"Overall, it is likely that being a non-portfolio landlord will become more challenging in the future, but it is not necessarily the case that their days are numbered"
With the government's perceived war on landlords, endless changes to legislation, new environmental responsibilities, and rising rates, there is much talk (again) about the death of buy-to-let. This, combined with a record number of property incorporations last year, seems to indicate that the sector is slipping away from the grip of 'amateur' landlords and becoming decidedly more professional.
Yet, despite this, for some, buy-to-let investing remains an attractive and highly lucrative option providing a good income stream and perhaps a means to top up their pension income.
As current market conditions remain highly challenging for both large and small landlords, Property Reporter asked those within the industry what may lie in store for 'accidental' or 'amateur' landlords.
Tough market
Kundan Bhaduri of The Kushman Group, got straight to the point, saying: As an incorporated professional landlord with a large portfolio, I will tell you this - The days of unincorporated 'pension-pot landlords' are gone. Accidental landlords or those renting nan's old home are dead too (along with nan).
"With Osborne's Section 24 changes now in full force, property remains the only industry where business owners are essentially taxed on revenue, not profits.
"While incorporation involves some costs and a degree of tax risk, ‘running the numbers’ will often show a clear tax benefit for many landlords.
"While incorporating a property portfolio can be beneficial, it is a process, not an event, and one best suited to those with a high income, at least a handful of properties, and the desire to hold them long-term and re-invest profit."
Gareth Davies, South Coast Mortgages, said: "There's no denying that for some landlords, the current market is incredibly tough. The stress rates currently associated with new mortgage products are making it difficult to find competitive deals for them. You either need a particularly small mortgage or a ridiculously high rental income.
"What's easiest for a landlord to do? Reduce their mortgage, or increase the rent charged? Factor in the pending legislation changes surrounding 'green' properties along with the changes in taxation in recent years, and it all makes life difficult for any landlord who isn't serious about their portfolio.
"Those that can leverage across their portfolio may be fine, but we are already seeing some small landlords give up and sell. Some people may rejoice at that thought, but the fact is we need good landlords to stay in the market."
Lewis Shaw, Shaw Financial Services, comments: "Overall, it is likely that being a non-portfolio landlord will become more challenging in the future, but it is not necessarily the case that their days are numbered. Those who are able to adapt to changing market conditions and meet the needs of tenants may still be able to succeed in the private rented sector."
Samuel Mather-Holgate, from Mather and Murray Financial, adds: "Without doubt, the balance is shifting in favour of portfolio landlords. Incorporation is the way forward, but to make this work from a financial and administrative point of view, it’s beneficial to have a few properties in the company.
"Personal buy to let’s face a raft of headwinds, but especially the lack of tax efficiency since the Tories went to war with landlords."
Cost of living playing its part
Emma Jones, Whenbanksaysno, said: "I think it is sad the impact I have seen over the last few months with the most recent conversation yesterday with a landlord who has seen his payment from around £600 to £1250 per month and due to lease difficulties cannot remortgage. The current lender does not offer new rates.
"For him, the likely outcome is a sale as even if he wanted to use this as a pension fund, he would have to find the money to repay the mortgage and the tax each month. With the cost of living rising, it just won't work. I am sure he is not the only accidental landlord in this position. We hope that this is a short-term issue and we hope to see rates reducing in the near future."
Nicola Schutrups, The Mortgage Hut, said: "I think it is sad the impact I have seen over the last few months with the most recent conversation yesterday with a landlord who has seen his payment from around £600 to £1250 per month and due to lease difficulties cannot remortgage. The current lender does not offer new rates.
"For him, the likely outcome is a sale as even if he wanted to use this as a pension fund, he would have to find the money to repay the mortgage and the tax each month. With the cost of living rising, it just won't work. I am sure he is not the only accidental landlord in this position. We hope that this is a short-term issue and we hope to see rates reducing in the near future."
Bad time to be a landlord
Riz Malik, R3 Mortgages, concludes: "In the current market, both small and large landlords are suffering, and rates are causing the most damage. The landlords most likely to leave the market are the unintentional landlords or those who let to buy.
"Yesterday, I spoke with one client, and the new mortgage payment was roughly the same as the rent. They were planning their exit from the market. Unless they have a large war chest, those who leveraged the most are likely to be the first casualties. It's a bad time to be a landlord."
