If you’re looking to build and grow your property portfolio in 2018 and beyond, you’re going to have to roll with the punches…
There’s been a lot of changes in the market – from section 24 to deposit caps, tighter mortgage lending rules to Capital Gains Tax, increased regulation to increased stamp duty.
But where there’s change, there’s also opportunity – and new statistics show that it’s the bigger and more professional landlords who are adapting and thriving under the new conditions.
So here’s 7 top tips for those looking to adapt their businesses to the new conditions they’re operating in…
1. Don’t be affected by the negativity
If you believed everything you read, you’d think it was all doom and gloom, negative equity and people planning their exit strategies – but there are lots of reasons to be positive. In fact lots of landlords are feeling pretty good – and the bigger the landlord the more optimistic their outlook.
New research into the ‘emerging landlord’ shows that 38% of landlords with 2-4 properties plan to buy at least one more in the next year, while over half of those with 5+ properties are planning more investments.
2. Change your mindset
The landlords poised for growth are thinking differently about property. They’re investors first and landlords second, and they’re looking at the return they can get on buy-to-let in comparison with other investment and saving strategies – and seeing opportunity.
Andrea Savadou, 27, has a growing portfolio and works mostly in commercial to residential conversions. She says: “I would describe myself as an investor rather than a landlord. In 10 years time I just see myself doing more of what I do now – more properties, bigger projects, more joint ventures.”
Carl Agar, landlord, developer, letting agent and NLA rep adds: “Existing landlords are seeing all of these new rules imposed on them and things getting harder and harder. Meanwhile those new to the market are seeing all the changes up front, and their vision is often clearer and more realistic.”
3. Change your business
Smart landlords are starting to look at their business in depth and make positive changes, checking they have the right financial structures, taking on board the recent changes in taxation, ironing out waste and maximising profits where they can.
4. Embrace regulation – and get involved in it
The majority of landlords are actually in favour of regulation – with 60% saying they support it. That rises to 70% amongst bigger landlords, who see it as a way to professionalise the sector.
Carl Agar says: “Don’t be scared of selective licensing – be involved. Push your Local Authority to demonstrate how they’re going to deliver their scheme and how they intend to measure success. Have your say and help to shape how it looks in your investment area.
“Personally I’m looking forward to a more professional and more prosperous private rented sector driven forward by landlord and investors committed to playing their part in the provision of housing for this country.”
5. Invest outside the box
Landlords are starting to invest differently. Flats now account for a 3rd of all investments, and 31% of flat-owners are in buying mode. Holiday-lets are another growth area, with the highest proportion of new entrants to the market – 22% of holiday-let landlords are in their first year. HMO landlords (Houses of Multiple Occupancy) are feeling particularly positive, with 43% in buying mode.
Build to rent is also getting bigger, as are commercial to residential conversions – where landlords can avoid second-home stamp duty and take advantage of different tax rules.
6. Don’t put all your eggs in one basket
“The really smart landlord now starts to look at other opportunities appearing in the market place and asks the question, is it time to diversify? They look to other areas to those they have traditionally invested in,” says Carl Agar.
Sue Sims, a property professional from Birmingham, has recently moved into Serviced Accommodation, has a mix of properties, runs a letting agency and a property meet-up group. She says: “The property market has changed, and if you want to make it work for you, you have to change with it. I needed to get better returns or get out altogether, and that led me to start diversifying my portfolio – and the different strands of my property business.”
7. Insure for success
Any sort of change – to your business or your strategy – involves some level of risk. Which is why insurance becomes even more important. Yet 1 in 4 landlords don’t have the right insurance for their buildings and contents – and that could leave them vulnerable if things go wrong in a rented property.
Director of Underwriting at Simple Landlords Insurance Tom Cooper says: “While every penny of profit counts, we strongly believe that high quality insurance, at the right level for your personal risk, can help free landlords to diversify their strategies and think differently about how, when and where they invest. We’re the safety net that let’s YOU take the next leap.”