The Private Rented Sector (PRS) has grown rapidly in recent years and there are now approximately two million private landlords who let out property operating up and down the country.
Whilst property investment remains a viable option, with a higher number of rental properties, tenants and huge sums of money changing hands every week, it comes as little surprise that the PRS has become more widely regulated.
Landlords have more to think about now and letting a property properly is no longer a quick and easy way to make some extra cash. Increased legal obligations and rising standards in the PRS mean many of the UK's landlords are becoming more professional.
Interestingly, at a recent industry event, Adrian Moloney of One Savings Bank used his keynote speech to declare that we'll be seeing a lot less of the 'dinner party landlord' in the future.
“This is very much an era of professionalism and I don’t think that’s necessarily a bad thing for the Private Rental Sector,” he said.
As we move towards the end of another highly changeable twelve months for the UK's landlord population, we've looked at why landlords are needing to become more professional and offer some simple tips on how you can increase the professionalism of your property operation.
Why do you need to be more professional?
The sheer size of the PRS means that it is now one of the country's most important sources of housing, accounting for approximately 19% of 22.5 million households, according to the most recent English Housing Survey.
There has subsequently been more attention placed on the sector and the government has allocated more resources to regulating the lettings industry, trying to make sure that rental properties and transactions are up to a certain standard.
Increased regulation and professionalisation of the PRS means the consequences of getting something wrong are now much higher. Landlords who break the law or flout legislation can be hit with hefty fines, or even custodial sentences.
Needing to meet so many new requirements and standards has automatically made the majority of landlords more 'professional'.
For example, not only do all landlords have to ensure the energy efficiency of their rental properties and meet stringent fire safety regulations, as of 1st February 2016, all landlords in England became responsible for checking their tenants have the right to reside in the country (for more information see our HomeLet Verify solution)
On top of this, there's the ongoing restructuring of the way landlords can claim tax relief, the first details of which were announced recently. Starting next year, buy-to-let mortgage interest tax relief will be gradually phased out by April 2020.
One way in which landlords are trying to avoid being affected by the law change is through incorporation – the act of forming a limited company to hold ownership of a property portfolio.
The uptake in this process – which instantly makes a landlord more 'professional' by its very nature – has increased significantly since George Osborne first announced the tax changes in summer 2015.
For example, according to figures from Mortgages for Business, in the third quarter of this year 63% of landlords purchasing buy-to-let properties did so through a limited company structure. This figure has trebled from the 21% recorded before the changes were outlined by the chancellor in July last year.
With many landlords clearly considering incorporation, earlier this year we spoke to a landlord tax expert who offered his guidance.
How can you be more professional?
Here's some quick tips which could help to increase the professionalism of your operation, making it slicker and more efficient in the process…
- Make sure you have the right insurance
The vast majority of professional landlords are likely to have specialist insurance cover in place that has been specifically designed for rental properties, from buildings & contents cover to loss of rent, malicious damage by tenants and legal expenses. You can find out more about our landlord insurance products here.
- Work with a good letting agency
Many of the UK's growing landlord population employ a letting agency to manage some or all of their property portfolio. Choosing the right agency is crucial. As the agent will be representing you in front of tenants, it's important you work with a firm that reflects you in a professional manner. Some things to consider when choosing a letting agent are:
• Are they a member of a client money protection scheme?
• Are they in compliance with deposit law? Ask for their scheme number
• Safety legislation – ask your letting agent t check whether your property is compliant with the law for example does it have a gas safety certificate? Any electrical items provided by landlords should be safety tested.
- Be consistent and thorough
Two key aspects of being a professional landlord are paying attention to detail and having a consistent strategy. These qualities should be implemented across all facets of your rental processes. Treating tenants equally and providing all lets with the same information is a good place to start. What's more, having standard procedures pencilled in for a range of different scenarios can be beneficial, too.
- Use an accountant
As you can see, tax return and calculating profits and income is going to change a lot over the next few years. Hiring the services of a professional accountant to look after your property business could help you to identify which properties are your most valuable investments, as well as ensuring you don't get into trouble with Her Majesty's Revenue & Customs.
- Keep your property up to scratch
Tenants are likely to see your rental property as a reflection of you personally – so what do your properties say about you? Not only will a well-maintained property be more likely to secure higher rents in the long run, but it will make you seem more professional – increasing the chances that tenants want to rent from you – and will encourage renters to treat the property as their own.