Despite all the government regulations making it harder to be a buy to let landlord, there is some good news and the advice from Mike White at Martin & Co is not to relinquish your properties just yet.
When, where and how did I miss that? Amid all the landlord bashing you've been experiencing over the last 12 to 24 months, I could envisage a lot of people responding like that to the suggestion there has been good news for landlords.
However, the good news has never really gone away, it has been there all this time and is only set to get better. I can hear the sceptical among you saying, agents only ever promote good news even when there plainly isn't any, so why should I believe this? Well, let me give you a real-life example.
Take an average two bedroom Victorian terrace house in the North City of Norwich – very much staple fare for landlords and beloved by tenants. This particular one has the added advantage of an upstairs shower room in addition to the downstairs bathroom but otherwise, two double bedrooms, two large receptions etc. It was purchased in early 2015 for £157,000 and let straightaway. Three years on, it has just had a change of tenant but no void period and fairly modest maintenance/repair bills along the way. Rent sits at £675 pcm and it is currently valued at £192,000.
So, do a few quick sums which will tell you that the property is yielding a gross cash return of 5.2 per cent per annum on the initial purchase price, against hich your typical high street bank (and I mean one you've ever heard the name of) will have paid you two per cent per annum if you're lucky. Unlike the money in the bank, which has gone down in value after factoring in inflation, the property has seen capital growth of 22.3 per cent in the same three year period. Over the three years, the property is showing a total return of 37.9 per cent or a whopping 12.6 per cent per annum. Now if that isn't good news I don't what is!
But how is the news going to keep on getting better for landlords? Regulations are on the face of it getting tougher for landlords to keep abreast of and, as tax changes on mortgage interest relief begin to bite, it is pretty clear a good number of landlords are going to hang up their gloves this year. Take a big chunk of the supply out of what continues to be a very buoyant rental market and the demand for what's left is going to increase dramatically. This will have a commensurately big impact on rents going up, with the added advantage of landlords being able to be more discerning in who they would like to let their property to.
There's an old adage that it takes an agreement and a disagreement to make a market and if you're one of those landlords who are inclined to disagree with me, I would still urge you not to rush into selling but consider holding on for another year or two. Unless, that is, your financial situation given the tax changes forces you into selling, then you probably have no alternative. For those who have no buy to let mortgage or only a modest one, then staying strong and holding on should really be a straightforward decision.
To absorb the extra demand that is going to be created, there will be a need for new landlords to enter the market; the housebuilders aren't going to be able to churn them out quick enough.
You can contact Mike White, director at Martin & Co in Norwich on 01603 766860. Martin & Co has sponsored this column. https://www.martinco.com/estate-agents-and-letting-agents/branch/norwich
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