Landlord Times March 2024

LANDLORD TIMES

March 2024

Portfolio landlords bullish about expansion in 2024

Over a third of landlords plan to increase the size of their portfolios this year.

Research from Paragon Bank has found nearly four in 10 (37%) said they intend to grow their portfolios this year. Most said they would fund it by releasing equity from other properties or using existing capital – 55% and 58% respectively.

Nearly 400 UK landlords with four or more properties were quizzed

for Paragon’s new Portfolio Landlord Report 2024.

According to the data, 69% of those adding property are doing so as part of a portfolio expansion strategy, 60% are driven by longterm demand for rental property. Half are doing so as part of their retirement plan.

The survey also showed 61% of landlords will buy with a mortgage while 39% will buy outright. It also found 52% prefer

to buy terraced homes, 46% semi-detached homes and 26% individual flats.

Overall, 36% of portfolio landlords said they would maintain their investments at current levels, with a fifth (21%) looking to reduce the size of them.

Elsewhere the report found landlords are still planning to improve EPC ratings for their properties to a minimum standard of C. This is despite

the government’s scrapping of planned legislative changes.

Four in 10 are improving their properties and a third said they had already done so to reach the C grade.

Finally, the report highlights some of the challenges associated with operating rental portfolios, including the most common

issues landlords face, such as late payment (37%), arrears (30%), voids (26%) and damage to property (17%).

Sheldon Bosley Knight’s lettings manager Claire Paginton said: “It’s heartening to see landlords are feeling bullish about 2024 and looking to add to their existing portfolios.

“With demand still very high it’s a great time to invest. There are still good mortgage deals out there and house prices remain stable.

“As ever if you would like any advice or help in managing your properties or adding to your portfolio, please do contact us.”

Crackdown on short term lets

Landlords who have holiday or short term lets advertised through platforms such as Airbnb are warned they will soon require planning permission.

Plans unveiled by the government will see the rule applied to those in areas where councils believe local people are unable to afford housing.

It follows a consultation lasting nearly a year, and includes the setting up of a new mandatory register.

However, homeowners will still be able to let out their property for up to 90 nights a year without planning consent.

Housing secretary Michael Gove said: “Short-term lets can play

an important role in the UK’s flourishing tourism economy, providing great, easily-accessible accommodation in some of the most beautiful parts of our country.

“But in some areas, too many local families and young people feel they are being shut out of the housing market and denied the opportunity to rent or buy in their own community.”

The changes would see a new planning use class created for short-term lets not used as a sole or main home. Existing ones will automatically be reclassified into the new use class and will not require a planning application. Further details will be set out in the government’s response to the

consultations, including the timeline for implementation of the register and the use class, with the changes being introduced from this summer.

Sheldon Bosley Knight lettings manager, Josh Jones said: “Landlords who are or who wish to let out their properties on a short term basis need to be aware of the changes.

“Places in areas such as the Cotswolds and South Warwickshire, are likely to be affected by these proposals but we will have to wait and see what the individual authorities decide.

“As ever, if we can be of any help or offer advice, please call in to one of our offices or call us.”

Coventry named as an investor hot spot

Coventry has made it into the top five best cities for landlords to invest in for 2024.

The city came third in the list behind Bristol and Manchester and ahead of Brighton and London.

The league table was drawn up by Aldermore in its Buy-to-Let City Tracker.

It analysed five key indicators that impact buy to let desirability: average total rent; the best shortterm returns through yield; long-term return through house price growth over the past decade; the lowest number of vacancies as a proportion of total housing stock; and the percentage of the city population in the rental market.

Coventry had an overall score of 68 and jumped up seven places from 10th in the table in 2021.

The findings showed the average rent per room in Coventry was £479. In terms of short term return it found the average number of bedrooms was 2.7, a total estimated annual rent for the average property was £15,520 and a yield of 6.5%.

The long term return showed house prices in Coventry were £138,643 in 2010 and had seen an average annual

change in prices of 5.6%.

The percentage of properties vacant was 1.2% and the proportion of residents in the city who privately rent was shown to be 24%.

The City Index Tracker also shows the national average rent per room has steadily increased. In 2021 the average room for rent was £423, while in 2022 it was £432 and this year increased to £455. Aldermore’s research also found nine out of 10 landlords (94%) increased the rent in the last 12 months and just under three quarters (73%) of landlords have seen an increase in tenant demand for their properties in the last year.

Sheldon Bosley Knight’s Coventry lettings administration manager, Meredith Redman said: “Coventry is so highly placed due to many factors. It has great transport links to London and Birmingham making it an excellent to commute for work whilst retaining a lower average house price than neighbouring cities.

“The average purchase price of a property in Coventry is £241,522 compared to Birmingham which is £268,987 saving investors over £25,000 on average whilst the yield

and rental valuation are on average higher.

“The average purchase price of a property in Coventry is £241,522 compared to Birmingham which is £268,987 saving investors over £25,000 on average whilst the yield and rental valuation are on average higher”

“It is home to both Coventry University placed 46th in the Guardian University Rankings and to Warwick University which is placed ninth in the rankings, ensuring a big demand for student housing.

“It is also the home of global businesses such as Jaguar Land Rover and TATA driving the economic growth of the city and allowing more opportunities for investors in the future.

“We have huge demand for rentals and would welcome any landlord speaking to us about how they can grow their portfolio in Coventry. Please do give us a call or pop into our office and find out how we can help.”

New planning and licensing rules to come in for HMOs

Landlords are being urged to take note of a new licensing scheme which has come into force for Houses in Multiple Occupation (HMOs).

The scheme, introduced by Warwick district council will affect all HMOs in the district.

It includes small HMOs with three to four occupants which were previously exempt from licensing rules.

Introduced on January 18 this year, the scheme will require all small HMOs to be licensed to remain in use. All existing properties currently in HMO use will need to demonstrate they have planning permission before being able to apply for the necessary licenses.

The council has allowed existing tenancies to run their course before they act. However, the correct

planning consents and licensing will need to be in place before any new tenancy agreements are signed.

Warwick district has Article 4 planning rules in the Leamington Spa wards of Brunswick, Clarendon, Crown, Manor, Milverton and Willes, meaning permitted development rights to change the use of a house to an HMO do not exist and planning permission is required.

Properties which have been in continued HMO use (including students lets) for a period of more than 10 years, should apply under a Certificate of Lawfulness Application to confirm the HMO use is lawful.

For properties which have not previously had planning consents and have not met the 10-year threshold, Full Planning Consent will be required.

These rules will also apply to any new HMOs which may come forward in the future.

If you have an HMO and would like to discuss the right planning route for you, please contact Sheldon Bosley Knight planning and architecture team either by email planning@sheldonbosleyknight.co.uk or on 01789 387880.

Sheldon Bosley Knight can also offer RICS formal written valuations of HMO properties. We have many years’ experience providing advice on this specialist residential investment sector. If you need valuation advice either for secured lending, taxation or estate planning purposes email commercial@sheldonbosleyknight.co.uk or call the team on 01789 387882

HMO changes could be positive for PRS

Proposed legislative changes regarding Houses of Multiple Occupation (HMOs) could prove positive for the private rental sector.

Under new rules, Warwick district council now requires all rentals which have three or more different households within one property to be classed as an HMO. This would mean the landlord having to apply for change of use from C3 to C4 if it has not been continuously let out with three or more households before April 1, 2012.

Alongside this, the property will need to have a license.

Failure to comply could result in a hefty fine or criminal conviction.

Previously only those properties with five or more households in them required an HMO license.

Landlords with such properties will need to pay a license fee plus any associated add-ons such as changing the windows and doors to make them fire safety compliant.

The extra expense involved, coupled with previous changes in taxation, confusion over the Renters’ Reform Bill and increased mortgage rates could see HMO landlords sell up and exit the sector. However, David French managing director at Leamington Spa-based letting agent Tara & Co believes it represents an opportunity for landlords.

He said: “There are clear areas in Leamington where the district council does not want them to be saturated with this type of accommodation.

“We have begun to see some landlords exit the market as a result of the changes. These are not professional landlords or who don’t have huge portfolios and these extra costs associated with converting the property to an HMO are considerable especially when factoring in the increased costs of being a landlord at the moment.

“However, for some landlords it could represent a great opportunity. By converting such a property back to a family home and appealing to the family rental market, it would allow those landlords to stay in the sector.

“Family homes in this area are in demand and the gap between HMO income and that of a residential let is shrinking so it is definitely an opportunity.”

One landlord we spoke to said: “I can’t get the planning permission I need for my property to be an HMO in this area of Leamington.

“So, rather than sell it I will be turning it to residential let which will be ideal for families and young professionals. The losses won’t be huge and it’s enough for me to keep making a profit as rents are strong here.

“It’s good for the rental market that properties like mine are going back to private rental sector.

“It’s good for the rental market that properties like mine are going back to private rental sector.”

“However, for my dad, who is also a landlord, he has been told his properties, now classed as HMOs need new windows as when it’s let out there needs to be a fire exit which means the window needs to be a certain height. It’s just another cost to the landlord in an evershrinking margin.”

More landlords opting for limited company status

Nearly two thirds of landlords are considering or have already become a limited company.

The figures, from OSB Group’s latest Landlord Leaders survey, found the figure jumps to 72% for professional landlords, ie those owning multiple properties and earning their main income from them. Just under half of the nonprofessional landlords have made the change.

It backs up research from Hamptons which reported a record 50,004 limited buy-to-let companies were set up last year. In December there were 345,426 active limited companies of buy-tolet investors, up 11% from the start of last year.

In encouraging news for tenants, OSB’s survey of 1,000 landlords also found they were continuing to invest in the private rental sector.

It found 69% had already or were planning to increase the size of their investment portfolio. Of

professional landlords the figure was 77%. Two thirds (66%) are investing or planning to, to stay ahead of legislative changes.

This investment comes at a time when 42% say they are optimistic about their future and one in five professional landlords say they feel very optimistic. Only 24% were neutral.

According to the research, the top reasons for being a landlord are earning potential and the ability to pass down wealth and inheritance to future generations. This is followed by investing in a fixed asset and having a positive experience on tenants’ lives.

The latter is reflected in landlord action, with 75% engaging or planning to engage with tenants to understand their needs better and foster positive relationships. A quarter (25%) have also expressed their desire to positively impact tenants' lives for the future.

Sheldon Bosley Knight lettings

manager Josh Jones said: “We are seeing more of our landlords explore the idea of becoming a limited company. In part this has much to do with the tax changes imposed on them over the past few years.

“However, it is good to see landlords thinking about this as a way to stay within the sector.

“They play a vital role in providing homes for people and despite all the challenges their commitment remains strong.”

“They play a vital role in providing homes for people and despite all the challenges their commitment remains strong.

“Before deciding on whether this is the right route for you, I would always advocate speaking to an accountant or financial advisor to get the best advice based on your circumstances.”

Importance of insurance and safety features for landlords

Landlords are being urged to make sure they are adequately covered, both financially and in terms of safety measures, in the event of any natural disaster.

It follows an incident which took place at a flat in Leamington, Warwickshire in February which started when a consumer unit caught fire.

The blaze resulted in considerable damage to the area around the unit as well as significant smoke damage to the majority of the one-bed flat. It also melted the smoke alarm and a metal lampshade. Although some items were salvageable, all the soft furnishings were destroyed.

Fortunately the tenant in the home at the time was able to escape but was only made aware of the fire

when the consumer unit exploded and woke him up.

He was saved by the fire door to his bedroom which was the only room in the flat to escape unscathed.

The cost of the professional clean up required has been estimated at £12,500 but there is also the expense of ensuring the tenants find alternative accommodation while the work takes place.

Sheldon Bosley Knight’s lettings manager, Claire Paginton, said it’s a wake up call to landlords, especially those who are let only, to make sure they are completely covered.

She said: “This has proved how important it is for landlords to have up-to-date and comprehensive insurance for just this eventuality.

“Landlords also need to make sure

all their safety certificates are in order and up-to-date and consider upgrading their consumer units, fire doors and any other safety measures.

“Not doing so could prove a very costly mistake.”

“Not doing so could prove a very costly mistake.

“In this case if the consumer unit was metal it would have stopped the spread of the fire. It also proves the worth of having fire doors as without them it could have been much worse.

“As ever if any of our landlords would like help or advice on this or any other issue, please do get in touch.”

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• Currently managed by Coventry University

• Well appointed three-storey town house

• Within walking distance of Coventry city centre

• Five lettable rooms

• Communal lounge, breakfast room and kitchen

• Current rent of £1,700 pcm

• Ground floor shower room and first floor bathroom

• EPC

• Six-bedroom HMO

• Six bathrooms

• Immaculate condition

• Popular location

• Low maintenance rear garden

Gross yield of 7.0% £290,000

• Rent starting from £500 pcm per room

• Communal kitchen/diner

• Traditional double bay window

• EPC -

Gross yield of 9.4% £382,500 OIEO

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Coundon Road, Coventry

Earlsdon Avenue North, Coventry

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• One upper floor apartment

• Ground floor commercial premises

• Net internal area 383.7m²(4,130 sq ft)

• Shop - £18,000 per annum

• Apartment £7,200 per annum

• Development potenial (STP)

• Pershore town centre

• Freehold

• EPC - TBC

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• 154.37m (1,662 sq

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38, Greenhill Street, Stratford-upon-Avon

18, High Street, Pershore