If a landlord is struggling to cover their mortgage, taxes, and other expenses associated with owning a rental property, they may choose to sell it to reduce their financial burden.
  5. Tax Benefits: Landlords may sell their properties to take advantage of capital gains tax benefits, especially if property values have increased significantly. (This opportunity is less favourable than previously due to reductions in allowances.)

Personal Reasons:

  1. Relocation: Landlords may sell their properties if they are moving to another city or country.
  2. Health Issues: Landlords may sell their properties if they are facing health issues that prevent them from managing their rental properties effectively.
  3. Changes in Family Situation: Landlords may sell their properties if they have a change in their family situation, such as the birth of a child, divorce, or death of a spouse.

Market Conditions:

  1. Increasing Interest Rates: If interest rates are rising, landlords may choose to sell their properties to avoid higher mortgage payments.
  2. Economic Downturn: In a weak economic environment, landlords may be motivated to sell their properties if they are unable to find tenants or if rental income is declining.
  3. Competition: Landlords may sell their properties if they are facing increased competition from new developments or if their properties are no longer in demand.
  4. Property Trends: Landlords may sell their properties if they believe that the property market is about to take a downward turn or if they believe that prices will decline in the near future.

Each landlord’s decision to sell will be unique, and will depend on their individual circumstances and priorities. Regardless of the reason for selling, it is important for landlords to work with a property professional who can help them understand the market, negotiate a fair price, and handle all of the details of the transaction.

In summary

As a landlord it pays to be vigilant and to keep on top of the trends. Despite the constant negative press, the sector is urging the government to support the PRS. The National Residential Landlords’ Association responded to the Department for Levelling up, Housing and Communities’ White Paper: A Fairer Private Rented Sector, with its own consultation document: A Fairer Private Rented Sector.

“Despite government rhetoric, the reality is that independent landlords are vital to securing a functioning PRS. Independent landlords provide tenants with flexibility, choice, and value for money at any price point. Tenants appreciate the role independent landlords play in the PRS, this reality is in contrast to the tone the government strike in their White Paper.”

Over the past 40 years, we have been through many periods of uncertainty and have helped both landlords and tenants. We are happy to discuss the challenges you face with your property portfolio, so feel free to get in touch. We’re here to help!