"This year the economy, mortgage rates, incoming legislation, and taxes are just the final straw leading many landlords to rush to sell off their portfolios to beat the market drops, mortgage versus rent gaps, and refurb issues"
PR: Tell us a bit about yourself and your role within the property industry
DC: The Landlord Sales Agency was established by myself, David Coughlin, co-founder of the National Association of Property Buyers, and private landlord Maz Saleem. We had a passion for property, and now live and breathe it. Together we have unrivalled experience in the landlord property sales industry having purchased over 300 buy-to-let properties over the last 15 years.
As landlords ourselves, we fully understand the challenges landlords face in the current climate, both in running properties and selling a property portfolio. One of the biggest challenges for landlords when they decide to sell, is executing it in a timely and affordable way.
Often landlords say to me, “but I have tenants that won’t or don’t want to leave” or “the market has dried up and my property won’t sell,” well, we know exactly what to do to overcome those issues.
We’ve built a strategy which we believe enables us to fix any problem for landlords who come to us looking to sell. We manage the entire sale from start to finish, we have a waiting list of new landlord buyers actively looking for business deals, meaning we can sell with tenants in, regardless of the situation or rents. We also sell to owner-occupiers, first-time buyers and investors who we have trusted relationships with.
We have built an in-house team of builders, electricians and tradespeople who can also carry out quick repairs to ensure properties are of the standard needed to sell.
If tenants need relocating, we have relationships with local councils to help, even providing pre-paid rent in some cases for tenants in their new homes so they’re happy and able to move quickly. We secure offers early in the process to avoid gazumping and wasted costs, which has become an increasing problem in the open market more recently.
PR: Data from several industry surveys, including one from RICS, has indicated there is currently momentum building for landlords to exit the industry. Is this what you're seeing too?
DC: Absolutely. Landlords’ profits are being squeezed from every direction. This year the economy, mortgage rates, incoming legislation and taxes are just the final straw leading many landlords to rush to sell off their portfolios to beat the market drops, mortgage versus rent gaps and refurb issues. This is before we start to discuss the impending EPC targets.
To put this into context, a year ago we were receiving around 30 landlord enquiries per month. That moved up to around 100 six months ago, and now we’re receiving around 240 per month. So, it’s been an exponential increase.
Many properties have been part of landlords’ portfolios for more than 10-15 years, they have tenants paying low rents, but the properties are in need of costly refurbs to meet the Government’s target of EPC-rated C or below.
It’s an outlay which most will not be able to recoup for a long time, with falling property prices and rising mortgage rates, so a lot of landlords are deciding to “cut the rot” and get out whilst they can. For many, it just doesn’t make sense to throw such a huge time and cash investment into something that they can shift quickly and refocus elsewhere.
With that said, we are also finding some very large portfolio landlords (a database of over 30,000 private buyers) who are willing to buy up other buy-to-let properties and spend the money making the necessary improvements, as they see the long game and have the financial capacity to do so. It really comes down to personal financial circumstances and how long someone plans to be a landlord for.
PR: Clearly, things are incredibly tough for landlords at the moment. What advice would you give to those facing increasing financial pressure due to current market conditions?
DC: You have to do your sums and know your own financial pressures. Some landlords see the rental money coming in but don’t plan well enough for the future when it comes to tax bills, maintenance and refurb costs.
Those coming off fixed-rate mortgages in the next 12-18 months need to scrutinise their budgets even more carefully. In addition, with the impending abolition of Section 21, more landlords could be forced to go to court to evict their tenants and that too comes with a cost.
In the past, some landlords have been reluctant to increase rents, particularly if they have good tenants who are taking care of the property. I’ve been guilty of it myself! On the whole, that has always been a good strategy, as the cost of finding new tenants for the sake of a small rent increase was not necessarily worthwhile.
Unfortunately, we are now in a very different market where landlords’ costs, just like homeowners, have shot up. Most landlords cannot afford to be taking below market value rents anymore and this is putting huge pressure on tenants and the market.
However, some tenants understand that competition in the rental market is fierce and, in some cases, they may not find what they currently have elsewhere. Finding a rental property for the right price, in the right location and that is available is no easy task right now, particularly in main cities, so landlords who need to raise rents should consider talking to tenants to see if there is a compromise before automatically selling up if, of course, they would like to remain a landlord.
PR: With demand for rental homes still outpacing supply, there is more need than ever to keep the PRS stocked with affordable property for tenants. Is selling up the answer and what would you say to tenants who are worried that their landlord is looking for the exit?
DC: For some landlords, regrettably selling up is the only solution. As I have said before, a combination of economic conditions and legislative changes have pushed landlords to this point, but tenants are feeling the brunt of this.
Fewer properties mean greater competition and high rents. There is no doubt about it, our country needs private landlords and those that can afford to remain in the market will in the long term continue to profit. However, in today’s climate, it is a big commitment and not necessarily the side hobby it once was.
From our perspective, we are doing everything we can to help landlords who need to sell, but also keeping as many properties in the PRS as possible by selling to other investors who will house the existing tenants. If they can’t keep the existing tenants, we help those tenants find somewhere else to live within their budget.
Tenants are having to accept rent rises, and in 50% of the sales we have agreed, the tenants have opted to stay with a higher rent because they know fierce competition for rental properties could see them paying even more elsewhere.
PR: Despite rising rates getting the lion's share of coverage in the press with regards to why landlords are leaving the PRS, arguably, government interference via legislation has proved to be even more damaging. How do you see the Renters (Reform) Bill impacting an already precarious situation?
DC: The Renters Reform Bill has been on the cards for some time and was the catalyst for the spike in landlords looking to sell. It is hard to be a landlord and keep up with the legislation, and for those with mortgaged properties, the return is often not worth the investment of time anymore.
When broken down, many of the changes in the Renters Reform Bill are simply to improve standards in the industry and that is no bad thing, but for me, it isn’t balanced fairly with support for landlords and that’s why we are in the situation we are in. Supporting landlords is not a political vote winner, but when the Government has not kept up with its own house-building targets, what will it rely on to house the millions of tenants when a vast number of landlords sell up?
As I have said, there is 100% a need for landlords, but sadly only those with the deepest pockets can make it financially viable. It means we are going to lose some really great landlords who are providing a valuable service to our housing supply, and they have not been given the recognition they deserve.
PR: What are your predictions for the PRS over the next 6-12 months?
DC: We’ve been waiting with bated breath. The problem with it is that the Government keeps saying they’re going to do something about it, but they don’t do it. Over and over again. Before you know it, it’s Christmas.
Eventually, they’re going to cancel section 21s and bolster section 8’s (for tenants that delay rent, have irregular payments etc.), but we still don’t know what that’s going to look like. The biggest challenge for landlords right now is that landlords are struggling to sell properties due to a variety of tenant issues, and it’s because of all of those things that landlords are suffering and in some cases can’t even get into their properties to sell. That balance is the biggest problem with the PRS.
Landlords who are forced to sell houses due to mortgages being higher than rent simply need to be able to do it or they’ll go bankrupt. The Government is thankfully beginning to listen more, but where it’s going to end up, I honestly couldn’t answer that right now.
