Is the Buy To Let sector worth it?

The pandemic has hit Buy To Let (BTL) landlords hard as a third have had to cut rents to help struggling tenants, and losses could mount up once the furlough scheme winds up at the end of the month.

Almost 1 in 5 landlords have tenants in arrears, owing an average of £2,523, according to the latest National Landlord Index published by accommodation.co.uk.

Many have been willing to help struggling tenants, but will now have to face tough decisions over whether to evict those who cannot keep up with the rent.  BTL had already become harder after successive chancellors have  mounted a tax purge on the sector.

Investors now pay an extra 3% stamp duty on purchases; have seen the ‘wear and tear’ allowance cut; can no longer claim tax relief on their mortgage interest payments, and have allowances on Capital Gains Tax (CGT) stopped.

Rising property prices have increased the upfront costs for new BTL investors, although 1 in 4 existing landlords are expanding their portfolios according to Aaron Short, the CEO of accommodation.co.uk

While some tenants are struggling, demand for rented property is high.  “The market is buoyant with an influx of tenants as lockdown measures ease and the economy recovers’    

Short added “It is encouraging to see landlords helping tenants with some form of rent reduction.”

Separately, Mark Harris, CEO of mortgage broker SPF Private Clients, said the pandemic had been tough for BTL landlords.  “Many ended up out of pocket as tenants could not pay their rent but rules banned evictions.  On the other hand, property repossessions were halted’.

Those landlords with larger portfolios have sufficient funds, and flexibility to cover one or two lost rents, but smaller landlords with only a couple of properties will have to cover the loss out of their own pockets.

Buy to Let is more challenging than before

Harris said the BTL mortgage lenders are starting to set tougher criteria for new investors. “More are asking for evidence of a cash buffer, making it harder to get into BTL.”

“Investors should brace themselves for stringent tax and regulatory rules” he added.  “Buy to Let is more challenging than before”

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