There are already around 400 pieces of legislation governing the lettings industry, with 5 more coming into force in 2018:
- 1st April – Minimum energy efficiency standards
- 6th April – Banning orders for rogue landlords & agents, plus a national database
- 6th April – Gas Safety Regulations 2018
- 28th May – GDPR
- 1st October – Tighter rules for mandatory licensing of HMOs
…and more on the slate and/or in consultation:
- Mandatory client money protection for letting agents
- Regulation of letting agents
- Ban on letting fees
- Tighter electrical safety regulations
- Compulsory membership of a redress scheme for landlords
Keeping on top of all this legislation is quite a job. Add to that licensing, planning permission, building regs, deposit protection, fire safety, health and safety, specialist insurance…it’s a lot of admin.
You’ve got to find and reference tenants, check them in and out, inspect the property, take phone calls, organise maintenance, pay contractors, jump to emergencies – who can be bothered?
In Scotland and Northern Ireland, you’ve got to register yourself and your property; in Wales you need a licence to manage a property. Licensing and registration is already in effect in certain parts of England (including Liverpool and certain London boroughs) so a national scheme can’t be too far away.
And look at the penalties if you get things wrong – even unintentionally. Your local authority can fine you up to £30,000, in addition to which, if your breach of the law is considered serious enough, you can be banned from working in the lettings business, prosecuted in court and even jailed. And if Karen Buck’s ‘Homes (Fitness for Human Habitation and Liability for Housing Standards) Bill 2017-19’ comes into force, your tenant will have the right to take you to court themselves if they’re not happy with the standard of their home.
The rewards need to be pretty good to make all this toil and risk worthwhile.
According to data from LSL Property Services, average house prices in England & Wales – excluding London and the South East, where prices are falling – rose by 2.3% in the year to January. (Taking England & Wales as a whole, the figure is a miserable -0.4%) Some areas are doing brilliantly: Rutland’s up 12.1%, Bristol’s up 9.1% and Merseyside’s up 8.2%. But other areas have performed pretty horribly over the last year: average prices are down by 9.5% in Wrexham, 8.6% in Kingston upon Hull and 6.2% in Middlesborough. Every one of the ten regions has some local authority areas going up and others going down, so it really does depend where your buy to let is located – you could be winning on capital growth or you could be losing.
Rent-wise, the average yield for England & Wales is 4.4%, ranging from 3.2% in London to 5% in the North East. In Scotland, you’re looking at an average of 4.8%. However, these are gross figures and don’t take into account all the costs associated with operating a buy to let – net yields will vary depending on how highly you’re leveraged and how much you need to spend on maintenance, etc. If you’re operating an HMO or have only a small mortgage, your cash flow might be quite good, but otherwise you might not be making very much, month on month.
Then, from these potentially very modest profits, you’ve got to set aside money for bigger periodical works and tax, and it’s sensible to have a ‘rainy day’ fund.
Now, take a good hard look at what you’re left with, tot up the time you spend on your job as a self-managing landlord and consider the risk v reward. Is it really worth it?