2024-04-22March 25, 20242024-03-25
Is it worth being a Landlord in the UK?

The housing market has recently boomed, with record house price growth rates and pent up demand seeing the busiest months for house sales in years.  Planning reforms have made it easier to convert premises to a different use – either commercial or residential and for many investors, the Stamp Duty Holiday is an opportunity to widen their portfolios and snap up a few more investments…but is being a landlord in the UK still worth it?


We are currently living in unprecedented times and the future is uncertain.  Economists are having a field day with forecasts but no one can be sure what the state the economy will be in at the end of the year.  Many experienced investors are looking at the recession as an opportunity to make more money and others are holding off for more certain times, although many are adept at the boom and bust cycle and are making money at each turn of the cycle.

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Commercial or residential property?

Before the onset of the pandemic, commercial renting was clearly more profitable than residential with a lot less stress involvement.  Repair obligations often lie with the tenant and landlords are not burdened with the same level of legal responsibilities as with residential.  Recent legislation has impacted more on residential landlords making commercial investment more attractive to some.

The tables have now turned since the onslaught of Coronavirus, with many commercial landlords having been affected by tenants whose business has not managed to survive or are having trouble making rent payments.  Much of the world has shifted to remote working meaning that offices are becoming more redundant.  Many tenants including big brand names are requesting landlords to write off a rental period of between 3-6 months.  Those with unoccupied commercial spaces in good locations are taking a hit on a loss of rental income while still being liable for full business rates.

Residential letting, although not as lucrative as commercial is a good steady way to earn from your money rather than not use it for investment.  With a steady rental income and the appreciation of property values, you are guaranteed a sturdy investment.  However, managing a residential letting is a lot more intensive than with commercial from various aspects such as managing repairs, damage to the property, obtaining unpaid rent, possible eviction of tenants, refurbishments and a whole host of legal requirements including:

    • Smoke alarms on each floor

    • Carbon-monoxide detectors if burning coal or wood

    • An up-to-date EPC

    • Electrical appliance checks for compliance

    • Safety standard furniture

    • Water supply checks

    • Deposit legislation compliance

    • Gas safety certificates

To ensure that your investment is actually going to make you some money all of the figures need to add up to a number in your favour.  As well as a possible mortgage, consideration should be given to possible rent arrears, void periods, tax liability and money aside for future repairs and refurbishments.  If after taking all of this into account, there is still 30% left for your pocket then you’re good to go.

Landlords also need to bear in mind the consequences of having an unoccupied property such as double the council tax – the UK has imposed a levy on unoccupied properties in response to the housing shortage.

Letting agencies can take a lot of stress and hassle out of managing properties, but then you need to make sure that you have a trustworthy agency and be willing to pay out a good portion of your income.

Although buying a property close to where you live makes sense in terms of managing it, rental yields are usually bigger outside of inner-city rings.  The further out you go, the cheaper property prices are although rental prices are often maintained in good locations when comparing to inner-city purchase/rental prices.

Many Buy-to-Let investors exited the market in 2016 following a whole host of measures to curb the industry including a stamp duty surcharge on additional properties which made it more expensive to start or expand a property portfolio and the removal of mortgage interest tax relief which made it harder to profit from residential property investments.

Many are now flooding back to the market following Rishi Sunak’s surprise move in temporarily abolishing stamp duty in a bid to kick start the property market.  Investors purchasing expanding their portfolio still only pay 3% of the entire value of the property in additional tax although the tax holiday means that their tax bills could fall by half making the investment much more viable.  Although returns have fallen in recent years, the tax holiday has incentivised investors and reassured them that they can still make a profit in the residential market.

The general consensus is that there is no reason to delay on a property investment as we can’t be certain what the future holds in terms of the economy or the property market, but if you are wise, there’s money to be made in renting.

Compariqo offers bespoke re-financing and insurance solutions to the property sector. Contact one of our advisors today.

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