Some Private Landlords Will Pay More Income Tax Than They Make In Profit

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Is it any wonder that so many landlords are selling some of their properties to pay down debt at the same time as restructuring the ownership of their rental property businesses?

At the foot of this article, I have shared a fantastic video interview where two Letting Agents from Christopher Shaw Residential Lettings interview Alex Norian

View Full Article: Some Private Landlords Will Pay More Income Tax Than They Make In Profit

Prominent landlord tells BBC how his mortgage payments now outstrip rental income

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A prominent landlord in the North East has told the BBC’s Newsnight programme that unless variable mortgage rates reduce he will have to start ‘handing the keys back’ to the ten or so properties within his portfolio.

Talking to reporter Sam Gruet (pictured), landlord Colin Campbell (main image), who is also chairman of the South Tyneside Landlords Association, said his income from rent was now outstripped by his rising mortgage payments.

“My market is the people who are on Housing Benefit or Universal Credit and I’m usually paid their rent direct by the Government,” he said.

“But now the interest rates is so high that the rent coming in from the Government, which here is £475 a month per tenant, is less than I’m having to pay the building society for the next two years.

“So if I’m ‘Joe average’ landlord in a very short time I’ll have to hand the keys back.”

Campbell went on to say that given his experience, the private rented sector is set to shrink significantly and that, consequently, unless local and national governments start building council houses in greater numbers, “the place is going to be full of desperate people in guest houses and hotels because there will be nowhere for them to live,” he said.

The 75-year-old landlord, who in the past has also criticised selective licensing in Tyneside, appeared alongside a local letting agent who recounted examples of tenants competing more and more for a shrinking number of properties, and a student tenant priced out of Newcastle city centre.

Watch the interviews in full.

View Full Article: Prominent landlord tells BBC how his mortgage payments now outstrip rental income

Mortgage rate rises major threat to London landlord profitability, says Moody’s

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More than a third of landlords (38%) with fixed-rate mortgages due to end between now and the end of 2024 will end up with loss-making properties if rates rise four percentage points higher than their current deals.

According to credit ratings agency Moody’s, as interest rates rise, these investors face taking a big hit because their interest coverage ratios (ICR) – the ratio of the gross rental income to mortgage payments – will fall below 110%. Two-thirds of landlords on fixed-rate mortgages will come to the end of their deals in the next two years.

Half of the nation’s worst-performing investment properties are in the capital where landlords would have to raise rents by 37% to keep them solvent.

Loss-making

More than a fifth (22%) of the buy-to-let properties at risk of becoming loss-making are in the Southeast where landlords will need to hike rents by 28% to make their properties mortgageable and profitable, while across the rest of the UK, rents would need to be raised by 24%.

Moody’s analyst Alexis Rivet (pictured) told The Telegraph that London will be home to the largest share of landlords falling below the 110% ICR benchmark because rental growth in the capital has lagged behind the rest of the country during the pandemic. Rents on newly-let properties in London are soaring at a record rate, but the measure that matters for landlords is the average rent across all rental properties. 

“Those landlords whose ICR falls below 110% have three options,” says Rivet. “They can increase the rent, they can reduce the amount they can borrow, or they can sell the property.”

However, many would struggle to make such sizeable rent increases during the cost-of-living crisis while tenants are being hit by energy price rises and a record drop in real earnings.

View Full Article: Mortgage rate rises major threat to London landlord profitability, says Moody’s