Rents are going up and tenants are the ones that suffer

[Nchgal]

I’m an accidental landlord. I’m not looking for pity, just want to share my perspective.

Not all landlords are bad or rich and this 4% tax plus the increase in mortgage rates will leave me no choice but to increase rent by £150 per month (!) OR sell up. Either way this is bad news for the tenant.

I’m currently charging £150 BELOW market rate for my tenant as she is a single mum of 4. I’ve been making a loss for the last few years and absorbing it as I can afford to but this 4% and higher mortgage rates will push me over the edge. I cannot absorb anymore, I have my own kids to feed.

House is just outside of London. Interest Only Mortgage. When I remortgage I sometimes struggle to even qualify for a BTL as they want the rent to be 125% the monthly payment. I’m dreading the next remortgage as rates are now above 5%.

Tenant has been in place for a long time, kids are school aged and settled. Having to move will cause them great disruption and anywhere else in the area will cost them £150-200 more at least.

I’m a good landlord, I fix things straight away, properly not bodged job. Tenant had bad credit and a pet but I accepted anyway given her situation (this was before renters rights). They will struggle to find somewhere else.

I really don’t want to make anyone homeless or hungry but I’ve been left with a horrible choice.

I don’t think Labour have thought this through…

Yep, it’s been endless for landlords. More and more costs added on through legislation and taxation which is all passed on the tenant. Of course rents are going up.

They have thought it through. You are the exact type of landlord that they are trying to force out of business so that the private rentals are owned by companies (ie, their rich mates) instead of by individuals.

People seem to ignore the obvious solution which is to build more social housing.

But the capital gains bill I will get makes me want to not sell, so therefore the rent has to go up. The tenant is going to take the hit, not me. Was Labour aiming for me or the tenant?

Will the mum not be eligible to a housing benefit?

Maybe you should have been charging a slightly higher rent to start with or upping, say £20 a year, so you were breaking even and not funding this woman's rent- then now having to increase by such a large amount?

Is being a landlord for you, really? Why on earth would you not charge the market rate (or close to it)? Shouldn’t you at least have been breaking even? Especially when you have kids to support?

You're not an accidental landlord. You didn't trip and land here, surely at some point in the process there was a bit of paper you signed or something that made you realise what you were doing??

Under charging was nice of you but you need to charge the market rent, as that is what she's going to have to pay anyway

i hate the term accidental landlord! You could have sold the property. Like you won’t make a profit at the end!

You pay capital gains if you making a profit . (Property sells for more than when you bought or inherited) So you will take away a gain when you sell (just lose some to pay on cgt).
So weigh it up.
Why do you want to keep the property? What for?
What is 150£ as% ?
700 to 850?
1000 to 1150?
1500 to 1650?

You're not an accidental landlord.

You're a landlord.

Yes cos now you can only increase once a year so I have to get it to market rate otherwise I’ll be screwed when I have to remortgage.

If fewer people hadn’t tripped and become landlords the property market wouldn’t have quite so out of control. There had to be a readjustment.

I think £100-200 Increase will be expected by her and she’ll be relieved it’s not more just give her plenty of notice

So you could officially up it by 250 but say you’re happy to give her a discount for the next four months? Is that legal?

Accidental in that we did not set out a business plan to rent out property. Everyone wants to make extra income so when it just happens you think I’ll just leave it there cos it’s actually making me some extra money.

Yes I have made money on the capital appreciation but I’m sure inflation has eroded the real value of that.

Plus I’ll have a big capital gains tax bill if I try to access that money. So I will be paying tax on that anyway.

I see the gain as interest for tying my money up for 10 years and taking the risk of the investment. I make a gain yes but doesn’t mean I should continue to accept a loss and be taxed so heavily when I’m already paying capital gains on it.

I’m very different to a landlord that has deliberately set out to be a landlord, set up a limited company and probably a management company and actively looks to build a portfolio. You cannot put us all in the same bucket.

@Nchgal I empathise. This government are an absolute disgrace.
their decisions are making life harder for everyone but tenants will suffer. Doing the right thing by people is becoming more and more difficult.

£1850 to £2000. Want to keep it for my kids.

Ultimately, if a lot of small fry landlords like me think the same and just pass the rent onto the tenant rather than sell, the house prices do not go down and rents just go up. So people cannot afford to rent or buy. If they want people to let go of their second homes they should incentivise them to. Just my opinion.

Does anyone ever fess up to being a non accidental landlord?!

I live off my rental income. The agent has just suggested an increase which equals 1.5%. That doesn’t even meet inflation let alone this 4% increase. And my other flat, I’m being hit with another extra charge (in 2023 we were hit with an extra charge which wiped out my income for the whole year). The ROI no longer makes sense - it didn’t even without this increase in tax. I’m putting that flat on the market start of March. My tenant will not be able to get anything nearly as good for the amount she pays and she knows it but understands my position. I need to support my family, and can’t wait for the next cyclical upturn in the market. She can’t afford to buy - so me buying that flat was not ‘taking it away’ from a first time buyer. People will always need to rent and 80% of rentals are with private landlords, and half of these own fewer than four properties. So it’s not big companies that have most of the properties, but people like the OP and me.

You're less well equipped to be a landlord than someone who made a business plan etc. Planning your business would have been wise.

I think we need more deliberate landlords, in whatever shape they come. This "accidental" model hasn't worked

Fair point

I agree that the Renter's Reform bill will disadvantage poorer tenants and make a lot of people rethink their plans, tenants and LLs.
However, I don't think this will play out as you suppose. It's not just small LLs who can't afford the higher rates. Many tenants simply won't be able to afford the rent increases, on top of all other expenses rising. And that's before you even start to think about job losses. Some of these people will need to be evicted and will end up in temporary accommodation, in horrible situations and some may become homeless. Some of them will have better options and may be able to live with family or in cheaper, shared accommodation. Rents don't just rise because the LL wants them to. There is a threshold where individuals or families simply can't pay and need to change their plans, in exactly the same way that you are changing your plans.
If we do have the expected recession and the job market takes a dive from it's already poor condition, rents are likely to fall. House prices are already falling and this is likely to speed up.

I don't know why you are complaining about paying CGT. You pay it if you make a profit, which presumably you have, as things stand now. You would be wiser to sell now, imo.

I inherited a house which I already paid big tax on as it was not from my parents. I chose to rent it below market rent as my tenant was a refugee and I know is on low pay . Luckily I don't have mortgage on it . But it is an older house and the maintenance can be quite astronomical that is if I can get workman to come in the first place . I have maintained this rent for nearly three years which I also pay tax on . I could do with more income because of COL but feel it's immoral to put someone in homelessness just to be more comfortable myself .

Might be, but that's dependent on her income, not the rent and doesn't go up in line with rent increases.