Landlords divided between staying or leaving the buy-to-let market

You could easily be forgiven for thinking that the UK government was to drive private, buy-to-let landlords out of the market. If that is its plan, then it may have a chance of success as new research from Octopus Choice suggests that almost half of UK landlords (44%) are thinking about selling up. Here are the five main reasons why and our thoughts on them.

61% had undervalued the costs involved

In all honesty, this reason does not really reflect the condition of the housing market as such, but it does reflect the fact that, at the end of the day, buy-to-let investment is a business and, like any other business, it is crucial to do your sums correctly. While you can get away with “back-of-an-envelope” calculations in a red-hot market, for the simple reasons that when fair winds are blowing strongly, even poor sailors are carried along by them, when conditions become more challenging, accurate calculations based on realistic figures are absolutely vital to success.

60% say that property management has become a burden

Buy-to-let has always been rather more “hands on” than many other forms of investment, especially if you wish to minimize costs by doing as much as possible yourself. While it is fair to say that recent years have seen an increased regulatory burden imposed on landlords, such as the infamous “right to rent” scheme, there is no need for landlords to shoulder this burden themselves, they can pass it on to letting agents. Alternatively, landlords could move away from the mainstream residential buy-to-let market and look at commercial property, particularly student accommodation investment and care homes, which are essentially residential property but are not legally classed as such.

24% are disturbed by falling yields

Yields are indeed falling in some areas, notably the Thames Valley area and, more broadly, in the south of England. In the north of England, however, yields are still very solid. Therefore, the solution here may not be to exit the market, but to adjust your portfolio to reflect the vibrancy of the northern market as compared to the southern one.

23% are unhappy about recent tax changes

The changes to mortgage tax relief may have been aimed at buy-to-let landlords but the simple fact of the matter is that landlords with investment properties in areas of high demand will be in a strong position simply to pass the additional expenses on to their tenants. Alternatively, landlords may wish to consider setting themselves up as limited companies, although the up-front cost of this option means that it may be best suited to landlords with larger portfolios who are confident that they will be investing in property over the long term.

19% are concerned about cooling house prices

This last statistic is arguably rather ironic, given the earlier complaint about falling yields. Cooling house prices are an ideal buying opportunity for committed landlords, who can pick up good stock at bargain prices and enjoy solid rental yield with the prospect of capital appreciation when the market picks up again.

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