Hello readers,
With the budget coming up in the next couple of days, I am sure you will all be watching closely and I will compile a summary shortly after to let you know everything you need to know.
The title of this blog, however, is a poignant one as it seems to be something that is on the minds of a lot of landlords at the moment. That question ‘what’s the point and should I even bother any more?’.
Honestly, my thought here is that owning rental property is, of course, an investment so it does need to make financial sense. There have been a lot of changes and the landscape is radically different now than it was just 12 months ago, so what should our approach be?
The answer to this question needs to be an individual one for every person. For example, what are your goals, how is/are your property/properties structured, what kind of tenants do you have and more. Hopefully you will find this article helpful however, in the questions you need to be asking to help assess your position!
Is there a landlord exodus?
I will start with an interesting fact from some research I have found; for every landlord buying, six are selling and a total of 24% are actively selling or looking to sell.
The graph below illustrates this; however, you may spot that 72% are simply holding. Not buying, nor selling. Is there a landlord exodus? From this research, I think the answer may be no, but the market is certainly contracting.
The private rental sector is changing dramatically
Whichever way you decide, it helps to see the bigger picture. Over the last decade, private renting has moved from a lightly regulated side investment to a sector where landlords must register, report to HMRC every quarter, meet energy targets and soon join an ombudsman.
2026 and 2027 see four of the big ten rule changes and that’s a LOT of change in a short space of time.
The effect of these changes is that the market is contracting. You will have seen above how, for every landlord buying, six are selling. This doesn’t mean that property is a bad investment – far from it. It simply means it no longer works for some.
According to Zoopla’s September report the flow of new rental homes coming onto the market is 6% lower than a year ago and there are 25% fewer rental homes on the market than before the pandemic.
This supply / demand coupled with increased operating and mortgage costs has led to a jump in rents over the past decade and this has been particularly stark over the past five years.
My conclusion here is that the rental sector is changing significantly. As I mentioned in my last blog, it appears that the market is shifting to becoming increasingly professionalised and a larger percentage of landlords having larger portfolios (ie: four or more properties).
Simply put, the era of the ‘hobbyist’ landlord is coming to an end. Running a rental property/portfolio now takes the time, knowledge and systems of a small business and the landlords doing well are the ones who either treat it that way or hand it to someone who does.
What questions should I ask before making a decision?
Whilst there’s certainly a lot to consider, there are typically three questions I recommend asking yourself before making a decision as to whether to hold/expand or sell. These are:
- What is my real return and am I happy with that? This is the headline figure and it involves working out your net yield after mortgage costs, maintenance, insurance, agent fees and taxation.
The answer here is not necessarily ‘is it better than investing elsewhere’, but does that work for you as part of your overall investment strategy. The key thing is to understand how property fits into a balanced investment portfolio. - Is it the money, or the hassle? If you are generally happy with your returns but the extra workload and paperwork are wearing you down, selling may not be your only option.
- Have I taken advice? This is key. It’s vital to speak with an accountant about your tax position and potentially get a professional valuation of your rental property, both its sale value and the rent it could achieve today.
If your rent has fallen behind the local market, that alone can change the whole picture. If you are thinking of selling with vacant possession, speak to a solicitor before serving any notice, as the new rules leave little room for mistakes.
Should you give up being a landlord?
My conclusion here is to always bear in mind how property is still a good investment when structured right and seen over time. It’s never going to be what it was, but key to remember is how property tends to provide steady rental income, particularly during economic downturns.
As to whether it is worth continuing, as mentioned above this is a question only each individual can answer with the answers to the questions above. I would, however, caution against making a rash decision based on a feeling and newspaper headlines!
If you would find it helpful to run through your position, then I’d be more than happy to set aside some time so do reach out on hasan@home-share.co.uk.
Hasan