Easy Money Not Anymore

Does "Easy Money" Apply To Landlords?

The answers are varied depending on what landlord you speak to it's NOT been easy money for a landlord who spends long hours redecorating frequently, cleaning up after tenants, passing up on luxuries - even some necessities trying to plan for the future. Some landlords would say the easy money is what the rent dodgers get, especially when they do not pay rents with tax- payers money already handed to them. Maybe easy money is when you do nothing, but sit at home most of the day watching the cash roll in. Then again if someone earnt the right to have their financial freedom through hard work then good luck to them in how they spend their time.

Then there are those landlords who bought property in the auction room that no one else wanted. They rolled up their sleeves, got stuck in and renovated them. They will also clear up after tenants leave, carry out repairs, up-grade and re-decorate. There are many landlords like this, would you say that's "Easy Money" for them? I don’t think so not when you consider that they have made this happen through hard work, it's all too easy for people on the outside to think that landlords have got it easy, but you try doing it before casting aspersions.

Easy Money can perhaps be denoted to any Landlord lucky enough to of got into the business, back in the early 1990's, It was comparatively easy back then as the Assured Shorthold Tenancy was  introduced by the Housing Act 1988. It brought together the two aims of those who wished to see the deregulation of the private rental sector, with limited rent control and an automatic right to possession for the landlord. Happy days if this can possibly be interpreted to mean "Easy Money" for those landlords who saw an investment opportunity in bricks & mortar when others didn't.

I can accept that is was “Easy Money”, since you would of benefited from excellent capital growth, providing the equity for re-investment or re-mortgage to build your property empire. Furthermore, you also had the great fortune to buy a property with a small deposit and it wasn't uncommon to get 85% to 95% LTV mortgages which acted as an excellent lever to build your property empire from the booming sales market that followed the recession after 1992!!. And mortgage lenders weren't asking many questions either when it came down to buy to let mortgages as rental yields were much higher and surveyors were valuing properties in accordance with soaring property prices at the time. And when landlords saw that passive income was far better than their working income they jumped ship from their day jobs to become full time property investors & landlords.

There was virtually no aggravation in renting a property, house prices rose, landlords had taper relief on CGT and no external grief from the government or the other anti- landlord bodies and media that have created an 'adversarial' landlord/tenant relationship that didn't exist until they waded in. Easy money- relatively speaking and you can look back fondly to those, long gone, good old days and maybe wished you had exited the business. Because the rental industry has progressivley become harder over the years and in my opinion much harder since the last recession in 2008.

Times have now changed there is no "Easy Money" now being a landlord rental yields in London compared to other parts of the country are poor on average 3.2 to 3.5%, the deposit for a buy to let is 25% of the mortgage compared to 15%, 20 years ago. Plus landlords have to take a more cautious approach and chime with the changing times with more regulation and tax hikes than ever before.

Hard Work Now And Tougher Times For Landlords...

Government regulation imposed on the lettings industry has made things tougher for landlords. Failure to comply with some of these laws are hefty penalty fines and go to jail terms. Did you know that, now, you have over 150 + government legislation & regulation to contend with in the rental property sector? You see back in the good old days when renting a property, you bought a shabby house did very little to it may be replaced a couple of carpets and did a bit of painting a local agent took it on and found a tenant very quickly. "Nice and Easy" and you could also afford to be ignorant and still get away with it - you see back then making money was easy. Now you could not let out a house in that condition and there's no chance the tenant would accept it. And back then there were no EPC's, Electrical Installation & PAT reports, How to Rent Guides and Deposit Protection. And I have only scratched the surface as there is so much more legislation that many landlords have no idea about.

I’m afraid the days of "Easy Money" have long gone; the one good saving grace in the lettings industry is that there's not enough housing to meet demand. The government have failed miserably in addressing the shortage - which is why bricks and mortar still trumps most investments.

The shortage in housing supply will always push house prices and rents up over the long term.   

The reward is still there - however the level of knowledge now is more important than ever before. At the moment we have some tough times the pandemic will mean some tenants are more likely to fall into arrears. On the other hand as a landlord you may also be able to get a great buy-to-let deal in these troubled times. Although Mortgage lenders are imposing stricter conditions. Many lenders are seeing buy-to-let landlords as a safer option to lend their money to. In June alone, the number of buy-to-let mortgage products rose by 19.2% (to just over 1,700) meaning if you have a decent deposit of 30% upwards, you are likely to find something that fits your needs at the time of writing this article, Birmingham Midshires had a buy-to-let 5-year fixed-rate mortgage at 1.94% and Santander at 2.04% … this is cheap money in anyone’s language). Mortgage rates are ever becoming more economical, which is a great motivation for anyone wanting to get a foot on the buy-to-let property ladder in Wandsworth & surrounding areas - which is a great place for renting your property.

The Challenge NOW for Landlords is the ever changing world of Legislation & Regulation!!

Landlords now have to deal with so much compliance and legislation in the lettings industry plus tax hikes that the profit margins are being squeezed. And you still have to deal with the day to day running of your investment which is finding good quality tenants and being diligent in your work to check out tenant references to ensure they have a good track record of paying their rent on time. Plus what checks can you make to know they are not going to trash the property and are clean and tidy? Then you have the usual managing tenants emotions when they become demanding for some reason through no fault of your own. This takes time and you may not be in the best place to take up the ever increasing "to do list" which has grown beyond recognition over the last 30 years. All to make sure you keep on top of things so your property is returned at the end of the tenancy without any problems so you can start the process again.

Well, you may not want to start the process again, your circumstances may have changed to the point where you have decided that you are better off selling or using a professional lettings and management agent who specialises in this area. Renting out your property does come with risks and challenges, but it’s all about mitigating those risks and as an agency we will help you not make those mistakes which we know cost time and money.

If you would like to find out more about our company or have any questions about selling now or in the future then please do not hesitate to get in contact with us on: 020 8870 5800 and ask for Matt. Alternatively, if you would like to book a valuation then please fill in the form provided below and we will be in touch.

Click on the link for a FREE valuation to complete the form and I will be in touch.