It’s been widely reported that landlords are leaving the property rental sector in droves. A combination of factors, including rising mortgage rates, increased taxation, EPC requirement changes and the Renters’ Reform Bill, are prompting the sell-up.
Concern has been expressed about the impact on the supply of rental properties at a time when demand is also rising. What’s less widely reported is what’s happening with the properties that the departing landlords are selling. In many cases, they are becoming part of the portfolio of other landlords.
The landlords picking up these extra properties are well aware of the challenges, but rather than deciding to quit, they are grabbing the opportunity presented by falling property prices and the exodus of many small-scale investors from the market. These are, in the main, professional landlords with a long-term commitment to the sector, and who may be better equipped to manage the upcoming changes.
Access to resources and practical skills
A typical buy-to-let landlord may have only one or two properties, handling the simple maintenance jobs themselves or calling on independent tradesmen for the bigger tasks. For these landlords, the work required for the EPC changes, for example, is a major undertaking. There’s the expense, and they are reliant on third parties. However, the professional landlord with an extensive portfolio might well have a team of skilled tradesmen on hand, ready to prioritize any work required so that the property can be brought up to spec and let as quickly as possible.
One man’s bad luck …
It’s also the case that financial pressures affect landlords in different ways. Let’s consider the growing problem of rent arrears.
Without the protection of insurance, small-scale landlords may find a non-paying tenant a significant drain on their income and wealth – not to mention the health cost of the ongoing worry. Unfortunately, for those private landlords with mortgages, rental arrears can lead to missed mortgage repayments. Sometimes they see no way forward other than to sell the property, often below market value, to another landlord.
The large-portfolio professional landlord is not immune to the problem of arrears, of course, but is better able to withstand them. If a small percentage of tenants aren’t paying, most of the landlord’s income stream is still in place.
A sector for the determined and professional
The property rental sector is always changing. But with the current challenges, it takes a determined, informed and professional approach to make the investment in rental property pay. While by no means the preserve of the large-scale landlord, that approach is not found in the amateur ‘dabbler’. The small-scale landlord who wants to thrive needs to be both careful and astute.
As for the shift towards larger-scale portfolios – property rental is a business and those with larger portfolios are doing what larger businesses have always done. They grow by acquiring the assets of the smaller players in the market, and when they see a bargain or an opportunity, they grab it.