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What are Landlord’s Biggest Worries in 2020?

Despite the property industry being incredibly fast-moving, recent years have seen a raft of new challenges for landlords. Brexit impacted every aspect of the UK and the property sector was no different. Thankfully, the new year has started positively for the industry with the results of the general election easing some of landlord’s biggest worries in 2020.

Using research from multiple industry sources including Upad, we’ve put together a list of the top challenges landlords are facing in the new year and what that means for their Buy-to-Let investments. 

Tax Changes 

The biggest concern that emerged for landlords within the research are legislative and tax changes, particularly the amendments to mortgage tax relief. With the scheme set to be scrapped entirely in April 2020, this will no doubt impact rental profits and leave landlords with little choice but to raise rents. 

2020 is also set to see the introduction of changes to Private Residence Relief (PRR) and Capital Gains Tax (CGT). Directly targeting ‘accidental landlords’ – those that lived in a home they then rented out – these changes could see those with a second home paying more in the long-term. 

Compliance

It emerged in the survey that 22% of respondents found compliance to be a big issue. With legislation changes constantly in motion, its vital that landlords stay on top of their due diligence to stay compliant.

The main changes to Buy-to-Let in 2020 include the following:

Tenant Fees Bill – Removes letting agent charges to tenants and a five-week limit on tenancy deposits for those that deliver an annual rent below £50,000.

Client Money Protection Scheme (CMPS) – It’s compulsory that letting agents register with an approved scheme.

Homes Fitness for Human Habitation Act – This change has ensured tighter rules on the condition of the rental property. 

Tenancy Agreement – Proposed changes to tenancy agreements mainly revolve around making them longer – current Government plans would put them on a minimum three-year contract. 

Rent Arrears

It goes without saying that rent arrears are a major worry for any landlord – whether you’re seasoned or just starting out. 

Research shows that 18% of landlords see it as a top concern – unsurprising considering enquiries to National Debtline regarding rent arrears have increased by 84% in the past four years – especially with the cost of living rising and wages not increasing fast enough to keep up.

Communication during this time is key. You want to ensure that you’re speaking about the issues with your tenants and finding suitable solutions. It can be worth setting up a system that alerts you if payments don’t get through, meaning you can act quick enough. 

Void Periods

Going one step further than not being paid on time is not being paid at all. Void periods are the biggest worry for nearly 14% of landlords according to the Office for National Statistics, to the point where landlords would happily charge lower rent than go through a void period.

The best way to mitigate void periods is to properly plan in advance, researching your tenants beforehand and creating lasting relationships when they’re living in the property. Keep the property in order and maintain a rent that matches the property value and it’s much more likely you’ll avoid void periods.

Brexit

As you’d imagine, Brexit has been a huge concern for landlords in 2019 and while it’s still present in 2020, the impact has been lessened by the results of the 2019 General Election. A majority government means a firmer stance on Brexit, reducing the uncertainty that is clouding the market.

It’s important for landlords to consider the effect that Brexit may have on future endeavours, especially in terms of demand. For some landlords, Brexit was a reason to invest, especially in terms of finding value through foreign exchange.

While it’s an ongoing process, it’s likely that more investors will be moving forward on purchases throughout 2020 in an effort to take advantage of any market growth. 

Tenant Fees Ban

While it has emerged as a landlord worry in 2020, the Tenant Fees Ban only plays a minor role. Just 2% of respondents believe that the Tenant Fees Ban is a big concern. This could be down to a number of factors but the most likely is that online platforms are growing in popularity and tend to have much cheaper fees.

At the same time, many landlords are already prepared to pay the fees and are therefore adjusting rents accordingly.

Despite these challenges, Buy-to-Let remains a cornerstone opportunity for investors that want to take advantage of a rising market. Landlords can increasingly find success up and down the country, particularly in prime regional areas and forecasts are showing incredible growth going forward.

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