/ Home & Energy, Money

Being a landlord can feel like a constant battle

Hands reaching out to a small house

Having just won a legal case against West Brom Mortgage Company, landlord Emma Hughes explains how the buy-to-let property market isn’t all roses.

Landlords in the UK have a certain reputation and face a lot of hostility, especially from people trying to get onto the property ladder. I’m a landlady. Let me make that clear from the start. Now please put all your preconceptions about me to one side while you read my story.

My husband and I own fifteen properties. They all have sizeable mortgages. Most properties were bought for around £50-£70,000. That is the price of small houses in Huddersfield and the rents are between £340 and £540 per calendar month. Factor in buying costs, renovation, insurance, repairs, mortgage payments, gas and electric checks.

You see where I’m going here… the financial returns are small. We raise money for deposits by saving carefully. No fancy holidays, no new cars, and local state schools for the kids.

Impact of higher rates

Now factor in lenders like the West Bromwich Mortgage Company, Bank of Ireland and the Skipton Building Society increasing the rates on some of their buy-to-let, interest-only, base-rate tracker products arbitrarily, even though they were supposed to track the Bank of England base rate, at 0.5% since 2009.

Some of our mortgage payments went from £150 to £300 overnight. My husband and I, along with 300 members of landlord advice site Property118.com, took the West Brom to court, as we felt bullied by the provider.

We’ve just won at the Court of Appeal after a three-year battle. Brilliant.

But being a landlord feels like a constant battle, we’re now dealing with 3% extra stamp duty if we buy another buy-to-let property, and tax relief on interest has been cut. Yet there’s still a lack of affordable housing in Britain.

My tenants are usually young, out of work or in low-paid jobs, and cannot even begin to consider buying a house… in fact I find they want to rent. Does that statement make you angry? If so, why? I live in a rented property, because it suits my family.

The landlord provides a service

Being a landlord means I am part of the service industry. The flexible working hours have allowed me to be there as my kids have grown. I go to my tenants’ houses when they have moved on and repaint, clean the loo, make the oven sparkle. I chat regularly with my tenants. They often can’t pay for a month or two, so I wait patiently for the rent.

Fifteen families rely on me and I take that responsibility seriously. I am not an ogre, just a normal mum, doing a job.

This is a guest post by Emma Hughes, a private landlord from Huddersfield. All opinions are Emma’s own, not necessarily those of Which?

Mark Alexander says:
11 July 2016

Hi Emma

It is indeed a constant battle, the restrictions on finance cost relief for individual landlords which kick in from next year being another example. Why does this only apply to private landlords and not every type of business which is reliant upon borrowing money?

With regards to the Bank of Ireland and the Skipton Building Society, The Mail described them as “Sharks” in a This Is Money article today.

As you will know, Property118 action Group has launched a crowdfunding campaign to fight these lenders too. It has already raised over £50,000 and is very easy to find via a Google search for “Property118 Crowdfunder”

The question I am burning to ask Emma is – Why do you do it? It sounds like a real struggle with not much to show for it.

And on top of all the management problems and new tax rules, are you not also building up CGT and IHT problems for the future?

Mary Rich says:
11 July 2016

I’m inclined to agree with John Ward – is it really worth the hassle?

There are no doubt many people who prefer to rent – shared occupation, relatively easy to move if you relocate a job, no responsibility for repairs, and so on. Equally, many people would prefer to buy their own property, with mortgage repayments being cheaper than rent and hopefully an increasing asset you own later. The problems are raising the deposit and the availability of properties. The more that private and public landlords acquire the less are available to those who want to buy. I’m not knocking private or company landlords – we have a free market. But I would like to see more low-cost properties available to purchase by those who wish to.

Emma Hughes says:
11 July 2016

Thanks for the comments so far. The reason we are landlords is because we are hoping that one day property prices will rise and we will be able to make gains in equity to make up for the fact that we have no pension. At present we make enough to enable me to do it as a job and look after the children, but nothing more. With regards to Malcolm’s comment, I think perhaps it is incorrect to assume that we are taking houses away from people who want to get on the property ladder. I don’t know what area you live in Malcolm, but in West Yorkshire it is fair to say that there are literally thousands of properties available under £100,000 (you only have to look on Rightmove) and the fact is that many of them sit on the market for months if not years. Often it is only landlords who are eventually willing to take on these properties and refurbish them, meaning that in fact we are putting these houses back into use, when they have previously stood empty. I think that it is important that the media and government begin to understand that the story of housing in non-metropolitan areas is completely different to that of London and the big cities. The sooner this is acknowledged the better.

Emma, I do not criticise what you are doing. In other parts of the country many young people would love to get hold of houses (at a discount) to refurbish, but they are simply scarce now. My first house was in unrefurbished condition and I learned a lot by bringing it to a reasonable standard. I think many others would do the same – my sons certainly did. Many smaller properties, particularly flats, seem to be snapped up because the letting market gives a decent return (compared to other investments) not only in income, but in capital growth.

I am not surprised it is only the prospect of capital gains that supports the buy-to-let market, given the acknowledged management difficulties and expenses. It is the leverage that enables this: if the monthly BTL mortgage interest payments and management expenses are fully covered by the rental income then the landlord can participate in 100% of any capital appreciation. This will depend on the loan-to-value ratio of the mortgage and lending is stricter nowadays so 100% LTV is less common on new acquisitions.

I am a bit perplexed by Emma’s comments that many of the thousands of properties in West Yorkshire valued at £100,000 or less sit on the market for months. I am aware of this and it occurs in many other parts of the country too, including rural areas. It is related to the strength or otherwise of the local economy and availability of work. Many de-industrialised areas have streets upon street of unwanted property. So why don’t the prices fall to a market equilibrium where supply and demand are in balance? This is needed in order to lubricate the housing market generally and provide opportunities for people to move and release properties elsewhere.

I remain curious to know how the CGT and IHT implications are factored into private landlords’ business plans, especially as their portfolio passes into double figures.

Hi Emma – I have friends who buy, sell, renovate and rent property, mainly in West Yorkshire. As you say, property prices are often very reasonable. Usually they look for properties that are structurally sound and in good or improving areas, but need modernisation. Over the years they have built up a team including plumbers, electricians, builders, kitchen fitters, gardeners and letting agents in two areas. I have often stayed in their properties between lets and am very impressed by the standard of workmanship. I have not discussed the economics of their business, which includes their son, but I gather that they have gradually been able to cut down on mortgages over the years. Best of luck.

It is exactly these sorts of properties that also suit first time buyers who will often put a lot of work in themselves, as and when funds permit, but gives them a place of their own and a better start on the housing ladder. They gain financially when they sell and move up by the improvements they have made.

As Emma has pointed out, there is plenty of available properties in West Yorkshire. The ones my friends buy are in need of refurbishment.

In my area, most of the small properties that come onto the market are snapped up by greedy landlords with offers well below the asking price, the advantage in today’s market being – no chain! Young people are unable to compete and have to either move away to a cheaper area or pay unregulated and extortionate rentals, often never able to save enough to put down a deposit on their own home. Tenants are unlikely to respect or treat a property as if it were their own, gardens are left to grow wild and neighbouring home owners often have to put up with noisy and unsociable behaviour. Private landlords often have no knowledge of their legal responsibility to maintain the exterior of the property and homes can become neglected and dilapidated.

I welcome the new regulations imposed upon the rental market in the hope it will free up more homes for first time buyers. More social housing needs to be built for people who need to rent which are more likely to be better maintained by local councils who have their own team of people to carry out repairs as and when needed.

Beryl- I agree with every word you said (cue to give me a thumbs down too ) but nobody will pull the wool over my eyes . I have watched slum landlords rake in money from the poor who are never able to obtain a mortgage . Council houses snapped up when Maggie “freed them up ” . Scotland has blocked that now . They have insisted a certain number of houses on new builds are for cheap rent and rent to buy and surprise -surprise ! council house building is on the increase there . I have seen all the tricks of the day played on tenants by landlords , so sorry I will not be crying into my hankie for them , for every good one the is 100 bad . When you live in poor surroundings , talk to poor neighbours visit their homes for nearly 20 years repairing their phones you see real life not some rose tinted version of it viewed from afar . Nobody remember Rachmanism ? -London area . I have given Beryl a thumbs up which removes the thumbs down but I expect several thumbs down for me but that just shows the lack of real information on real life living in this country . Dont talk about it , dont publish it , those Poooor business people , when I see young people made homeless by removal of housing benefit and spikes put in streets to stop the homeless being seen by tourists it just shows the social decline of this country into -me-me-me .

Many local authorities had a deplorable record for maintaining their tenanted properties and allowed them to become run down to the point they had to be demolished at only a third of their life expectancy. In the whole of Norfolk only Norwich City has any significant housing stock now as so many in the other areas have been acquired by the tenants under the right to buy [and many of which are now in private landlords’ hands] or were transferred en bloc to housing associations. Norwich has one of the largest Council-owned housing stocks in the country and has lost very few through the right to buy but it is now smarting under new government requirements to facilitate tenant acquisitions much more readily and to sell off the properties with the highest values on the open market, notionally to fund additional social housing supply.

You can’t look further than first hand experience Duncan. There is a book within waiting to be written there I feel!

Avoiding the temptation to venture into politics, Emma’s most recent post does emphasize the existence of and the reality behind the north-south divide in this country.

There are affluent areas in the north, and deprived areas in the south. I used to live in the north midlands and there are many attractions – lower housing cost and more choice perhaps, lovely country, less commuting, nice people, ………What’s not to like. I’d like to see instead of a vanity project like HS2 (and Trident) putting money into moving companies and public bodies away from the south east so we spread the population more evenly and ensuring that attractions like the arts – music, theatre, opera, pictures – and sports are not centred on London. Which? could move out of London and set an example. The BBC did.

I was also raised in the Midlands Malcolm and I am all too aware of the social division that exists at local level in large cities and towns such as Birmingam and London. House prices can vary according to which area you happen to live. There are also pockets of more affluent areas in the North such as Cheshire and Harrogate for example.

The North-South divide is a generic term that pertains to the majority population residing North or South of what used to be referred to as The Watford Gap at Daventry, Northamptonshire and you only have to look at the difference in house prices to realise it does exist. There is a sign post erected at the M1 Service Station defining the unofficial boundary and dividing point.

When I first moved to my current house in a beautiful village in the South on a small development, most of the houses were occupied by single retirees who had downsized. The downturn in the economy lead to homes being bought by wealthy investors, (some actually live abroad) renting them out to tenants who have no regard for the existing home owners who go to great lengths to keep their properties well maintained. You can tell at a glance which properties are rented and which are owner occupied.

Landlords need to be made aware how their investments in property can affect the lives of others, after all most don’t have to live next to their tenants. If they did maybe they would have a better understanding of the annoyance some can cause to their neighbours and act accordingly.

Graham D says:
11 July 2016

I have been a Landlord for 10 years now, We have 5xflats with mortgages, if I had my time again I would not bother .The goalposts keep being moved which incur more costs to me. Tenants do not as a hole look after the home that is provided , Living in DORSET means the prices are high compared to many other areas in the country.Currently 1×2 bed flats £100,000 going up to £250,000 for the swankiest. Things will not change until they revert to a mass building of COUNCIL HOUSES for those that realisticly will never aspire to gaining a MORTGAGE. We are now living in a time where Technological advances mean we need fewer people to undertake general jobs .The population is growing at a greater rate than the Country can produce additional jobs and houses . I fully understand why EMMA has taken this course and I hope it goes well for them towards their retirement ,people may say otherwise but in general terms they are using the term speculate to accumulate, but for those that do this ,there are always a lot of negative aspects to being the Landlord when others think you are making loads of money which is far from the truth .

I’m sorry but I find it totally unacceptable that taxpayers money should subsidise private landlords bank accounts when council owned property can be rented at a lower cost to the taxpayer. Who are the main beneficiaries here, the local council or the private landlord or both?

I have absolutely no qualms about people who find themselves in need of housing benefit receiving this, but private landlords benefiting from taxpayers hard earned cash? My conscience would not allow me to sleep at night if I were to engage in such unethical practice. Landlords who venture into such procedures are in a win win situation whereby they are almost guaranteed regular governmental generated income funded by the taxpayer.

I would like to see more council houses built for people in genuine need with a view to cutting out the private middleman profiteers who, at the end of the day, only add to the ever increasing price of rented accommodation.

If people want to make a living by renovating property and selling it on, good luck to them, but please don’t expect the taxpayer to subsidise any rental income accrued from their endeavours.

Here ! here ! Beryl you have a fan on this issue ,more power to your elbow .

Graham D says:
12 July 2016

May I ask what you are renting for £340 per month. Cannot see where your making money when you are responsible for repairs ,void periods etc. All you need is a boiler to go down and that’s your profit gone for months. Clearly yourL.H.A. rates must be very low.

I hope you aquire these properties at a really low price cos I just can,t see where your profits are coming from. Considering the expenditure that you say you do including your time every time a new tenant comes in and without being rude you need to re-brand yourself as the Salvation Army. I really hope that the Capital growth on your properties are good otherwise surely the numbers don,t stack up. Its clear that L.H.A. rates are different in areas, DORSET is higher but saying that the property prices are also higher. Down here 1xbed rate £105.94 & 2xbed rate £136.93 till 2020.finishing on a positive several areas sections of Dorset have accreditation schemes for Landlords, we have been trying for 3 years to get an accreditation scheme for TENANTS then we see first hand who has issues, bad debt ,before somebody throws us a curve ball but as you can imagine all the will in the world it still has NOT arrived ,so with L.H.A. tenants like tenants with jobs there is an element of luck involved .And I have had some where there was no luck at all. Good luck with your venture and clearly with the compassion you show I hope it all goes well for you ,but as always there will be some that will class even you as that nasty ,greedy landlord .

Emma, council owned property in this part of the country is termed social housing. For more info re this, please log onto england.shelter.org.uk – Shelter – What is Social Housing? It is now a legal requirement at planning stage for all developers to commit to building a percentage of social housing on any potential new developments.

Regarding landlords responsibilities, Section 11 of the Landlord & Tenants Act 1985 states: The Landlord is responsible for keeping in repair:
“The structures and exterior of your home, for example, the walls, roof, foundations, drains, guttering and external pipes, windows and external doors. These repair reponsibilities can’t be cancelled out by anything your Tenancy Agreement says. Also your landlord isn’t allowed to pass on the cost of any repair work to you which is their responsibility.”

Tenancy Agreements can include such things as, no pets or smokers and
instructions to keep gardens tidy by cutting grass and to refrain from any behaviour that is likely to cause distress or annoyance to the neighbourhood. If all polite attempts to resolve any problems caused by uncompliant tenants go unheeded, it is then up to the neighbour to contact the landlord asking that he/she speaks to the offending tenant in order to resolve the situation.

Your above report states a return of between £340 and £540 pcm which could make quite a sizeable contribution to someone’s mortgage repayment if only they were able to save enough to put down as a deposit on their own place. Most landlords are able to utilise the collateral on their existing homes to secure a deposit to put on a property and then, very conveniently, its the tenant who pays the mortgage for them, or in some cases the taxpayer!

I very much agree with you about the need for council housing, but with long waiting lists in some areas, what is the alternative to private landlords?

Wavechange I think my latest comment goes some way to answer your question.

I see your point, Beryl. It’s a subject I know little about.

Beryl, you seem very critical in your last post. If a homeowner has equity in their own home and releases that towards another property what is wrong ,they still then have a mortgage to service on their own home from that point onwards , There are an enormous amount of people out there that DON,T want a mortgage ,have bad debt , no deposit ,poorly paid jobs, prefer renting, that private landlords assist ,What happens if there are no private landlords, its a fact that they have not built sufficient housing for well over 30 years and it does not look like its going to change with the overall increase in the population, where I come from there are local hoteliers that assist the Council with emergency accommodation and they charge £25 per night per person and they are only allowed to use the kitchen to make tea & toast ,main meals to be eaten elsewhere. So are these hoteliers robbing the taxpayer or should people be left on the street or sofa surfing.

Graham I think this conversation has gone round in a big circle. The answer to your first question is contained in my first posting. I regard constructive criticism as the best and most honest way forward in solving problems.

Suffice to say, I am not at all convinced that private landlords have the best interests of the country’s housing problems at heart although this maybe used as a valid excuse to justify their profit margins. That is a matter for acting government to solve, but it is very obvious to me that providing accommodation for the homeless in the private sector is just a way of absolving local authorities from all responsibility to provide shelter for those in need at the taxpayers expense. You may be the exception but I remain very sceptical.

The new regulations were introduced in order to allow young people to enter the housing market and to make it harder for private landlords to buy up affordable housing with the sole purpose in mind of making a profit at someone else’s expense.

Andy B says:
12 July 2016

When this kind of debate comes up, the anti-landlord sentiments often come personal experience and/or a perception that all landlords are making excessive profits for the time and capital risks they take. This distracts criticism from the route causes of problems within the housing sector.

Having said that I think all those so far agree that more social housing should be made available and more low cost house should be built. Although this would need funding via taxation in some way and a planning system that favours this kind of housing being built next to existing owner occupiers.

I would suggest that folks have a read of EHS_Headline_report_2014-15.pdf for some hard facts. After you’ve had a read, think about who benefits most from increasing house prices and who pays more in tax, private landlords or owner occupiers. Which sector makes best use of housing by high occupancy rates. Which sector is making the best use of and improvements is existing, old housing stock. Please take London and the SE as exceptions.

There is so much I could point out but I would rather you looked at the data yourselves. Yes the Private Rented Sector can improve more than it already has, there are some rogues and bad landlords that give the rest of us a bad name. However the data does suggest the vast majority provide a good service at a reasonable cost to tenants and taxpayers.

Emma is making a small income (not profiteering) but remember that local authorities and housing associations also employ people including chief execs. It is her private capital she is risking with the hope of a gain in the future (which would be liable for CGT) . Her article points out that if banks and or the government are willing to attack small landlords with the vocal backing of “Landlord Bashers”, the consequence to millions of tenants have not been properly considered.

Emma, I hope that when you and your husband reach a pensionable age you will have accrued sufficient equity from all 15 properties to be able to enjoy a comfortable retirement.

Your tenants may not be so lucky.