A new year starts and here’s a question for landlords. Did you make any property resolutions at the same time as personal ones? If you didn’t, you may want to rethink your January.
There has never been a more crucial time for landlords to set goals and strategies. Those that do not plan for the year ahead will run the real risk of losing money on their buy-to-let.
Why set goals and strategize?
Buy-to-let isn’t a hands-off investment. How can it be when the parameters change so frequently? Setting goals and having a strategy is smart asset management and provides benchmarking for better assessment. Idling will allow opportunities to pass a landlord by.
When landlords have goals and a strategy, they can stop their buy-to-let straying in loss-making territory, improve their profits and ensure the investment’s true value is being realised.
A healthy investment needs attention. Although landlords can set goals and implement a strategy at any time, January is a great month to plan for the future. Here are Landlord Buyers’ top considerations:
Review last year’s performance
The basics are obvious – how much rent was collected versus the outgoings (mortgage payments, tax, service charges, ground rent, insurances, property maintenance, management fees etc). After some number crunching, it should be clear if the investment made a loss, returned a profit or broke even. Landlords should also appraise the property’s condition and assess how happy their tenant was, as this will help determine financial success in 2025.
Plan for 2025’s reforms
A buy-to-let strategy should include plans on how to adapt to future reforms. There are strong indications the Renters’ Rights Bill will pass into law in 2025, with many reforms taking immediate effect. Landlords should plan ahead for changes to evictions, habitation standards, and how rent is achieved and increased. Landlords looking to purchase another buy-to-let or grow a property portfolio should also factor in a higher rate of stamp duty from 1st April 2025.
Start monitoring performance monthly
Whether you self-manage or pay an agent to do it on your behalf, every landlord should regularly look at the figures. Make 2025 the year you track overheads, income and fixed costs on a monthly basis. Knowing your rental income, buy-to-let’s property value and running costs will give you a good snapshot of the investment’s viability. Knowing the ‘bottom line’ will also flag up if it’s possible to save any money or overpay the mortgage.
Look ahead at long-term outgoings
Ignoring the expense of futureproofing a buy-to-let can prove costly. Many landlord’s will have a fixed-rate mortgage due to expire this year and some have already been forced out of the market for failing to plan for a rate increase when remortgaging. Note down when your term ends and what rate you may be able to secure moving forwards.
A mid-term issue is energy efficiency. Rental properties will have to possess a minimum EPC rating of C by 2030, with thousands of landlords needing to invest in improvements to meet the incoming standard. Landlords should plan for long-term costs too. For example, a property’s value will dimmish if a lease isn’t extended. Conversely, a leasehold’s value will increase if the landlord purchases the freehold. Both involve a cash investment.
Work out whether your goals are achievable
Once you have set goals and worked out how much they will cost (perhaps you want to install an air source heat pump or extend the lease), you can devise a strategy to achieve them. This may involve increasing the rent, refinancing, deciding to self-manage or saving more in a slush fund.
Plan an exit strategy if the figures don’t add up
If you carry out an appraisal of your buy-to-let and find your figures are in the red - or your forecasting doesn’t add up and you predict a loss - it may be time to consider an exit strategy. Disposing of a poorly performing investment is sensible in 2025 as the sector will become tougher to operate in. Selling loss-leading buy-to-lets also allows landlords to free money to diversify or buy in strong growth areas. Don’t forget to factor in the cost of selling and any capital gains tax due.
LandlordBuyer is working with landlords to deliver fast and cost-effective exit strategies (with completion in just over 40 days, if required). As a professional property buyer making offers on tenanted buy-to-lets and those in vacant possession, we should be part of your 2025 strategy.
You can find out what your buy-to-let is worth by requesting a cash offer now. When you sell to LandlordBuyer, there are no agent fees to pay and no need to evict tenants or improve the property. We’ll also cover any EPC fee and legal costs to improve your financial position. Get in touch today for goal setting and strategy advice.