As a landlord, you probably know that the best source of income is a passive one. But letting property for profit still requires excellent management skills. If you’ve been staying on top of the latest developments, you know that some potentially significant changes are on their way. Here are the big challenges to look out for in the coming year.
Any consideration of the challenges of becoming a landlord, and ways to maximise your profits, would be incomplete without taking tenancy into account. Good tenants are the bread-and-butter of your passive income generation. Many people who dive into the realm of buy-to-let property management will be hoping for an ideal scenario of continuous occupancy and monthly profits.
In the real world, matters are rarely so straightforward. Problem tenants can be late on the occasional payment or two, or even fall into rent arrears. In some instances, tenants can be careless or neglectful, and this behaviour will lead to frequent and often costly repairs and maintenance work. And there will also be void periods when your property is unoccupied; this means you’re missing out on passive income and may even be losing money if you’re still paying off the mortgage.
Fortunately, taking the right steps will help mitigate some of these problems. For instance, even if you’re letting out an older property in Putney, real estate agents can help with reference checks, finding long-term, quality tenants to give you monthly rental income with minimal fuss over tenancy issues.
New legislation and taxes
A quick look at 2020’s upcoming changes to taxation and legislation for landlords can have you worrying about the potential consequences for your letting revenue stream. Starting in April 2020, for instance, landlords will have to shoulder all financial costs at basic tax rates; new legislation will reduce tax relief, tighten restrictions on eligibility, and enforce shorter payment deadlines. This will make it more difficult to manoeuvre in terms of compliance or to make a profit when you decide to sell your property. New measures for obtaining Energy Performance Certification and testing electrical safety standards may also result in increased costs.
While many landlords feel that these measures will harm their business, it’s vital to maintain a reasonable perspective. Stricter compliance measures improve the industry by penalising lax operators; along with a forecast increase in rental demand, this can open opportunities for you in terms of increased rates, or shifting your business to a focus on seasonal rentals for vacationing families, for instance.
The economic outlook and property trends
The beginning of the year has confirmed Brexit, but the only certainty so far is that we will undergo a transition period. The exact nature of how things unfold, and the ultimate impact this will have on the national economy and trends in the property sector, are open to speculation.
Interest rates and property prices could shift either way in the near future, so rather than making a big decision such as selling your property in a hurry or the opposite – going all-in on your investment – the best strategy might be aiming for diversification and looking at cheaper markets where you can expand your portfolio.
As we move into the new year (and decade), change is certainly coming for property investors. Do your research, and you can still find the moves which will maintain your profit margins and keep your property letting a sustainable source of passive income.