Landlords have taken to the Landlord Referencing forum to discuss the changes to the private rental sector, and how newcomer investors will deal with these responsibilities.
One user begins by highlighting the strength of the buy-to-let market at present. They explain that loans increased by 37% in January, and that 2015 is expected to be a “boom year” for investors.
They continue: “An increase in the number of products being offered to landlords at very attractive rates is encouraging more investment.”
However, the user then questions whether this will continue with changing legislation in the sector, including the Deregulation Bill, which will make the section 21 notice to evict tenants more difficult. They ask: “Have the major lenders taken this into consideration, or will the penny only drop when landlords begin to default on their loans because of delays in evictions and difficulty in recovering rent arrears?”
They also bring up Universal Credit, which is expected to be rolled out nationwide this year.
They conclude: “Buy-to-let landlords are riding the crest of a wave of increased demand at the moment, but there are several changes coming which might have a negative impact on the market, and therefore the growth.”1
Landlord Mary Latham is quick to respond, saying: “The big problem is that most people go into buy-to-let without knowing what is really involved; they don’t know the legislation or regulation never mind the ongoing issues or rent arrears, property damages and anti-social behaviour.
“Most tenants are good tenants and many landlords get away with winging it for years, but when the trouble does start they have no idea how to deal with it nor how to pay their loans without income.
“I really dread the fact that many people will be investing their pensions in buy-to-let soon; they think it is passive income and it just isn’t. They will ruin their retirements after working all their adult lives.”
A user in West Yorkshire, Adam Hosker, offers his advice: “Or, they could get a good letting agent and it becomes hands-off again.”
He says that landlords can appoint work to their agent, and if they want to go it alone, it is the “risk they take.”
Landlords Discuss New Investors in the Market
Hosker does believe that Universal Credit could cause problems, but he does not expect it to go badly. He also explains that rent controls would be bad for the sector, but that “no party” supports them.
He predicts landlords in London will move away from the market if house prices continue increasing. He says: “We should see higher landlord investment up north as rental yields are more investor friendly.”
Latham replies, saying that although letting agents can be a good option, landlords “cannot devolve their legal responsibilities…to anyone.”1
Hosker then agrees, stating: “It’s still you stood up in court.”1
A landlord named Geoff enters the conversation, saying: “I usually agree with Mary’s opinions. I fear that there are many who will come a cropper purely through lack of knowledge.
“Getting a good letting agent being crucial to those going down that route.”
A user named Patricia A explains her thoughts on agents: “If letting agencies do have qualifications, it does not mean that they look after the landlord’s interests before their own.”
Geoff goes on to comment on the figures in the buy-to-let market. He says of the high lending: “Obviously a lot of this borrowing will be by experienced existing property guys taking advantage of the low interest rates and knowing the market.
“Unfortunately, many of the newcomers will see the headlines and think that it’s easy.”
He adds: “Borrowing the money and buying a property is the easy bit.”1
Patricia says that she has noticed: “These newbie landlords are listening to the get rich quick guys who are selling their expertise.”
She then says: “One thing I have learnt is that tenants who have problems go to the private landlord first. So a private landlord on his own has to be pretty savvy.”
She concludes the discussion: “It is right that all new landlords should be taught about the pitfalls and the legislation. It would save them so much grief. The sooner all tenants know their obligations and responsibilities, and the bad tenants learn that small landlords are not naïve and are well-educated in the letting industry, the better it will be for all.”1