I’ve always felt uncomfortable with the term ‘amateur landlord’. To me it comes across as a little contentious and bordering on condescending. I mean no offense when I use the term ‘amateur’ and perhaps ‘inexperienced’ is a more appropriate term.
Last week I wrote about five important things York landlords need to know in 2018. The commonality between all five points was very much legislative. After all it is vitally important that landlords keep up to speed with changes in the market as well as new legislative changes. In an ever-changing property market; the impending mandatory requirements regarding Electrical Safety Certificates, requirements for landlords to register with an approved body such as the Property Ombudsman (coming into effect in due course), banning orders and heavy financial penalties to name a few, it is clearly becoming a tougher market to operate as a landlord. Added to this, Section 24, prohibiting higher rate tax payers from mitigating their mortgage interest from their tax liability and changes to buy to let stamp duty, profitability is being squeezed out of the buy to let sector. The question I find myself asking, is this the end of the ‘amateur’ York landlord?
With the upmost respect it would be short-sighted for a landlord to think he/she can have an agent market their property on a ‘let only’ basis and expect to only manage the maintenance throughout the course of the tenancy with little or no regard for the ‘legals’. Conversely, it would be short-sighted for a landlord to allow an agent to manage their property without ensuring they are aware of their fiduciary responsibilities meaning either way landlords should have, at worst, a good understanding of what is required of them in a court of law.
However you wish to structure your portfolio as a York landlord, you need to be aware of all aspects of the industry. Ignorance is not an excuse in the eyes of the law and a “my agent is responsible for that” mentality won’t satisfy the Home Office when you are issued fines of up to £3,000 per tenant for you or your agent not ‘Right to Rent’ checking them.
Gone are the days where one could just market a property, get the tenant to sign a tenancy agreement and hand over the keys. We now need to vet tenants to ensure that they have eligibility to legally reside in the UK. We need to protect deposits, prove that the tenant/s (and/or any relevant parties) have been served Prescribed Information for the relevant deposit scheme as well as the terms and conditions, provide a copy of the EPC (ensuring it does not fall below an ‘E’ rating), Gas Safety Certificate, up-to-date How to Rent Checklist, as well as evidence that these documents have been provided to the tenant/s, ensure Smoke Alarms and Carbon Monoxide Detectors (where applicable) are present and work on move in day of the tenancy. All these need to be done just to be able to serve a Section 21 notice to gain vacant possession of the property should the landlord wish to obtain it.
Letting a property nowadays is very much a game of the unknown and if you don’t know what you are doing, you leave yourself open to a legal minefield of civil and criminal sanctions and exorbitant fines and penalties.
With all of the above, my expectation is in the next five years we will see a culling of the ‘amateur’ York landlord. With this in mind, according to UK Finance, the number of new buy to let mortgages approved in March 2018 has decreased by a whopping 19.12% from this same time last year. Interestingly enough, the number of landlords re-mortgaging on buy-to-let properties has increased by 0.8% in the same period.
What we can surmise is that there has been some cooling in the BTL sector, undoubtedly as a result of the new policies put in place against landlords as well as any economic uncertainty from Brexit. I would envisage, within the next few years, the figures would read a particularly different story with numbers of re-mortgages starting to decline as the more inexperienced landlord realises there is no profit for them in buy to let.
But before we all put our properties on the market for sale, not all is lost. Section 24 has started and we’re just about half-way through this process with the mortgage interest relief being fully dismissed by April 2020.
Now is the time to take stock of your position and create a plan of action so that you are not unwittingly forced out of the buy to let sector. There are great gains to be had from investing in property in York if done correctly. Seek professional advice from a qualified Tax Accountant who specialises in property and should be able to help you consolidate your portfolio.
As for the legislative element, if you are steadfast on managing your own portfolio, perhaps become a member of The Association of Residential Letting Agents (ARLA) where you can take advantage of regular industry knowledge of others. If using a managing agent, cheapest is not necessarily the best. I find it hard to believe that an agent can charge an 8% letting and management fee per month nowadays and maintain the ever-increasing standards imposed by the government and regulatory bodies. As a landlord you should focus on value for money and I would argue having someone manage one of your most valuable assets in the most compliant way is worth paying a premium for.
The question to ask yourself is, “am I going to be”, dare I say, “an amateur landlord or am I going to box clever and really get an understanding on the legal side of running my property/ies?” If you do the latter then I am confident you will weather the turbulent storms ahead.