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…

No such thing as an accidental landlord. You chose to rent out an inherited house. Own that decision to run a business and take some responsibility instead of the victim whining. Tiresome approach to life.

You do know that if you gift the house to your children you have to pay CGT anyway?

It would be a quicker way for the government to increase the supply of houses. But that clearly isn’t their only aim. Building more homes takes longer but they get other economic benefits like creating jobs and additional tax revenue.

This house is classed as an asset because it does generate a future economic benefit, even if the current return on investment is poor.

You may be right on the sales prices being reduced but all I see are the same houses being listed on Rightmove and remaining unsold for 6-12 months because (I assume) people are not budging on the asking price. Plus other conversations on here where people are saying they are not getting any interest so are taking it off market until things recover…
Could be for other reasons tho, like affordability

Give over, "accidental landlord" is an actual term used for people who become landlords due to inheritance, relocation or changes in personal circumstances.

It's not always a choice for people, for instance, my house was in negative equity when I had to relocate for work, and therefore became an accidental landlord, as I could not afford to sell it, I literally had no choice. I don't use the term for myself anymore as I have since intentionally bought properties to let.

@VerinMathwin Plus there's a mortgage on it that still has to be paid.

House was not inherited. Bought it and paid stamp duty etc on it. Please see above.
Keeping hold of it was never designed to be a business, but an investment. Property is an asset class. There is a difference between the two.

I’m not whining, this isn’t a pity party. I’m just making the point that whatever decision I make will hurt the tenant. Labour is saying it wants to reduce homelessness but I see this as increasing the risk of homelessness.

And I’m highlighting the fact that there are some small landlords out there like me and not all landlords own loads of property and run it as a business.

I’m sharing my perspective not asking for sympathy.

Any mortgage advisor should have made it very clear that the capital still remains outstanding and should have discussed how you would pay it off.

Interest only does not make anything "cleaner", it gives you more cashflow but if you're not using that to pay off the capital, or if you needed that cashflow for everyday life and weren't financially able to pay down the capital, then you should have sold it instead of letting it out as you could not afford it.

Yes, hindsight is a wonderful thing, but I'm concerned that you were given extremely poor financial advice on this one.

You need to discuss the situation with your tenant, ensure you have all the correct paperwork in order before issuing the Section 13, just be careful to do everything correctly and keep it within market rates as if the property is in England or Wales, if she takes it to tribunal, then it may not go your way.

If I were you, I'd explain to her that you've been running at a loss, and that you need to put the rent up by £150/mth, apologise, tell her it's unavoidable. See how she reacts...if it's badly, still put the rent up but then look to Section 8 to sell. Be prepared for court costs for the eviction.

Your tenant has been paying your mortgage all these years and the money went into your pocket. Now you expect her to pay your taxes. Did you keep up with the decoration and maintenance or just fix it when things went wrong? Very often with long term tenants the property becomes shabby and worn because this is what the LL does. Then they whinge about how the rent has "fallen below market value" when the property itself is not worth market value. It has fallen well below current modern standards.

If your tenant has the nerve to go to a tribunal (cost £47) for a fair rent determination then they will look at the current state of the property compared with a newly modernised one in the same area to determine the rent. The tribunal could even set a lower rent than the current one. Ive just helped a relative in this position negotiate a rent increase down by 50% by the threat of a tribunal. Its a lot of bureaucratic work and the LL simply would not have been up to it. Furthermore tribunal decisions can take many months and meantime the rent stays at the same level.

Please can we all just let the "accidental landlord" issue rest now. Its not what the posting is about and it's getting repetitive.

You clearly haven’t read any of the above.
They have not been paying my mortgage and I am happy to pay my taxes but taxes should be on income earned, not when you make a loss.
Im ok with not increasing the rent but that just means I will sell and they will have to move out.

Thank you, this is helpful

I don't know if it is a real asset for you if you are paying an interest only mortgage. Surely it's only an asset if it rises in prices relative to inflation. At present, it seems to be a liability!
There are definitely some sellers who don't want to drop their asking prices yet but there are plenty who are, quite often not by enough to achieve a sale though. There have been those conversations about taking houses off the market until that magical time when things recover for the last 4 years! Lots of people keep wanting to relist in the Spring every year but that doesn't ensure a sale if the price isn't in line with what buyers can or will pay. I could be wrong, of course, but I expect further falls so some of these people may regret 'not panicking first'.

And how does that work?

I’m a one small property landlord aswell . For years my rent has been less than local rents because my tenant is long term and good . However the more and more pressure this Labour government are putting on landlords in taxation and licensing costs the rents will have to rise . It’s a shitshow .

So it’s like a corner shop and a supermarket, one is a large coperate business and the other isn’t but you both sell food to create meals

no sure it’s accidental, just on a different scale

you can try and put rent up, but the tenant can object and do so officially- meaning you have to wait for the decision and can’t put it up in the mean time or get back rent rise if you are allowed.

House prices have also been affected

Tax changes on landlords have acted as a powerful dampener on house prices
, particularly for entry-level properties and flats. Rather than causing a dramatic market crash, successive tax increases have created a "slow leak" effect—driving private investors to sell up, increasing the supply of starter homes, and keeping overall price growth in check.

there is a surge on properties on the market, and with interest rises / buyers are frightened- so prices stall or lower

so at least if you sell the cgt will be lower as the lower price will not pay so much tax

The rental rights reforms are entirely neccessary and proportionate. Things that have been normal in other countries for many years.

Housing benefit is capped so an increase in rent very likely would not be covered. For example where I live the rent for a 1-bedroom flat is around £1500 and the maximum benefit you can receive for it is around £1000.

Guildford, Brighton, east thame valley, West herts, Chilterns are all over £1450 for housing element/HB of UC a 3 bed

edited to say London HB rates are higher, but didn’t give those as an example

Another benevolent landlord thread bemoaning being taxed.
”Look what they are making me do to the tenant”

on £1000 a month your rent profit would be £11,000 and your tax was £2,200 now £2376 (this is taking into account that you have another job and you take the £1000 landlord tax relief - £176 a year

if your charging £2000 a month then the annual difference in tax would be just shy of £1000 difference form last year

She has paid the interest on your debt then plus a nice little income stream that you resented sharing with the HMRC (paying taxes on.)
All income gets taxed, why should you be exempt?

You may not have to evict your tenant to sell. You can explore selling to your tenant. Landlords who truly care about long term tenants who have been good caretakers but cannot afford the full deposit or full market value will consider a concessionary purchase as a sort of profit share in the equity gain during their tenancy.

A concessionary purchase is buying below market value. You would agree to sell the home to you at a discount (e.g., 10% below market value), treating that price cut as a "gift of equity" which can count toward or completely replace a cash deposit. For your tenant, the lenders offering concessionary purchase mortgages include TSB, Halifax, Nationwide, Barclays, and NatWest (some require no buyer deposit, while others ask for 5%).

@LiberteLynx - ok you’ve not read anything I’ve written.
I don’t resent anything. And I’ve certainly not concealed anything from the HMRC. I have not idea where you got that idea.
It’s one thing to not understand my perspective but to make up a completely narrative is just ridiculous.

*completely different