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…

Saying it's not a business but 'an investment' or 'an asset class' is not really accurate. It's not like gold or fine art that you can just stick in a vault somewhere and wait for it to increase in value.

In order to service your investment you have a tenant to whom you are providing a service for which they pay you. That's a business.

Whatever you choose to see your business as, it is a business. You provide a service, make an income, take a profit, pay tax.

It may not be a feasible or well planned business, but then again many aren't.

The costs for landlords increased dramatically under the conservatives, people demanded it in fact, the whole landlord evil house buying good narrative. Unfortunately some people need to rent due to circumstances and there isn’t sufficient social housing, and social housing has never been flexible enough for many people anyway. I had the opportunity to buy some housing 18 years ago and thankfully chose the stock market instead! We need good housing and that includes fairly flexible rentals not just long term contracts

This is a major problem with amateurs landlords. Not accepting they are choosing to and do run a business.

Unintended consequences, it seems.

I'm no longer an 'accidental landlord' but I was for 9 years, and it was definetly never intentional but a means to an end.

When I first wanted to sell, next door neighbours who had moved to area and then had second thoughts as they missed their family, but were retired and had financial flexibilty sold there house via a 'we buy any house' auction route and crashed the value of the terrace temporarily, so I couldn't sell it without a massive loss, verging towards negative equity.

Then when the first tennants put notice in the house was in the mist of having a load of grant funded energy efficiency work done on it (gas installation for entire village, free boiler and CH refit, and free solar) which was great, but work was being done to the schemes schedule not the owners and no way any solicitor would allow completetion on a house in the middle of that going on, so got another tennant in.

Life isn't always simple and can push all of us in directions we don't plan or want.

As soon as they gave notice I sold. Sold it in 2024 for £1k more than I paid in 2006 for a quick sale as empty houses are very very expensive things, and got rid just as rental reform laws came in in wales. Completed in mid march, maxed out my 2023/24 isa limit then two weeks later maxed out my 24/25 isa limit and made over 4% interest on it with no commitment, stress or risk!

If the effect of the government policy is to hold down housing prices, particularly at entry level, then it is an excellent thing. House prices have been too high (relative to earnings) for at least a decade. Holding down prices until earnings catch up is a good thing, if it works.

I'm also a beneficiary of the last time landlords were squeezed and lots of smaller landlords sold up. My first house was ex-rental. Taking this house off the market didn’t reduce the overall rental stock because I vacated a rental house. The same thing happens when most rental properties are sold. There arent enough rentals, but that is partly because there aren’t enough affordable houses for sale so lots of people get stuck renting. Most rentals are at the affordable end of the market when sold so those people have a chance to buy and get out of renting.

Also, my experience of renting (for 15 years) was that smaller landlords were a mixed bag, but the larger ones were good. They are run professionally as a proper business, which is much easier for good tenants to deal with. They knew the law / my rights and I never had to argue to get things fixed.

You do sound like you are whining and playing a victim.
If you want to talk about business strategies that is fine. But if you had you post would have been written quite differently

Private rent will go up and supply go down.

Unfortunately, rental supply is fairly consistent as people need places to live. The change comes on who foots the bill- if people can't afford private rents, they become homeless and end up in temporary accommodation which is covered by benefits in the main. Some LAs have schemes with private landlords where they bulk rent private houses to move people in to. The rates they pay are more than the local housing allowance if there isn't sufficient supply in the area. Some areas are now almost exclusively using discretionary housing benefit to top up rental benefits - it is intended to be short term but more and more often it's becoming a long term solution.

This year we put our tenants rent up by 8% usually we only increase by a token or more often not at all for good tenants. The extra tax means next year and every subsequent year it will go up by the full 10%. We are already below marker rent but we can't sustain that anymore. We sold a flat when it looked like Labour were getting in so only have one other property now. We usually buy derelict properties and return them to family homes renting out for a few years or until tenant asks to buy or leaves. We won't be doing it again there's just no return. When this tenant leaves we will do the property up add an extra toilet /laundry room and a garden office and sell. The extra work can get offset against capital gains and the money will go in the bank. We've told the tenants but they own a property elsewhere and don't want to buy,
All the new expenses have pushed all the small and accidental landlords out of the market and pushed rents up and up and up. Our turn tent has been there 5 years but changed to some tenancy 2 years ago we will definitely sell before she gets to 5 years as there's talk of giving tenants the right to buy. We are mortgage free so interest rates make no difference

How were you planning to pay off the capital in order to gift the house to your kids if you have an interest only mortgage and are spending the income? And what would your tenant do at that point? Or do you only care about her at this point in your life?

There are so many holes in your arguments. It’s clear you just like the income and the potential rises in value of the house and were waiting for the right time to cash in. But you’ve missed out now.

Just sell now. Making your tenant make up for your own lack of any financial acumen is worse than making her find somewhere new. If you really cared about her you’d sell the house to a housing association with her as sitting tenant.

It’s really not worth it to be a landlord at the moment. Especially if you have just the one property. Just sell up. You need to put your own family first, don’t let your tenant guilt trip you, you’re not a charity.

Regardless of being an accidental or professional landlord you need to make sure you are not running at a loss. I have 10 rental properties and review rents annually so that increases are gradual year on year. However I also make sure that properties are all well maintained and that any issues are sorted promptly as this leads to a low turnover of tenants and I also find that if they are satisfied with the property standard they are more receptive to an increase in rent. I visit each tenant prior to the annual increase as I find explaining to them the reasoning behind the increase does help.

What you may find if you go for a substantial increase in monthly rent is that the tenant will use the new renters rights act to object and this will cause a delay in the increase as it will be assessed by the first tier tribunal also make sure you follow the correct procedure for increasing you need to give two months notice and issue the tenant a for 4A.

£2000. We need more social housing urgently. I pay £500 in a nice area with good schools.

The government should start purchase orders as it must be cheaper in the long run then paying landlords this in housing benefit for the landlord then to pay off their mortgage and get basically a free house.

My husband saw the writing on the wall and started getting out in 2022 and was all done by 2023 with his flats. Its not a good time to be a landlord or a tenant. He's a builder and has nothing good to say about planning or building regs, it is making housing too expensive to build and interest rates mean people can no longer pay what they previously could pay for a house. There's been loads of building around here in the last few years but it is quietening down substantially now, a major local housebuilder has gone bust as well as smaller ones.

Good point, the cost shifts to the taxpayer.

I genuinely don't understand your logic, which essentially boils down to "I don't want to pay CGT, I want to give the flat to my kids". I mean, I don't massively want to pay income tax and would much rather give that money to my kids... But that's not how it works? And please can LLs stop pretending it's all for their tenants' benefits! Please. You liked getting a decent return when house prices were flying and saving rates were in the bog. You don't like it now it's the other way around. You've slightly slowly realised that while savers were paying tax on their savings income, you have to pay CGT in a lump sum. I totally get that it must be bloody annoying to be on board the buy to let gravy train when it comes to a grinding halt, but if you've going to have to pay CGT, you really haven't done too badly overall.

I'm a Landlord too. Some of my houses are under the ltd company but some in my own name and some owned between me and DH. I generally charge £100-£120 below market rent for tenants that have been living in my houses for many years and cause me no problems. I have a maintenance person who deals with any repairs and a gas person who comes out for my tenants quickly. I'm fed up of it his Labour government and their relentless pursuit of punishing Landlords. So yes, I'll be passing the full 4 percent increase in tax and the £65 to be on renters register fully on to my tenants on top of the 5 percent rent increase they will have this year, on houses that are not in ltd company. The net result will be the rent will going forward be set at market value. This incidentally will explode over the next couple of years due to this Labour government. I know many Landlords and have spoken with them and all but one intends to add this 4 percent and £65 on to rent. If renter's keep voting Labour they will be the ones to suffer.

Successive governments have made it quietly clear they don’t want small landlords like you and I which is why I sold up last year.

They want corporate landlords so they can suck more tax from the big organizations.

Sadly you are caught as pig in the middle. I didn’t want to give my tenants notice but I saw the writing on the wall. I’m so glad I’m free of if all now albeit it took me a year & nearly went court. It was a huge moral dilemma.

@Nchgalyou say you want to give the property to your kids, but when and how will you do that? If you transfer it to them you will have to pay the CGT anyway. Or wait til they inherit and there is potential IHT? Apologies if you’ve already covered this..

OP is just a whiner and playing victim. Oh no, I have to pay tax like everyone else, how terrible, poor me.
Can't stand this.
OP has a business that so far she has done well from. Don't take on a business if you don't understand the legalities, including tax.

So this was a property that you owned prior to moving in and having dc with new partner? Or dc from a previous relationship? And you kept it. At some point you moved from repayment to interest only? So many questions!

Are you now suggesting that interest only monthly payments close to £1850 a month (this leaves you with a debt of several hundred thousand at least) are not sufficient to service the mortgage because you are paying several hundreds every month in rental fees and maintenance of the property such that your additional income stream (that takes you into higher tax payer bracket) does not cover higher interest? But you still think it is in your financial interest to keep the property for your dc?

It doesn’t add up. Sounds like the capital debt is low enough for you to afford to pay out of profit on rental income or at least you thought it would be. And you just want to increase rent to maximise profit assuming the government (taxpayer) will increase housing allowance to stop the poor tenants from being made homeless.

To be clear no one but ‘accidental’ landlords thinks they are philanthropists or expects them to be so. They are just people who own an asset that they think they can earn a greater return on by ‘investing’ in housing (because they have a spare one) than savings accounts or ISAs etc. owning a second property as an income stream does no favours to renters.

As rental costs increase year on year whilst mortgages are fixed at purchase price it means that the rental cost of a property exceeds the monthly mortgage cost of a similar property bought ten years ago. Accidental landlords that horde property that they don’t live in and don’t put on the market add to this problem.

I suspect making a single Mum of 4 homeless is not going to be happening at any great speed, can you find extra income from somewhere else to start paying down your mortgage debt?

The big organisations offshore their profits, the UK government won"t see much of that, but in an environment where less people are going to Uni, more people are staying at home and immigration is in reverse do you really think big corporates want to be landlords on a massive scale?