If you’re a landlord today, you have to have deep pockets or a mortgage-free investment. Many investors are at a crossroads, wondering whether to personally cover increased costs in hope the landscape will soon change, endure profits as low as £7 or sell up to avoid making a loss.

The screw has been tightened again in 2023, with more expensive mortgage repayments at a time when landlords are still incorporating extra costs passed on to landlords after the Tenant Fees Act, Section 24 (when landlords lost the right to offset mortgage interest and arrangement fees) and increased expenses to stay legally complaint.

Landlords reporting losses

The pinch is already being felt. A new survey by Cornerstone Tax found just 1 in 5 landlords can claim their property investment has been profitable in 2023, and a further 1 in 5 say insufficient knowledge when they became a landlord has cost them thousands of pounds.

Some of those landlords will have invested in London, where yields have been overtaken by areas in the North. It, therefore, comes as no surprise that Zoopla found an estimated 26% of all homes for sale in London during Q1 of 2023 had previously been rented out – a figure up from 22% in Q1 of 2019.

Pre-empting EPC changes

Landlords with the least energy efficient investments are already taking action. Market analyst TwentyCi found more than 65,000 rental properties were listed as ‘for sale’ in the first three months of 2023 and 60% of them had an EPC rating of D or less. It is a clear sign that landlords are taking pre-emptive measures ahead of harsher energy efficiency standards scheduled for the future.

Arrears are troubling for tenants and landlords

Other landlords will not have a choice about whether to stay in or exit the market. A report by i News in March 2023 contained unsettling figures concerning landlords who can’t afford their mortgage repayments. The data, provided by UK Finance, claimed there were 6,060 buy-to-let mortgages where landlords were 2.5% or more behind on their total outstanding balance at the end of 2022. Within this group, 1,770 buy-to-let mortgages were in significant arrears of 10% or more.

While, in the past, remortgaging could sort solve of a landlord’s financial niggles, it’s not possible in 2023. Mortgages for Business recently declared that 1 in 3 buy-to-let landlords are struggling to remortgage after failing their lender’s affordability test, with many selling up because they could no longer afford the loans offered or they failed to secure finance completely.

It’s not just landlords who are struggling to balance the books, with the cost of living crisis also affecting tenants. When Goodlord surveyed more than 160 lettings professionals, 66% expected to see rent arrears increase by up to 5% during 2023, with 58% predicting that landlord volumes will decrease as a result of detrimental factors in the market.

Exit for health and wealth reasons

While running a loss leading let is unquestionably the top reason for selling a buy-to-let, other factors are at play. The same survey by Cornerstone Tax found 24% of landlord participants said their biggest mental health strain is managing their tenants.

LandlordBuyer is already helping investors who need to sell property fast due to mortgage arrears, rent arrears or failing a lender’s affordability test, with our cash purchase and ‘exchange within seven days’ offer the fastest way to cap debt or limit exposure to higher repayments.

If you are a landlord beginning to question your buy-to-let future - or you’re already planning your exit - please contact LandlordBuyer for advice and a free, no obligation cash offer.

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