UK Landlord Forum / Life

Had my flat in east London since 2002 - moved out in 2012 and rented since then.

Got a couple of solid tenants in (found them on OpenRent), but they're paying 2020 rent levels and an imminent tripling of mortgage repayments in May has got me thinking about exiting the game.

Fortunate in that the property has tripled in value since 2002, and I can't see a huge amount of growth in the next few years.

I could request a rent increase but it will be nowhere near enough to cover the mortgage hike. Sure, rates may come down late in 2023 but only slowly I'd wager

Local agents are talking about kicking them out and marketing at a far higher rent but after fees and the inevitable tax hit, it's still running at a loss.

Appreciate I'm in a very fortunate position but wondering what to do next - perhaps it's time to sell up.

Anyone else in a similar position or able to offer some wisdom?

If the words in bold are true...

QuoteI could request a rent increase but it will be nowhere near enough to cover the mortgage hike.

Local agents are talking about kicking them out and marketing at a far higher rent but after fees and the inevitable tax hit, it's still running at a loss.

...then it's obvious that you should sell up.

Why would you contemplate running your business at a loss?

Quote from: HandyMan on February 20, 2023, 07:50:07 PM
If the words in bold are true...

QuoteI could request a rent increase but it will be nowhere near enough to cover the mortgage hike.

Local agents are talking about kicking them out and marketing at a far higher rent but after fees and the inevitable tax hit, it's still running at a loss.

...then it's obvious that you should sell up.

Why would you contemplate running your business at a loss?

Well, the hope that rates will dip... the desire to keep a rental property in London in case it *maybe* appreciates in value further...... the lack of alternative income generating investment options

I'm leaning into selling but it feels like giving up too easily

Quote from: crabsticks on February 20, 2023, 08:26:55 PM
I'm leaning into selling but it feels like giving up too easily

You have a stated that you will have a loss making rental business when your mortgage payments increase from May. You have also said that you can't see a huge amount of growth in the value of the property  in the next few years (and in reality its value might even fall).

How much loss (put a ££££ figure to it) are you happy to bear and for how long would you stick with that before bailing at a later date?

Quote from: HandyMan on February 20, 2023, 08:38:16 PM

Quote from: crabsticks on February 20, 2023, 08:26:55 PM
I'm leaning into selling but it feels like giving up too easily

You have a stated that you will have a loss making rental business when your mortgage payments increase from May. You have also said that you can't see a huge amount of growth in the value of the property  in the next few years (and in reality its value might even fall).

How much loss (put a ££££ figure to it) are you happy to bear and for how long would you stick with that before bailing at a later date?

That's a useful way of looking at it... holding out for an uncertain future value and sucking up a loss for an uncertain period of time. Not very attractive!

QuoteThat's a useful way of looking at it...

The point is that it's only you who can decide what your criteria are for sticking or twisting.

You can't know for certain what mortgage rates or the value of property is going to do but you can guess at upper and lower bounds of interest rate %, property value growth or decline, and achievable monthly rent, and then do a range of rough what-if calculations. Then see how the results measure up to your criteria.

Make a decision and stick to it.

No Landlord should be running any let at a loss. Let's just state that as a fact. Even with mortgage rate increases looming on the horizon, you should have time to plan adequately. I don't believe there is any part of the country where it is known to be the case where rental income is defined as being so low, by the local market, that a profit cannot be made. So it's obvious some of your sums aren't right... probably, as touched-on, the rent being charged is currently too low. As there's some doubt whether an existing Tenant would be wiling to cough-up the necessary to cover you, if you intend to stay in the game it looks like a refresh of the Tenant and an attempt to reset the rent level to current market rate. If it's at market rate (and isn't a slum property) then someone will take it - that's pretty much a given.

But - even then - you are in some doubt, it seems... that's quite strange. Maybe you need to be looking at different mortgages. You have provided no figures here, but a tripling of mortgage payments sounds a bit off to me. Yet, it all depends on the figures. If you've been living in it and then letting it out for over two decades, haven't you paid massive chunks of the capital off? Or are you one of these Interest Only living-the-high-life Landlords?

But - at the end of the day - it's only your fault that the current Tenants are paying what you refer to as "2020 rent levels". It's not their fault, or anyone else's fault. What it feels like (to me) is that you've mismanaged all this.

The "London rental game" is certainly not broken... certainly not for Landlords... for Tenants? Probably.

Quote from: Hippogriff on February 21, 2023, 09:02:39 AMWhat it feels like (to me) is that you've mismanaged all this.

Appropriate tough love from Hippogriff. Listen well.

Then do the sums.

Quote from: Hippogriff on February 21, 2023, 09:02:39 AM
No Landlord should be running any let at a loss. Let's just state that as a fact. Even with mortgage rate increases looming on the horizon, you should have time to plan adequately. I don't believe there is any part of the country where it is known to be the case where rental income is defined as being so low, by the local market, that a profit cannot be made. So it's obvious some of your sums aren't right... probably, as touched-on, the rent being charged is currently too low. As there's some doubt whether an existing Tenant would be wiling to cough-up the necessary to cover you, if you intend to stay in the game it looks like a refresh of the Tenant and an attempt to reset the rent level to current market rate. If it's at market rate (and isn't a slum property) then someone will take it - that's pretty much a given.

But - even then - you are in some doubt, it seems... that's quite strange. Maybe you need to be looking at different mortgages. You have provided no figures here, but a tripling of mortgage payments sounds a bit off to me. Yet, it all depends on the figures. If you've been living in it and then letting it out for over two decades, haven't you paid massive chunks of the capital off? Or are you one of these Interest Only living-the-high-life Landlords?

But - at the end of the day - it's only your fault that the current Tenants are paying what you refer to as "2020 rent levels". It's not their fault, or anyone else's fault. What it feels like (to me) is that you've mismanaged all this.

The "London rental game" is certainly not broken... certainly not for Landlords... for Tenants? Probably.

Appreciate the feedback, although 'Mismanaged'? Not quite. Taken my eye off the ball? Probably. As you rightly identify, I havent provided exact numbers... so that makes the charge of mismanagement a touch speculative.

its on a BTL mortgage for specific cashflow and availability reasons, guided by my IFA. And its worked well for many years. However, given the storm of rate rises, a market boom, a looming recession, regulation changes etc... a lot of landlords are being forced into a decision as you well know.

And yes, my payments are likely tripling (from 1.9 to around 6%). Alternative providers are limited due to my working arrangements.

The rent needs to be marked to market - the tenants are friends of friends with special needs btw - and the sums do need to be fleshed out. The reason I came onto the forum was to get a sense of where other similarly positioned landlords are at in their decision making

So back to my original question - anyone else reviewing their current letting situation?

We've already suggested you're doing it wrong. The fact you've let to friends of friends just validates that a tiny bit more. The fact I'd kinda enquired of you if it was Interest Only or Repayment and you've said "its on a BTL mortgage" (sic) further demonstrates you very likely don't have a good handle on this.

Go flesh out your sums. Go look at better mortgages. Go see what the possibilities are regarding rent increases. Other Landlords (like me, for example) aren't being forced to take decisions like this. This might be because they are effectively managing their letting, I can't say for sure. But I can say the market in London is most definitely not Landlord-unfriendly and the "perfect storm" of all the things you mention is just a victim mentality you're demonstrating a little bit. I'll be categoric - if the property is reasonably nice, and then becomes empty - you'll certainly have people competing hard for it at market rates and the market rate will be a profitable level for you.

The restriction here appears to be your own indecision. If you sell-up or change Tenants then the current Tenants will still lose their home of over a decade - so, for them, it's going to be zero-sum. You are looming on their horizon. Your IFA (in my opinion) has guided you wrong... I'd use the good years to pay down any mortgages I have so, when things heat-up, I have breathing space. Interest Only is certainly preferred by some, I get it, but you must now have a huge nest-egg of profit from over a decade of letting in London?

The thread is about whether the London rental game has issue(s). It doesn't. Your particular position does.

Quote from: crabsticks on February 21, 2023, 09:32:47 AM
So back to my original question - anyone else reviewing their current letting situation?

To my mind, this illustrates perfectly why you are going about this in the wrong way.

It's irrelevant what other people are doing regarding their current letting situation. Their situation will be different from yours in lots of ways:

- Location of property
- Value of property
- Current rent
- Market rent
- Status of tenant(s)
- Mortgage remaining
- Current and future interest rate
- Personal situation, e.g:
-- Housing need/other properties owned
-- Age
-- Income
-- Savings/investments
-- Planned expenditure
-- Job security
-- Risk appetite

All of these, and more, will have a bearing on your decision to continue to be a landlord or to sell this property.

You need to get your business head on, do your sums, and then make your IFA earn their fee. And get them to justify their advice.

Finally make your decision.