How to show homeowners that buying rental property is always a good investment – Property Industry Eye
This article appears courtesy of Lord
Predictions about the future of rental buying vary widely. Some say the buy-to-let industry is thriving and will continue to grow and develop based on increasing tenant demand. Others say the weight of legislation and the associated costs are driving homeowners out of the market. So what does all of this mean for the future of the industry and how can you encourage your owners to keep investing?
Rental owners come and go
Let’s take a look at the statistics first. The Nottingham Building Society has estimated that 20% of rental landlords intend to sell all or part of their portfolio within the next two years. This almost balances out with the 16% aiming to buy more properties in the same time frame – but not quite. Research by the Center for Housing Policy at the University of York suggests one explanation: Baby boomer homeowners age outside the market and are not being replaced by younger homeowners at the same rate.
To stem the flow of owner departures and help potential new owners see the benefits of the sector, your agency must demonstrate the importance of its role in supporting owners throughout their journey. Research from the construction company showed that 52% of homeowners intending to sell blamed it on increased regulation in a recent survey. This leaves an opening for you to help potential owners recognize the importance of choosing the right agency to help them stay in compliance or to show why your current owners would benefit from your fully managed option.
Rental limited companies
The end of tax breaks on rental mortgages is another reason cited by 24% of homeowners considering leaving the industry. However, the issue of taxation is also driving a new positive trend in the market, with more and more rental owners forming public limited companies.
When registered as a business, homeowners can grow their portfolios faster because they can offset the interest on their mortgage against the profits they make. They also benefit from lower corporate tax rates than income tax. Hamptons Countrywide found that 41,700 public lease buy-for-lease companies were formed in 2020 – a 23% increase from 2019 and a record number, which could help give your landlords more confidence in this journey. ‘investment.
Expanding the Choice of Rental Mortgages
The increased demand from tenants also had a positive impact on the number of rental mortgage products available. Moneyfacts has highlighted 2,709 mortgages available in July 2021 – and this influx of new choices means average rates have started dropping to be lower than in July 2019. Which one? Note that some of your homeowners coming to the end of two-year fixes may even be able to remortgage at a cheaper rate.
Paragon Bank echoes this positive sentiment, with one-third rental mortgages between October 1 and June 30 compared to the same period in 2020, up to £ 911.4million – and claims are still as numerous despite the gradual abolition of the public holiday of the stamp duty.
Investment opportunities in energy efficient homes
As the government continues to push forward with plans to raise the minimum energy efficiency standards for private properties leased to the EPC Band C on new rentals by 2028, homeowners are understandably concerned about costs. related to the implementation of the necessary changes to their properties, which are expected to increase. at £ 7,646 per property according to the Office of National Statistics.
However, there are opportunities for your homeowners who want to invest. In a recent survey, 82% of homeowners, investors and brokers said they would prioritize “environmental friendliness and energy efficiency” when purchasing properties. This builds on increased tenant support for sustainable solutions, and could also have a financial benefit for your landlord; green mortgages could offer your rental investors lower interest rates if they were to invest in energy efficient properties.
For those who already own properties, you can advise your homeowners on inexpensive ways to improve the energy efficiency of their properties, including using low-energy lighting, estimated at £ 38 on average. , insulation for hot water tanks around £ 23 and draft. £ 100 proofing windows.
The best places for rental investment
Trends in the number of rental owners in the market should also take into account the areas where investors are most successful. Research from Intus Lettings shows that downtime has decreased for rental landlords, with a growing number of properties with near full year-round occupancy in some areas – a quarter of landlords in the eastern part of the England have said their properties were empty for less than a month over a period of a year, for example. This reflects data from the Goodlord Rental Index which shows that in July 2021, vacancies on average across England were at their lowest since August 2019 – so, overall, a positive outlook.
Some areas of the UK offer higher returns to homeowners – and if you’re an agent lucky enough to operate in those regions, you have a strong case to help encourage homeowners to join the market. Recent figures show that the North East of England offers the best rental yields. If you are advising potential homeowners on where to invest, this could be a good place to start.