Thinking of Becoming a Landlord or Increasing Your Property Portfolio?

This month’s blog is for landlords – whether you are an existing landlord thinking about growing your portfolio, or a prospective landlord with lots of questions – when, how, where, maybe even whether? We can help!

Before we jump in, we need to be clear that this blog is here to help you make the choices which are right for you. We don’t know your personal finances, and being a landlord is something which comes with risks and rewards. For advice which is specific to your situation, please come and talk to us and we’ll be happy to help.

The Ups and Downs of Being a Landlord

Being a landlord brings both opportunities and challenges. Some of the opportunities are:

Passive Income: One of the most significant benefits of being a landlord is the potential for passive income. With a well-managed property, you can earn regular, recurring rental income.
Capital Appreciation: as well as earning regular rental income, the value of your investment may increase over time. While no one can tell you what the future holds for house prices, the average house price in Newcastle-under-Lyme rose from £121,410 in 2013 to £200,360 in 2023, an increase of 65%.
Tax Deductions: As a landlord, you can claim tax deductions for some expenses incurred in maintaining and running your rental property. These include financing costs, repairs, and maintenance costs. Recent changes in tax treatment do make this more complex than before, so be sure to take advice.
Flexibility: Being a landlord can offer a level of flexibility and control over your investment. You can choose the type of property you want to invest in and set the rent price.

And then there are the challenges:

Tenant Management: If you choose to go it alone, one of the biggest challenges landlords face is finding and managing tenants. This involves tasks such as advertising the property, screening potential tenants, handling rental agreements, and managing repairs.
Legal Responsibilities: As a landlord, you have legal responsibilities to your tenants, including ensuring the property is safe and habitable, complying with tenancy laws, and handling disputes with tenants.
Maintenance and Repairs: Landlords are responsible for maintaining the property in a safe and liveable condition. This includes fixing any issues with the property, such as electrical or plumbing problems, and handling routine maintenance tasks.
Financial Risk: Investing in property can be risky, and there is no guarantee that you will make a profit. Like any investment you need to think about all possible scenarios when making the choice to invest.

Is Now the Right Time?

If you do decide that being a landlord is right for you, your next question might be whether now is the right time to take that first step. There is no question that the market has seen more volatility than in recent years, with positives and negatives for landlords.

The positives:

There continues to be a real shortage of rental stock. This means that rents have been rising steadily, with some new tenants even willing to pay above the advertised rental amount to secure a home.
The slowdown in property prices could mean that now is a good time to pick up a bargain. If you are looking for a medium to long term investment it is likely that prices will return to their upward trajectory in the not too distant future. On top of this the ability as an investor to move quickly to completion with the seller can give you a real advantage in a market where some people may be selling because their mortgage payments have become less manageable.
Landlords exiting the market offer the chance to buy a readymade income stream. Whether a landlord is selling because of recent tax and legislative changes, or simply because they always planned to at this point, buying a property which is already compliant and with sitting tenants offers an immediate income stream without the need for capital investment to make it rental ready.
Getting ahead of forthcoming legislation. We know that there is increased legislation coming down the road from the government’s white paper published in 2022. This includes new tenancies having a minimum C EPC rating within the next couple of years. Knowing this now means you can buy something which is already compliant, or it gives you the time to get it ready before bringing it to market.

The negatives:

The increase in interest rates and associated rise in mortgage costs will have an impact on the return you will get from your rental property. It is vital that you understand how this and any future potential increases in rates may affect your personal financial position.
Recent changes in capital gains tax, with more to come in April 2024, reduce the tax-free allowance you will benefit from when it comes to selling your investment property. By 2024 this means the average landlord capital gains tax bill will rise by roughly £2,600.
Increased regulation. As already noted, the government’s White Paper, ‘A Fairer Private Rented Sector’ which was released in 2022 heralded increased legislation and demands on private landlords, with more compliance demands and costs.

Location, location, location.

With all these different factors in mind, one of the things which makes a significant difference to the success of your rental property is location. Having your property in the right location can determine rental yields, capital appreciation potential, and the type of tenant you will attract. So choosing carefully is critical.

At Heywoods we know the areas across Staffordshire, South Cheshire, and the Shropshire borders really well. We constantly keep an eye on areas which have great potential for landlords. The three below all have something to offer at the moment and are definitely worth considering to get you started as a landlord or to add to your portfolio.

Westbury Park Area

This area, situated just three miles to the south of Newcastle town centre, holds lots of opportunity for rental properties. It is perfect for families, with larger, higher value homes in a sought-after area. It is well served by a good road network, with quick and easy access to the M6, making it a popular choice for professionals. The majority of the properties in the area are newer style, reducing maintenance costs, making it easier to meet the required energy standards, and providing really attractive options for landlords and tenants. We think this area should definitely be on your list.

Wain Drive

Even closer to Newcastle town centre, little more than a mile from the centre of Stoke, and more importantly right on the doorstep of the Royal Stoke University Hospital, Wain Drive and the surrounding streets have great potential. The proximity to the hospital helps ensure high demand along with a good tenant profile. It’s worth considering casting your net anywhere within walking distance of the hospital for the same reason.

Blurton

Three miles south of Stoke town centre is the area of Blurton. This may be a less obvious choice, but there are lots of reasons we would suggest putting this on your list of areas to consider for a rental property. The local housing stock is predominantly council/ex-council properties, which are solid in build and make for great rental stock. There is always high rental demand from tenants looking for long term accommodation. There are good local road connections but also plenty of local job opportunities in logistics, distribution and the ever-expanding Stanley Matthews Way developments. The area also brings good opportunities for capital growth – over the past 10 years 3 bedroom semi-detached properties have, on average, increased in value by 67%.