By Stewart Day, Director, Landlord consultants
The stark reality is it is uncertain times for everyone right now. I am a man with a family that worries about the cost of living, mortgage rates and affordability and let us not mention fuel prices!
I, like you, search looking for someone to make the important decisions so simple that there is no risk to all I have worked for. So that I cover all the bases, so that I am safe from impending doom. The decisions that you hope, will even make a few pounds when we all come out the other side.
Are you a property owner asking; Do I lock into a new mortgage? Shall I sell? Do I manage my property myself or use a property management company? Should I employ a letting agent? Do I try and ride out what I think is a storm coming?
Are you in the middle of your mortgage term and worried when your fixed rate ends you will find yourself in an inflated mortgage rate muddled market and your asset has crashed? Then what? There are so many variables it is impossible to predict so what do we do?
When I came into the Rent-to-Rent market I knew that I bore the brunt of the financial risk. I was offering to guarantee rents for landlords, I was saying I could do this without charging fees. I do this by picking the right properties that I can maximise rental income on by letting them on short, serviced accommodation stays.
As we go into the course of the next few years is this going to stop? Will landlords loose newfound margins back to the traditional processes of using a letting agent?
My business model is built on safe bets and historic happenings. So, if we take the rental market solely in this current dilemma, I am sure it will be fine, I am sure I will be able to carry on. Yes, there will be people in negative equity with unsustainable repayment rates trying to drive up the rental price to make up for the situation they find themselves in. However, the reality is they will eventually correct, I have history on my side, after all this has already happened in my lifetime!
How will my business survive today? There will be other businesses like mine that will not last it out, but I play safe bets. As I bear all the financial risk, I must pick winners. The Pandemic taught me that people will still spend. We adapt, if we cannot go abroad but want to holiday, we holiday here! If we can no longer eat out twice a month, we eat out once. Even throughout the pandemic we did not stop spending, we just bought and did things we never use to. So, I ensure my business survives by hand picking properties where I know the geographical area can sustain a small amount of serviced accommodation properties.
This is good for you why? Rewind back to the beginning, are you worried about the price of your assets crashing, are you mid- or long-term mortgage and cannot pay the early redemption. Are you stuck? The housing market is about to dry up. The first clue will be the mortgage companies offering 90 – 95% Mortgages and 6 –7 times your salary lending. This is an attempt to hold values and keep the market moving, it may buy some time, but Mr Inflation will bring this to a holt. You do not have to be a genius to work out that inflation is going to hurt affordability, combine this with high repayments and there will be casualties.
How can you avoid this situation as a property owner if you do not sell at the peak times and are stuck? Well, out of the depths of Mordor (Lord of the Rings) comes innovative and creative companies. My solution: my company will only work for a small pool of landlords that have a very specific property location suitable for my clients.
I can assure you that if your tenant does not pay their rent because they cannot afford it due to the cost of living, it is not going to bankrupt the letting agent, but it might you. Especially if they cannot get the tenant out of the address without a long-drawn-out court resolution. At Landlord Consultants we do not have that problem, so neither will you. Our clients pay upfront and in advance of their short stay. But this is not about Landlord Consultants this is about you; this is about mitigating your risk during uncertain times.
If you cannot sell your home for whatever reason and you are stuck riding out the storm, or you do not want to sell, get creative! start looking at what is available to you, away from the traditional routes. I think from now you have 6 – 12 months where you must make important decisions, we will have a vastly different property market soon and now is the time to plan for that however your circumstance finds you.
In the next few months, I am hoping to speak to property owners with portfolios and discuss diversifying the risk of those properties to new innovative solutions such as my company offers. It will not fit all their properties but there may be a few. Whatever decisions you make, I wish you well.
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