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…

I'd wait for next government. If Labour go at next election I think CGT might come down.

You may be a good landlord OP, but the vast majority of small time landlords are utterly shit (I know this from moving around a lot in my 20s and renting in various different cities). Best things for the rental market will be for small time landlords to disappear completely and for corporate landlords to take over, who will meet regulations and benefit from economies of scale (i.e. have their own maintenance workers to deal with repairs etc).

The provision of housing should never have been left to Joe Public. It’s been tried, and it’s been a total disaster.

Yes I agree op, you should sell up, you have to imagine if you can survive like this for the next few years.

You can sell with a tenant. You would be choosing to evict her. Once again, take responsibility for your actions. Stop playing the victim. You are an adult making choices. Own those choices i.e. I want to make more money, so will evict a single mother.

OP you’ll get better advice on Reddit, without the emotional baggage people have here.

It’s worrisome that you have an interest only variable rate.If you decide to keep it you do need to focus on getting a more sustainable mortgage.

The next landlord will evict her.

OP should be working with her to get her rent to a reasonable rate that covers the cost of the property. No one else is going to let someone live there at a loss.

I could reduce the cost by half and she still wouldn’t be able to get a mortgage or the deposit for it. Is that my fault as well?

No one is playing victim. I have 2 choices and they are both difficult. I was just sharing my situation. I’m pretty sure I say in my original post that I’m not asking for pity.

You’re clearly in your own head, don't like to read what’s been written and are not open minded that people may be affected differently by the government’s decisions.

I’m not out to make money, I just don’t want to lose money.

Anyway, have a nice day.

Nobody is an accidental landlord - you make a choice to go into that business.

Capital gains is only paid if you make a gain after all the deductions. If you make a gain then yes it is (and should be) taxable.

You chose to go into the business of providing the roof over someone's head. Its a business which comes with particular responsibilities. If you don't manage the business properly in terms of balancing rent/gain/costs then someone loses their home but its not you.

You are not the victim here.

Tell that to the person on this thread!

https://www.mumsnet.com/talk/am_i_being_unreasonable/5595079-simply-dont-know-what-to-do?page=19&reply=155695678

Possibly the only genuinely accidental landlord I've seen.

You should of gradually increased each year with say £20-30 each time to bring her up to standard rent. Its not their fault you don't know what your doing as for "accidental landlord" nobody is a landlord by accident ffs.

Even there, you can decline an inheritance. Nobody can be forced to accept a gift/inheritance.

Brutally they took on a business without taking advice on the legal position or understanding the business of landlording. They had a choice in that situation, the tenant didn't.

@C8H10N4O2That’s like saying to the many businesses that have had to close because of the increase in NI / taxes that they did not take legal advice or did not understand the business properly before they started…it’s a bit silly. Everything was fine until the tax increase. Now they’ve closed, people have been left without jobs. That’s their fault too is it? I’m sure they were just being greedy and nothing to do with them wanting to stem the bleeding further.

Maybe I didn’t take advice on “the business of landlording” because I had never intended for it to be a business or for it to be treated as one (hence below market rate, happy to take a small loss etc). It was a spare house that we ended up with that we allowed a family to live if if they could cover the costs of us keeping it.

You have to charge what you need to cover your costs. We were going to sell but with the slow market and the low levels of rental stock our agents talked us in to staying in the market and pushing rents up to 'the local level' which will be about a 5% increase. I feel bad for tenants across the UK but it's ultimately down to the govt. The law of unintended consequences.

A good deed never goes unpunished….. There are some horrible comments on here for someone who was trying to do the right thing….

@foxychoxThank you. I’m fairly new to MN and this has been a real eye opener for sure!

@OneSparklyGoatThank you, I’m learning haha.
Its a fixed rate but that will end in 6 months so I need to make a decision

@HeyUpDuckie Yes I should have but I had increased it after the last remortgage and that was then fixed for a while so I didn’t think it would be fair to increase her rent if my mortgage payment wasn't going up. It’s the taxes that has changed things.

People really getting hung up on the term “accidental landlord”. Ok - if I have misused the term “accidental landlord” then please replace with “silly goose”.
Does that change things?
Same with whether this is a business or investment.
Call it what you want, but does it change anything? Does the tenant get more protection? Do they get less shafted? People are missing my point and getting hung up on the less important words.

Also putting here clearly that I know I am not a victim in any of this. The tenant is. I do not want or need any pity.
As long as I take action now I will be ok. The tenant has no choice and will be shafted regardless because of this tax change. Everything was fine before.

Here’s a test, if we see any more posts calling me a victim or arguing whether I’m an accidental landlord or not, people are clearly not reading the thread and just posting or trolling.

I’m in a very similar situation. I’ve rented out my old house. Rent is below market value. It covers the mortgage, insurance, tax etc. My mortgage is going up in January. I kept it as security. If I sold now and put the money away I’d have to pay CGT which would not leave me enough to buy anything if I needed to (eg relationship breakdown).

The moment you entered a contract with someone to take money for providing a service you were in a business. You chose to enter the business of providing a roof over someone's head - that is a significant responsibility to take on which includes planning for a degree of future change.

I'm not getting "hung up" on the term "accidental landlord", I'm just sick of hearing it from hobby landlords who have not taken their business responsibilities seriously, see it as easy money/capital growth and through poor management of the business end up selling the roof over someone's head.

Hobby landlords are the reason landlords in the UK have such a poor reputation. Good landlords are landlords running decent and sustainable businesses which plan for eg future variations, not landlords who simply get the boiler maintained and the washing machine fixed. Landlords I know who have built up professional letting businesses are notably less concerned about the rental changes than the hobby landlords.

I'm also slightly bemused by your description of "spare house" whilst also talking about when you come to remortgage. If its mortaged then you chose to buy it - it didn't fall onto you from the sky and if you are so concerned about capital gains tax then presumably you have a sizeable capital gain pocket after all the costs are accounted for. Your tenant will have to find a new home.

@Nchgal It’s a really difficult situation. We were in a similar situation a few years ago (were renting out our former family home, as got v large mortgages on the former one and the new family home that we bought). We realised that it wasn’t financially sustainable for us in the year or so before interest rates rose, so sold up when our last set of tenants gave us notice. Partly it was because of the changing rules on mortgage interest relief, but a large part of it was because we realised that rental yields for houses were much lower than rental yields for flats, in our local area, especially when you factor in the mortgage required to own a house. (ie, where the house costs maybe twice what the flat does to buy, the rental income for the house is only a couple of hundred pounds more than for the flat). So the economic model of renting out a (higher value) house that probably has a larger mortgage on, is not financially sustainable now, especially if one or both of the owners (landlords) are higher income tax payers (when taking into account the rental income. I suspect the only business model for a small-scale landlord, that is financially sustainable in the long-term, is if the landlord owns the property outright (no mortgage), and is a basic rate tax payer; and if the property has a decent rental yield (lower cost to buy, but reasonable rental income).

I suspect most landlords who are renting out their former homes don’t fall into this ‘financially sustainable’ model, and have not realised how inefficient this type of investment has become.

It might be worth hypothetically exploring whether you should sell the house, and buy a much lower cost flat (with little or no buy-to-let mortgage, ie outright if possible), and see what the returns are likely to be (taking into account CGT and tax on rental income). You need to compare the return against what you could achieve in savings etc - shifting over £20k a year into an ISA, to avoid a tax burden on the interest earned. (ps - if you live locally to the rented property, another way to make the return more efficient is by not using an agent, but using the Openrent platform (a one-off payment of maybe £100, but you need to do your own viewings / negotiation etc, and need to manage it yourself).

But you are correct, any steps you need to take now will ultimately hurt the tenant in some way, it is such a shame - but you do need to put your own family’s financial stability first, unfortunately.

Selective reading again. I’m pretty sure I clarified the CGT point above. The house became spare when two people have a house each but decide to move into together.

Bored of repeating myself. This is becoming tedious. Have a nice day.

Immediately increase the rent to market value and place the blame squarely on the Labour government then take time to consider which option is the best for your financially.

@FeelingOldOldOldThank you for your constructive feedback! Appreciate it :)