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Portfolio landlords are keeping their foothold in the rental sector – Hendry

by: Grant Hendry, director of sales at Foundation Home Loans
  • 11/03/2024
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Portfolio landlords are keeping their foothold in the rental sector – Hendry
For some time, there has been a widely held opinion that a significant number of landlords are seeking to make their exit from the private rented sector (PRS), forced out by higher rates, greater costs of running properties, and taxation policies that impact overall profitability.

Now, of course, it’s fair to say those points mentioned above continue to prey heavily on landlords, and that for some, the culmination of these measures has meant they have sold up and are no longer active. 

However, at the same time, we have to recognise it is far more likely to be those landlords who had one, possibly two, properties who have made their exit from the PRS over the last few years, compared to those we might deem to be portfolio players. 

And, of course, it is far more likely that the properties they have divested will not have left the PRS at all, with other landlords being the ones most likely to have purchased those properties and put them back into ‘circulation’. 

Our recent BVA BDRC research of landlord intentions, when it comes to their portfolios, revealed that, in the last quarter of 2024, the number of landlords planning to purchase had actually increased by three per cent to 11 per cent. 

And it is portfolio and professional landlords who are much more likely to be looking at expansion or acquisition opportunities – not just in terms of property numbers, but also in terms of diversification of that portfolio.

Some 19 per cent of those with larger portfolios said they planned to acquire over the course of this year.

They recognise, more than most, that having large numbers of very similar properties in very similar areas might provide them with the bedrock of their portfolios, but that they also have the opportunity to move into different, potentially larger, opportunities, utilising their existing stock in order to provide finance options.

 

Moving with market demands 

There is a fundamental here that seasoned portfolio landlords will be acutely aware of, and it comes in the form of ongoing demand for tenancies, against the backdrop of a rising population who might wish to own their own homes, but are having to wait longer to do so, due to a combination of property supply shortages, high house prices, mortgage costs, income levels, etc. 

That will lead many landlords to acknowledge that long-term property investment in the PRS is unlikely to lead to too many void periods, poor rental returns – even with higher mortgage costs – or a drop in the number of tenants seeking properties. Add these together and you have a compelling argument for further investment. 

Especially in areas which can deliver a bigger, better return. It’s why we see portfolio landlords much more interested in house of multiple occupancy (HMO) properties, or multi-unit blocks (MUBs), because they are able to see the larger yield achievable and, of course, over the long term the level of capital appreciation that can make such opportunities too good to turn down. 

Of course, that can be easier said than done, particularly if you’re a landlord that – up until now – has tended to stay within ‘normal’ residential property, two-up/two-downs, etc.

Specialist knowledge, as both an adviser and a lender, can be crucial here because, for the HMO/MUB ‘newbie’, there are a lot of different things to think about, in terms of licensing, room size, exits, shared communal areas, and everything else.

Overall, we anticipate portfolio and professional landlords who are in this for the long term are not going to be put off by the greater complexity of these opportunities and will recognise the demand that’s there in the market and how they can meet it.

They will need help, and having a specialist adviser and lender available to them will get them to where they need to be in a much quicker time-frame and with the right finance behind them.

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