2022: The year of cutting losses and tighter portfolios

It’s been a tough year for portfolio landlords, and it’s fair to say that 2022 was up there with one of the most stressful and tumultuous years since the financial crisis for many landlords.

But for me personally, and many other landlords, it was also exactly the jolt I needed to act on my portfolio, especially regarding rents.

I also admit that I took a year or two longer to incorporate my portfolio in response to the Section 24 tax.  I should have acted sooner – I was caught napping at the wheel! Hey, nobody’s perfect.

For those of you who may not know me yet, I’m David Coughlin, founder, and director of National Residential and more recently, the Landlord Sales Agency.

Like many of you, I’m a private landlord having built a personal portfolio of 150 properties over the past 20 years and then going on to help other landlords buy and sell over 4000 properties.

During the past 20 years, I’ve also built a strong reputation as an industry expert and amassed a formidable network of peers and business owners in the property sector.

It was the last two years of economic change which caused me to set up The Landlord Sales Agency having been contacted by fellow portfolio landlords and peers in my network asking for my help and advice to sell their own tenanted properties.

Having experienced many of the challenges dealing with tenanted properties myself such as: trying to increase rents to offset interest rates; evicting problem tenants; selling tenanted properties for best prices; paying for repairs with tightening budgets; I put necessary measures in place and built a fantastic team and network to overcome these challenges for my own personal portfolio.

I was in the right niche at the right time with the right power-team so that I could help other landlords successfully overcome these issues quickly.

But this last year wasn’t without challenges, and as many of us were to find out, it was going to get a lot worse, and fast, before we discovered solutions.

Tough one

On the one hand, when I look back it’s easy to see why this year might have been a tough one: interest rates and taxes went up in an almost exponential way, inflation and the cost of living rose higher than ever before, and for landlords on tracker mortgages especially, concerns rose over deteriorating rental profits, with worries of future stagnation or worse deflating sales prices.

Then we had Section 24 and landlords not knowing whether they could incorporate, or even if they had the financial or technical resources to do so. Landlords feared paying more tax than they were making in profits. Added onto that was the volatile mix of rising regulatory costs: EICR (electrical) certificates required for us to continue to rent legally, expensive refurbs and even more regulations and costs with EPC ratings (which for some of us meant spending up to £10,000 per property).

Rocky times?

The future looked bleak, and when faced with the hard truth that we needed to sell our portfolios, this seemed like rocky times ahead.

I took a long, hard look at my own portfolio and came to the same conclusion: right, it’s time to downsize, so which properties are going to go?

That’s when I realised what I should have done years ago. They say that every cloud has a silver lining, and perhaps going into 2023, that’s exactly what the last year did for me.

What was clear was that with my focus on other business ventures, and fantastic relationships with my tenants, I’d avoided raising rents.

In fact, I’d not put my rents up in over 10 years while interest rates bobbled around at crazy lows of 0.1-0.5%.

It was an eye-opening hit of reality. Immediately I got to work and over these past 12 months to quickly match the local area rents, whilst ensuring we kept tenants happy by offering an explanation and support during the rent increases.

We were still proposing to charge tenants slightly less than the market rate and committed to resolve any nagging repairs.

For those who could not afford the increase we offered alternatives such as paying them a financial incentive to leave along with a full refund of their deposit.

Supportive

Most tenants were understanding and supportive and were more than happy to pay the rent increases because historically they’d been paying far less, and we were providing win-win solutions.

It seems simple, but I guarantee, if you’re a landlord reading this, a fine-toothed reassessment of your buy-to-let rents could make a huge difference. Straight away this tightened up my entire portfolio, and with that I was able to make the decisions I needed to make: sell the “dead weight” to counteract the financial consequences of the year; and keep only the very best properties going into 2023.

Once I’d reached the sweet spot of taking stock of my own portfolio and selling the properties I’d decided to let go of in the fastest way, for the highest possible prices with a brilliant team I’d created, I was able to do the exact same thing for landlords around me, with incredible results, and that’s how The Landlord Sales Agency was born.

So, as I look back on 2022 now with a smaller, but more efficient and profitable, portfolio I feel relieved to be going into the next year without all the stress and hassle of the year before.

Shake-up

Yes, in an ideal world perhaps we’d all like to have kept our bigger, diverse portfolios, but on the other hand maybe this is exactly the shake-up we needed.

A fresh portfolio with smaller, better, more manageable properties that require far less work, as many of us hit an age where sooner, rather than later, we’ll be looking to kick back, enjoy and retire after a wild ride in this ever-changing industry we call Property.

For more reading on the economic and political landscape of the past year and what it has meant for landlords, you can see Total Landlord’s full month-by-month round up of 2022 here.

And for a detailed look at what’s happened to the economy and the UK housing market over the last couple of years, and what the forecasters are suggesting will happen in 2023 and beyond, read Total Landlord’s Economic and property market update for 2023.

Author bio:

David Coughlin is an entrepreneur, co-founder of the National Association of Property Buyers and founder and director of both National Residential and the Landlord Sales Agency. He’s one of the UKs most recognised private landlords, and best known for being a leading expert within the UK property industry, with over 20 years of experience.

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 [CF1]Photo also attached

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