Is it still worth being a landlord?

Disclaimer: I’m not FCA approved. Any comments are my personal opinion, and you should seek professional advice before changing any aspects of your property investments or strategy. This post relates to UK property investment.

Anyone who owns UK rental properties in their own name may be wondering if it's still worth it.

At the time of writing, January 2021, higher rate taxpayers are about to feel the full impact of section 24. Changes to legislation such as electrical checks that are now mandatory and the end of section 21 notices will almost certainly be removed and replaced with more lengthy, expensive, and restrictive Section 8 notice. All these make property investment less attractive, particularly for the casual or accidental landlord. As with most things it depends on your personal circumstances. Why you became a landlord, if you’re a higher rate taxpayer, what your long-term goals are, and how heavily leveraged your property or portfolio is, will all impact your view.

For anyone who is currently a basic rate taxpayer, nothing is likely to change from an income tax perspective on property income. Any decisions for the ongoing viability of investments will likely revolve around being put off by the perceived higher risk of renting to tenants and the legislative burdens.

For higher-rate taxpayers with mortgages on their rental properties, they'll likely see a reduction of income after tax, the more leveraged the property the bigger the impact.

When I posed the question to myself “Is it still worth having investment properties in my own name?” the answer was “Yes, but, I need to evaluate how I acquire and hold property going forward“

Here are some of the further questions I asked myself to come to that decision. How you answer these may lead you to a different conclusion.

• What are my longer-term plans and my exit strategy?
  

• How much is section 24 going to impact my income from property, or indeed will I still be making a profit after tax?
  

• What costs am I paying? Is there a way to reduce them?
  

• How much work am I going to have to put into running this income stream?
  

• How good are my letting agents at mitigating the legislative risks?

For me, I’m in property Investment for the long-term as it fits my strategy to continue to hold some property in my own name but I'm also a director of a limited company to acquire, hold and manage an increasing portfolio.

Here are some of my top tips:

• Run the numbers – does it add up to a consistent and worthwhile profit margin after tax?
  

• Speak with a property savvy tax accountant – Yes this will cost upfront, but in my experience, it’s worth the money. If you plan to hold your property or conversely get out completely, they’ll be able to go through your unique situation to find possible savings or structure exit in a tax-efficient manner.
  

• Speak with an FCA approved mortgage advisor, ensure they have access to the “whole of the market” they can let you know if it’s possible to re-mortgage to a lower rate.
  

• Shop around the letting agents to see if there’s a better deal or agent. Beware here, lower agent fees may be indicative of lower standards. It can be a false economy just save a few pounds. Recommendations from other landlords are always helpful if you're thinking of changing.

Having spoken to many landlords over the past year, some are happy to continue seeing the benefit or a regular income even if it’s reduced and hold for long term capital growth. While others are thinking it’s time to cash-in and let go of the worry and effort of running their property business. The trend seems to be for those with single rental investments or smaller portfolios to be looking at this second option.

A rather unsatisfying answer to the question posed in the title is that only you can answer this for your situation...

But here's a picture of a kitten to take the edge off your disappointment.

I’m happy to pass on the details of the professional services that I use, just drop me a mail.

If you are looking to sell your investment property or portfolio, do feel free to contact me, I’ll be happy to have a chat with you on how I can help.