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I would go as far as to say that the last three years have been the most challenging ever for landlords and the private rented sector.I thought I would put together the 5 threats that I believe landlords need to be aware of, in order of importance and impact.1. Section 24With recent news that 26% of landlords have not heard of Section 24, this threat is HERE NOW and many landlords continue on in blissful ignorance.Section 24 - landlords must take action now Section 24 Landlord "Survival Guide" Resources for reducing landlord tax liability 9 irrefutable reasons why property is still a viable investment + Landlord Survival Staying strong in the face of S24 challengesPart B of this threat is that HMRC are actively targeting landlords for unpaid taxes and the penalties can be very stiff.2. The PRA Understanding the impact of PRA on landlords PRA will make S24 look like walk in the park3. The Energy Efficiency ActWe are only a matter of months away from this being implemented.Energy efficiency 2018 - threat to landlords Green Deal warning: Don't end up with an un-lettable property by 2018!4. Institutional InvestorsThe Build to Rent developers are raising the game in the private rental sector. These schemes are going to be offering residents such perks as all-in and reduced costs, through significantly reduced energy costs, no letting fees, and free services such as WiFi, gym, and a car club membership.Some schemes may offer residents longer and more flexible tenancies, with tenancy options ranging from six months to five years. Tenants can also decorate their own homes and keep pets – options traditionally only linked to home ownership.Is your rental property going to be competitive in the new market place?Institutional investors set to revolutionise private rental sector In the student accommodation sector, universities awash with pension funds are building their own bespoke student accommodation, leading to saturation in the market place and many landlords are finding it difficult to rent out their student rooms because of this.5. Councils on the war pathYour local council have landlords in their sights!i) Landlord licensing spreading across the countryii) Greater enforcement of legislation with civil penalties up to £30K.iii) Advising tenants in rental arrears to stay put until eviction.Councils are the landlords' enemy tooiv) For HMO owners, councils increasingly banding individual rooms for CT.HMO, Individual Council Tax BandingWhat are the other threats you see to your business?SEE ALSO - Top 10 most deadly landlord pitfalls and how to avoid themUP NEXT - The REAL reason for Government attacks on LLsDON'T MISS - Growing a property portfolio - resources NOW WATCH:
Some landlords on PT say that they don't think we have been attacked by the govt ect
I say the five issues you have highlighted are an attack on the PRS
if it was not retrospective I would have said it was NOT an attack but a change of policy which all business has
Put on your Tin Mats Boys and Girls
Keep watching your front for more attacks this Battle is far from over ...
Learn Change and Adapt ?????
I think the last three years may have been better than 1915 (introduction of rent controls) to 1988 (introduction of ASTs).
HMRC are actively targeting landlords for unpaid taxes and the penalties can be very stiff.
Attacking tax evading LLs is a benefit to LLs who don't evade tax, so is not an attack on the PRS as such.
Increased energy efficiency standards have been applied to social housing and new builds. Extending it to the PRS is not really an attack on the sector.
Institutional investors are part of the PRS and have been for a very long time. BTR is encouraging the expansion of the PRS. It is hardly an attack. Yes it will increase competition in cerrtain sectors, so to some LLs it will seem like a threat but it will benefit the PRS overall.
Greater enforcement of legislation with civil penalties up to £30K.
This will affect rogue and incompetant LLs and hopefully drive them out of business, benefitting those LLs who conform to the law. It will benefit the PRS as a whole.
I agree that the other points are attacks on the PRS.
Attacks on LL, Hmm!?
Well what Peter states is correct.
No LL whatever type they are can consider themselves exempt from competition.
If that means BTR puts all small LL out of business then so be it!
It is the aspiration of every capitalist to put all the competition out of business to then charge what you want.
If by the competition the tenants end up with a supposedly better offer then that surely has to be a good thing.
No LL is entitled to believe their existing business circumstances should remain because it has been the case for decades.
That is the capitalistic market which we private LL are part of and NOT immune from, neither should we be.
Unfortunately the Govt has made the playing field very unlevel by introducing S24 giving the institutions an unfair competitive advantage over mortgaged sole trader LL.
In an effort to compete such LL will have to reduce leverage or increase rents.
Neither of these options are possibly doable.
LL will have to adjust their business models if they stand any chance of competing with the new unfair institutional competition.
Unfair on the basis that their finance debt is offsettable against tax for institutions.
Many institutions are using private capital to compete with mortgaged LL and therefore don't have the same costs though they will be expected to produce a return at a reasonable rate.
It will be interesting to see whether these institutions will be hit by the existing eviction process.
That can put a severe dent into any LL returns!
I would imagine that appropriate tenant selection will be of paramount importance to institutions, and who can blame them!?
Where will all the rubbish tenants go!?
Yep to all the little LL who don't do proper referencing and rely on useless LA referencing.
These LL will be finding that they face many more rent defaulting issues.
As the institutional money floods into the rental market, smaller LL will be forced to rationalise their business.
This should be no bad thing.
With Brexit there may be reducing tenant demand.
It makes sense for the little LL to carefully consider how institutional developments night affect his rental property viability.
The institutions are coming make no mistake about it.
Small private LL have to be aware of the unfair competition.
Only by converting to corporate status might they compete more effectively.
This tenant situation is simply not viable for many S24 LL.
The writing is on the wall.
Small LL should be aware of these issues.
Pension funds will be looking to invest in rental housing.
It still provides stable and consistent income which is what pension funds require.
The volatility of stock and bond markets is a dodgy basis basis on which to produce consistent reliable income.
It clearly makes eminent sense to invest in rental property as fewer people will ever be able to afford to buy.
Private LL need to be aware of these business dynamics.
It is highly unlikely that such smaller LL will be able to match the institutional offer.
But a more personal service will be required.
Hiding behind LA will no longer be considered acceptable.
Tenants will wish to see the LL dealing with matters in a timely and personal fashion.
Something the big institutions won't be able to offer.
A more boutique offer is what will be expected from the small LL.
Small LL need to get their thinking caps on to determine how they may have a superior offer to large institutional LL.
As a small and relatively inexperienced landlord your comments ring very true. I'm aware of all the threats mentioned by the OP and find them acceptable. The greatest threat I see is a non paying tenant and the current eviction process. This alone is causing me to consider alternative ways to invest in property.
I agree with you but you can mange that via insurance and guarantors.
But the list above we can do little about its govt policy
DL, I recently read the following thread and it has caused me to doubt my own experience. If this can happen to an experienced landlord, how would an inexperienced landlord cope?
Its a risk all Bussiness is a risk all we can do is manage the risk
For the small landlord with a couple of properties it can be a huge problem
The larger you become the risk lessens
I had a bad year last year with the biggest arrears in all my days as a Landlord
so even experienced landlord can have issues too
its the bad side of being a Landlord but we have to take the bad with the good
They cant steal the house can they
Yes they can steal the house!!
Several unmortgaged LL have discovered the property has been sold by the tenants!!
Which is why ALL LL should register with LR for notification of any attempted change of legal title.
The ONLY way to reduce substantially the risk of suffering from rent defaulting tenants is to ensure the tenants you take on qualify for RGI or a guarantor does.
It is not a total solution, but will pay rent in the event of rent defaulting and all eviction costs
Have a look at the LRS offer.
A very attractive proposition which substantially protects the LL from most of the effects of rent defaulting tenants.
The only problem is that many tenants can't qualify for RGI.
If you have invested in an area where the tenant demographic would struggle to qualify for RGI then you have to consider whether your property investment is located correctly.
All the supposed yield in the world disappears if they default.
Then you as the LL are at the mercy of the dysfunctional eviction process.
I'd rather have less yield from tenants who DO qualify for RGI.
But that is just because of my reduced appetite to take on risky tenants irrespective of whatever yield they may produce when PAYING rent.
How do you research the tenant demographic qualifying for RGI?
I'm not aiming for maximum yield but a good, reliable and regular return.