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Tenants in exclusive locations have high expectations from their landlords, with many owners delegating day-to-day maintenance tasks to professional property management companies, adding value to the rental experience and ensuring that all necessary services are available on demand.

We often hear from portfolio landlords looking for efficient property managers yet who need to understand the costs and fees involved in a comprehensive management contract.

Let’s look at the essential aspects of managing rental properties to the highest standards, maintaining superb tenant relationships and what you might expect to pay for expert property management.

The Benefit of Professional Property Management Services

Rental property ownership in some of the best West Sussex postcodes can be a viable, long-term investment strategy, attracting residential tenants looking for stable, quality accommodation in key locations.

However, property management is often one of the concerns for owners, who may not have the time to deal with maintenance callouts, regular upkeep and compliance with tenant documentation.

Tod Anstee’s property services are led by accomplished colleagues with decades of expertise in maintaining every property to exceptional standards, providing responsive, positive communications, and assuring each property owner that their rental home is in good hands.

There are also different considerations depending on the location and value of your property asset, as residents living in luxury properties will naturally expect a higher standard of property management.

Property Managers for Premium Rental Homes

Full-service property management involves far more than dealing with building repair work or ensuring that complaints are handled swiftly on your behalf.

Landlords can choose between varying management services depending on their requirements:

·         Applicant selection and vetting: your property manager will market your rental property to target prospective groups in select areas and arrange private viewings. On application, the property management team checks references and draws up formal paperwork.

·         A more active service involves all the above, plus collecting rent, with deposits stored according to tenancy deposit protection regulations and any queries or late payments addressed directly.

·         Fully managed services provide complete rental management, comprising the above alongside property inspections, day-to-day management tasks, appointing contractors to complete repairs, and ensuring the residence is maintained to the expectations of you, as the owner, and your tenants.

Comprehensive management provides multiple benefits, not least addressing the time burdens of responding to requests, liaising with repair professionals, and managing tenants’ finance agreements.

It also means that tenants deal directly with a proficient property management company and are confident that their accommodation is proactively managed, with a consistent point of contact.

What to Look for in a Capable Property Manager

Property owners are advised to conduct due diligence before contracting any property management companies to manage their residential property assets. Several skills and abilities are crucial to being a responsible property management team.

Local knowledge is key, not solely to establish reliable networks of property management tradespeople, but to understand how to market a premium rental asset or development site to the correct demographic.

For example, upscale real estate close to sailing clubs and country parks is in extremely high demand, with professionals who may base much of their time in London. Marketing this type of rare rental opportunity commands an understanding of client expectations, needs and priorities.

Other factors that we suggest owners look for include the following:

·         Experience– wherever the property in question is, you require a reliable property manager who can independently handle residential property repairs, communicate on your behalf, and take on all the responsibilities associated with strong tenant support.

·         Services– we provide the full spectrum of property management, including assessing your property to determine the optimal rental premium, collecting payments, arranging maintenance, delivering rent increases and providing emergency liaison 24/7.

·         Transparency– our property managers often work with clients disappointed with previous services due to unexpected charges, fluctuating rental property costs, and delays in meeting requests. As a respected leader in West Sussex real estate, our property managers keep you fully in control and provide a clear fee structure upfront to ensure you make informed choices about your rental business assets.

The aptitude of your appointed property company is even more important for higher value residences, creating a flawless level of service, and mitigating the potential for vacant periods.

How to Compare Property Management Company Fee Structures

We endeavour to cater to the needs of every owner we represent and will always discuss your requirements before providing advice about the right property management services for you.

Much depends on your level of involvement and whether you would like to retain responsibility for particular tasks, such as day-to-day management, liaising with rental clients who are in arrears or selecting from prospective new renters based on our background checks.

From there, your property management costs will vary depending on the scope of the work you would like us to conduct and how you prefer to engage with your tenants.

In many cases, the most effective charging structure is based on a percentage of rental income, clarifying how much your property management services will cost and ensuring that you have a professional manager on hand as and when you need them to handle an issue or rectify a maintenance problem.

Experienced landlords and property owners often opt for a tenant introduction service, where they take over the management of their rental properties once the tenancy agreement documentation is in place. However, a fully managed service may be more suitable if you prefer a less hands-on approach.

When comparing UK management quotations, we suggest you examine pricing carefully to establish variances and potential extra costs, such as:

·         Authorisation policies for recommended repair work.

·         Early termination charges if you opt to discontinue the property management contract.

For more guidance around management services for high-end rental accommodation or to discuss our fee structures and the services available, please contact Tod Anstee at your convenience.

Alternatively, our Residential Property Management page details the options you may wish to choose from.

Information Source- https://www.todanstee.com/latest-news/how-much-pay-for-high-value-property-management-services/

A swiftly changing tax landscape is adding more confusion to the pros and cons of purchasing a rental property as an incorporated company vs as a private individual.

Many landlords have opted to transfer ownership of property assets to an SPV, a limited company specific to the property letting sector. However, where the rental property belongs to an existing company owner, they might decide to transfer ownership or invest in a new property through their commercial business.

In this guide, the Tod Anstee team explores all the options, with comparable information to help you make informed decisions about which property ownership structure is right for your portfolio.

Stamp Duty Rates for Limited Companies, SPVs and Individual Property Investors

Stamp duty is payable by the property investor at the point of acquisition, but rates vary depending on your tax position and legal ownership status.

Limited companies pay commercial stamp duty at 15% if the property is intended as residential accommodation and costs over £500,000. A 3% surcharge is automatically added, plus a further 2% if the buyer is not a UK resident.

However, the purchase may qualify for a different treatment if:

·         The business is a property rental company, for example, an SPV, AND

·         The property is expected to generate a profit (e.g., not leased free of charge to a family member or employee).

This factor is one of the key contrasts between investing in property as an SPV and buying rental assets through an incorporated business with another purpose. SPVs pay the standard stamp duty rates plus a 3% second homes surcharge on any acquisition of any value over £40,000.

Note that the 3% applies regardless of whether you, or your company, already own a private property.

Individual investors pay these same standard stamp duty rates and are also normally subject to the 3% second homes surcharge. Private investors, unlike companies, can claim exemption from the second homes levy if they do not own the home they live in or any other residential property.

Stamp Duty Rates for Companies

Companies pay stamp duty at a standard higher rate of 15%, plus a 3% surcharge if they purchase a residential property. This rate applies to investments of over £500,000 made by companies, partnerships where one partner is a company, and investment schemes.

SPVs pay the normal stamp duty rate as below, plus the 3% surcharge.

Stamp Duty Rates for Private Individuals

Stamp duty thresholds changed on 23rd September 2022 and will remain as follows until 31st March 2025, any further announcements notwithstanding.

Property investors who purchase residential accommodation as a private individual pay these rates, plus 3%, if they already own another residential property.

Property Value                                 Stamp Duty

Up to £250,000                                  0%

£250,001 – £925,000                         5%

£925,001 – £1.5 million                     10%

Over £1.5 million                               12%

The Tax Advantage of Owning a Rental Property through a Limited Company

An SPV works like any other limited company but is designed for rental property ownership rather than a trading business, with financial benefits linked to stamp duty.

Changes to mortgage tax relief have driven more landlords to consider managing their property business through a limited company. The ‘sliding scale’ gradually reduced the amount of mortgage interest and other expenses self-employed landlords could deduct from their taxable profits to zero.

Landlords that pay tax as a company rather than as an individual can deduct 100% of their mortgage costs from their revenue before calculating a net profit against which they pay corporation tax rather than income tax.

Generally, corporation tax and dividend tax rates are lower than income tax, but particularly for higher and additional rate taxpayers. For landlords with high-value portfolios the difference in tax exposure can be as great as 40%.

However, it is also important to remember that company owners still need to pay income tax on any profits they transfer to themselves from the business. It is advisable to speak with an independent financial adviser to calculate how transferring property ownership might impact your overall tax position.

Other Tax Considerations for Landlords

While there are clearly multiple, potentially complex factors to consider, additional tax system elements could impact your decision. Stamp duty and income tax are only two tax obligations associated with owning a rental property through any ownership structure.

Dividend Allowances

In April 2023, dividend allowances will drop from £2,000 to £1,000 – this is the amount a company owner can pay themselves from their business tax-free, as a separate allowance to the annual personal allowance, which relates to income tax.

That means company owners and shareholders will pay more tax on dividends they distribute to themselves from their profits.

Corporation Tax

Corporation tax is set to increase from 19% to 25%, although smaller businesses with profits of £50,000 or less will remain at the current rate.

Those with profits of £250,000 or more will switch to the higher tax rate from April 2023, and moderately sized businesses will pay somewhere between the two, calculated on a marginal relief system.

Income Tax

Income tax is also due to increase, with lower bands frozen, and the threshold for the additional rate dropping from £150,000 to £125,140 – private landlords with higher profitability will pay an extra 5% income tax on any profits between those values.

Capital Gains Tax

Another reform due to hit in April 2023 is the cut to capital gains tax allowances, dropping from £12,300 to £6,000 and again to £3,000 in April 2024. Landlords pay capital gains tax when they sell a property based on the profit made.

Property owners who intend to sell portfolio assets this year may wish to proceed quickly to avoid paying an additional £6,300 on the net gain.

The positive for incorporated companies is that there are several business allowances, such as Business Asset Rollover Relief. If a landlord sells a property and replaces it within three years, they may be able to delay paying capital gains tax.

Owning a Rental Property Privately vs Through a Company

This long list of considerations demonstrates why there isn’t a clear-cut answer. Although stamp duty rates make the cost of owning a rental property through a business appear less attractive, this option may remain the most tax efficient.

It is important to work through every element carefully before making any decisions about how you own and manage your portfolio.

Please contact Tod Anstee at any time if you would like to arrange a more detailed conversation about any of the information contained within this guide, or speak with your accountant or financial adviser for advice on your tax exposure and the most suitable route to take.

Information Source: - https://www.todanstee.com/latest-news/stamp-duty-levies-worth-investing-property-through-limited-company/

Landlords rely on a letting agent to take over the management, advertising, maintenance, and tenant communications linked to their rental properties, and need an agent they can trust to fulfil their expectations in terms of tenant care and professionalism.

One of the many ways to assess the quality and standard of a prospective letting agent is to evaluate the accreditations, quality marks and experience they have. A well-established letting agent will always be happy to discuss their capabilities, specialisms, and expertise.

Here are some of the industry-leading accreditations we hold, including the ARLA Propertymark, to explain what they mean and why they are a useful indicator of the service on offer.

What Is an ARLA-Approved Letting Agent?

Propertymark is a designation awarded by the Association of Residential Letting Agents (ARLA), an industry body launched in 2017, absorbing several previous organisations. It focuses on industry standards and only accepts applicants who prove they meet the requirements.

Working with a Propertymark letting agent provides several assurances and safeguards, protecting the value of your rental property and guaranteeing that the agents you liaise with are trained and qualified to a suitably high standard.

Some of the advantages of working with an ARLA-approved agent include the following:

·         Income protection through the Propertymark Client Money Protection Scheme, which applies to tenants and landlords. Any affected party could claim compensation if a dispute arose.

·         Access to up-to-date professional knowledge, with agents required to demonstrate professional development to remain current regarding property law and legislation changes.

·         Professional indemnity insurance, providing peace of mind that if you ever receive poor advice or experience substandard service, you will be backed by full coverage.

Every letting agent must comply with these mandatory requirements and submit accounts annually that have been independently audited, implementing robust checks, external verifications and ongoing commitments to excellence that provide a first-class service to their clients and tenants alike.

NAEA Propertymark Protection

Tod Anstee is also an NAEA Propertymark agent, although this applies to the estate agency aspect of our business. The same rigorous standards apply, ensuring that every landlord consults with an experienced agent at the forefront of current market knowledge and advice.

Letting and estate agents do not need to register with any compulsory supervisory body, and ARLA and NAEA membership is entirely voluntary and at the agents’ cost. However, this investment in standards, transparency and industry leadership is an important way to showcase a level of service unavailable elsewhere.

Tenancy Deposit Scheme Members

Letting agents, and landlords who manage their rental properties directly, must comply with government legislation around the handling of deposits. There are specific rules in place, which protect deposit funds and ensure landlords, or their representative agents, return funds at the end of a tenancy according to the regulations.

The Tenancy Deposit Scheme is one of the compliant schemes which includes adjudication in the event of a dispute, which protects the interests of all involved.

Tenants are entitled to information about where their deposit is stored, how it is protected, and how that money is managed for the duration of the tenancy agreement.

The Guild of Property Professionals

Our membership of The Guild represents inclusion in a limited network of 800 selected property agents, chosen for high standards, knowledge-sharing, innovation, and outstanding customer service. Guild members are spread across the UK and are an exclusive group of the best property experts available.

The Guild provides access to dynamic technological resources, optimising the exposure every marketed rental property receives and increasing rental yields with reduced vacant periods owing to the enhanced promotion.

Tod Anstee follows The Guilds’ Trading Standards recognised industry training – the only one of its kind – which sets Guild members apart in terms of compliance and trust.

Registration With the Property Ombudsman

We also recommend you select a letting agent (or estate agent for sales transactions) registered with the Property Ombudsman (TPO) Scheme, which provides the approved code we display on our website.

This scheme delivers redress options in a conflict or disagreement, holding agents to stringent standards and implementing an independent, fast, and fair complaints resolution system.

The TPO Code of Practices sets out higher service level requirements than those otherwise enforced in the industry. Every verified member has demonstrated accurate record-keeping, ethical marketing policies, vigorous complaints procedures, and capable service and a commitment to adhering to all government guidelines.

Trading Standards Approved Code

Trading Standards sets various rules and regulations about how British businesses serve and support their customers. The Consumer Codes Approval Scheme is awarded to companies that meet the requirements and provide good service levels, including clear information and access to a complaints procedure.

Codes of practice apply, and the scheme aims to improve customer service standards by requiring diligent adherence to all rules and regulations. For example, members must hold appropriate insurance, comply with consumer protection laws, and avoid unprofessional practises such as cold calling or hard sales.

The Benefits of a Highly Accredited Letting Agent

Each of these standards or awards focuses on a slightly different aspect or area of the property letting market, but evidence whether a letting agent has successfully been granted membership, or has achieved the requisite professional standard to gain the accreditation.

Landlords need to know which standards to look out for to be able to clearly distinguish between a substandard agent without formal training, education or marketing networks and an established, talented team with wide-reaching skills and knowledge.

Choosing a letting agent with a broad range of accreditations ensures landlords are protected by redress schemes and receive improved service levels for themselves and their tenants with a significantly lower risk of error, extended vacancies, or tenant complaints.

Background checking can help you select a competent, professional property team with appropriate formal credentials and independent endorsements from recognised trade bodies.

Please contact our friendly letting team for more details about our accreditations and awards, including the Estate Agent Awards 2021 award for Best Agency Network, presented by The Guild of Property Professionals.

Information Source: -https://www.todanstee.com/latest-news/important-arla-propertymark-letting-agent/

Location is always an important factor in property, especially when deciding on the best opportunities to expand a buy-to-let investment properties portfolio. Landlords may have a preferred niche, such as high-end apartments for professionals or semi-detached family residences, but local knowledge is key.

For example, a well-maintained rental property marketed to tenants with children is less likely to command a premium if it is outside the catchment area for the best local schools, and vice versa.

As we’ll explore below, there are advantages to working with an established agent with comprehensive experience in property sales and the letting market in any region you intend to buy.

Calculating Demand before Making a Buy-to-Let Investment Property Acquisition

One of the fundamental elements of making a reliable profit through property rental is demand; both having plenty of quality tenants to select from when letting a new rental asset and ensuring that tenancies are longer-running and sustainable.

Every city, town and village has specific neighborhoods, roads and areas that are considered the most exclusive or preferable for diverse reasons:

·         Falling within catchment areas for outstanding schools.

·         Excellent views, with sea or river views a particular draw.

·         Off-street parking or free and plentiful on-street parking.

·         Easy access to transport routes, supermarkets and local amenities.

·         Being within walking distance of parks, beaches and attractions.

These features are unrelated to the property itself. Still, they can make a significant difference in the rental value assigned when a residence is offered to let and demonstrate a variance in the rental price achievable for two comparable properties but in different areas of the same town.

Understanding Tenant Demographics for Rental Investment Properties Marketing

Landlords who live locally may be aware of some of the factors that might make one address more favourable than the other, but it is also important to consider demographics and those things that will matter most to the tenant group you expect to let to.

It can be useful to assess who you most anticipate renting your newly acquired property to and then consulting a letting agent to pinpoint the most meaningful priorities for that group.

Examples include properties within ten minutes of central city office districts, homes with larger outside gardens, residences close to harbours or marinas, or even homes away from flood plains or areas more exposed to high winds in coastal areas.

While most landlords will be used to considering their tenants rather than their own preferences and tastes when selecting investment properties, local agents can provide valuable insights that can add value to your bottom line.

Another good example is the EPC rating, not least because of the evolving standards. Particularly for smaller properties, a rental investment with upgraded insulation, double-glazing and heating is far less likely to be vacant since lower-income renters will want to know what a rental home will cost to run, as well as what the monthly rent will be.

Evaluating the Right Rental Price

Rental pricing can be difficult to get right because so much depends on the perceived desirability of a postcode, area or property, balanced with the type of tenant you intend to market to, general market conditions and the property itself.

Setting the price too high can make it harder to attract quality tenants and will usually mean a rental property remains on the market, provided other accommodation options are available at a more competitive cost.

However, if you set the rental value of a newly purchased buy-to-let too low, without realising a feature or element could allow you to charge more, you could be inadvertently reducing your potential profits.

All the aspects mentioned above can add real value to a rental property, and a letting agent working in the area will be able to offer guidance as to the following:

·         The number of prospective tenants on waiting lists.

·         Average rental prices in the specific part of West Sussex.

·         Demand for property types, sizes and locations.

·         Comparable rental premiums currently being charged.

·         Marketing options to boost visibility.

The final point is important because although many rental investment properties are let to tenants living in the local area, that may not always be the case.

Where appetite for semi-rural living has grown substantially over the last couple of years, advertising a new rental vacancy to affluent renters around the commuter zone will positively impact your rental yield.

The Advantage of Local Rental Market Expertise

Local market trends and future developments can also affect the profitability of a rental property investment. However, those purchasing from outside the immediate area may not be aware of other factors that could impact the future value of a rental asset.

If new-build developments are planned within a mile or so of your intended purchase location, this could mean other relatively modern buildings draw less attention since a brand-new rental property may be considered preferable.

Other factors such as expansion work to roads, new schools or school closures, planning permission related to developing green spaces or commercial zones, or local council plans to add new roundabouts, or link roads can all make a huge difference to the rental value of a property within a few months of purchase.

A rental property purchased based on being in a quiet, safe, family-friendly area may lose value quickly if development works cause disruption or introduce a higher volume of traffic or commercial vehicles to the area.

In contrast, future plans can benefit landlords, who use local agents to make astute choices about where to invest. Keeping abreast of regional developments, investment and innovation can be an excellent opportunity to invest in rental properties in an area or specific postcode that will likely become more desirable.

Using the expertise, know-how and understanding of the local renter demographics an agent can offer, can provide a competitive advantage and ensure you invest in buy-to-let accommodation with confidence that it will return a viable profit.

For more information about buying rental investment properties in any area within West Sussex, please get in touch with Tod Anstee - estate agents chichesterat your convenience.

The government announced new rules linked to UK properties owned by overseas businesses in August 2022. Businesses and owners had until 31st January 2023 to report to the Register of Overseas Entities.

However, various issues, from lack of awareness to non-compliance, mean that only 19,510 of 32,440 overseas organisations submitted their details to the register before the deadline. A further 5,000 are expected to be pending.

This guide explains what the register means, who it applies to, and what to do if you are obliged to declare your ownership and still need to do so.

The Purpose of the Register of Overseas Entities

The logic behind the register relates to attempts by the UK government to enforce transparency around foreign nationals with business assets and properties within Britain – it is part of the Economic Crime (Transparency and Enforcement) Act 2022.

One of the many problems has been the scope and breadth of the scheme, which incorporates beneficial owners and expatriates, potentially including British citizens who trade through an offshore limited company or similar structure, because of the tax efficiencies available.

The pre-existing Non-Resident Landlord system is separate and may have led to confusion where owners of UK Chichester rental properties believe that they are already compliant and registered as an Overseas Landlord and therefore are not subject to the new rules. This scheme applies to individual owners, rather than those trading through an overseas business.

Who Needs to Register as an Overseas Entity?

This new register is aimed at businesses and the individuals that own them and applies to:

·         Any business registered overseas that has purchased property or land in Britain since 1st January 1999 (in England and Wales).

·         Company owners who purchased property or land within that period and disposed of it before 28th February 2022.

·         Properties or land owned freehold or leasehold for at least seven years.

·         All legal entities, including companies, partnerships and other organisations registered outside the UK, including owners of businesses in Ireland.

Beneficial owners can be individuals, trustees, or other companies, but the regulation requires disclosure of anybody who holds 25% of shares, directly or indirectly.

Verification Checks for Overseas Entities Owning UK Property

Another complication is that companies or organisations registered overseas are required to work through a verification process. However, overseas entities that had owned British land or property and sold it before 28th February 2022 are exempt.

A verification check can only be completed by an agent registered in the UK, who can validate the identity of the owners and status of a business registered overseas – this is necessary before the organisation can submit details to the overseas register.

Agents include legal professionals and financial institutions, and the verification must be completed within three months of the registration date.

Those professionals with the accreditations to act as agents must also contact Companies House to request an agent assurance code before they can provide services. Agents without a code cannot file verification statements.

Once an organisation has appointed an agent, it must also give one month’s notice to beneficial owners before their details can be registered. The notice asks the owner (or shareholder) to respond within 30 days, confirming their details.

Impacts of the Register of Overseas Entities

Many organisations subject to these new rules will not take any further action since the primary objective is to identify concealed ownership structures, prevent money laundering, and avoid companies from disguising the true beneficial owners of UK property and land.

However, restrictions will be applied to all overseas entities from 31st January 2023. An overseas organisation is prohibited from transferring or leasing any UK property or land for seven years or more without registration.

The Land Registry will restrict the title deeds of all land or properties considered owned by an overseas entity that is not registered and will impose this limitation until the organisation complies. Those who do not register and fail to comply with the restrictions on the use of their property or land could face criminal charges or be further limited in any land transactions.

Non-compliance for registered organisations could result in an initial fine and a default penalty of up to £2,500 per day, as a maximum.

While these restrictions are intended to incentivise overseas entities to register, the fact that 40% still need to do so, weeks past the end of the transition period, demonstrates the level of confusion, misunderstanding or deliberate non-compliance present.

Once organisations have registered, they must comply with further requirements to provide updated information annually or verify that the records held remain correct.

Why Have So Few Organisations Complied With the Register of Overseas Entities?

There are many factors at play, not least that many high-value British properties are owned by trusts with complex structures or could be owned by investment funds and institutional investors, with difficulties identifying beneficial owners – or where the beneficial owner is a corporate entity itself.

The scheme aims to stop illicit financing being channelled through the UK property market, estimated at around £100 billion. A second focus was to expose criminal organisations using overseas entities to launder money without disclosing the names of the beneficial owners.

Despite strict penalties for non-compliance, the scheme has been slow to catch on, partly because some organisations have been struck off or dissolved. The UK government may not have access to this information – expected to be around 10% of the total.

Another could be the inclusion of retrospective purchases, where organisations are instructed to register the beneficial owners related to property investments dating back 24 years.

Offshore companies controlled by trusts may also be able to claim exemptions, regardless of whether beneficial owners were required to disclose their details in confidence to Companies House.

In the interim, any company owners or shareholders living overseas or with shares in an organisation located overseas that owns property or has owned and sold property or land since 1999 should register if they have not yet done so or seek legal advice to resolve any queries that are preventing them from complying.

Information Source: - https://www.todanstee.com/latest-news/changes-to-rules-for-overseas-owners-of-uk-properties/

Property assets appreciate gradually over time and are considered a fairly inflation-proof investment since, although the economy may be sluggish, it is very unusual for bricks and mortar to drop in value.

However, with rising inflation putting pressure on other aspects of owning rental properties or managing a portfolio, there is the likelihood that higher mortgage interest rates, utility costs, and council tax will impact your bottom line.

Here we’ll run through some suggestions to help you maintain profitability, along with guidance about assessing the fair rental value of each rental property in your portfolio to recognise the increasing demand for quality accommodation, particularly in the most sought-after areas of West Sussex.

Why Does Inflation Impact Rental Property Profitability?

Inflation itself doesn’t normally have any marked impact on the valuation of a property, but it can affect other outgoings.

Managing those costs during times of swift price rises can be essential to ensure your portfolio achieves the returns you expect to make on your investments.

Selling up is also inadvisable, given that the highest returns are realised over at least ten years. Purchasing a residence with a suitable rental value should cover the running costs, with a profit element.

This ‘dual’ return is one of the key reasons property is such a valued asset, whether to retain towards retirement as a low-risk investment or benefit from long-term market growth.

An important consideration is that while interest rates may mean some expenses are higher, it also means that average rental premiums have risen. In many cases, the best course of action is to re-evaluate your portfolio to see where increases would be reasonable and fair.

In some situations, landlords with tenants in situ tied into a tenancy agreement may be limited in their recourse to introduce higher rent, so it can be useful to look at proactive ways to manage the costs associated with a portfolio.

Other solutions include marketing a vacant property or new portfolio acquisition as a short-term holiday rental, if permitted within any mortgage agreements you may have, seeking a higher income while interest rates settle.

Controlling Rental Property Costs During Rising Prices

For most landlords, the mortgage is the highest expense linked to a rental property. Although interest rates are currently high due to the successive base rate increases introduced by the Bank of England, they are forecast to revert in the coming months.

The Economics Observatory estimates that within the next 12 months, inflation will fall to 2%, in line with governmental targets, and the current average 6% mortgage interest rates will fall to 3.3% by 2026.

In the meantime, rental mortgages can be flexible, and professional property investors may have several options to consolidate, extend or reduce their payment obligations through:

Extending the mortgage term to reduce monthly repayment costs. Some lenders will offer terms of up to 40 years at the outside, but most financial institutions will offer mortgage terms of up to around 30 years.

Switching from repayment to interest-only. Although fewer buy-to-let homes are purchased on a repayment basis, this could be an effective solution in this circumstance.

Consolidating mortgage borrowing. This may benefit portfolio owners with a larger volume of properties, where lenders keen to secure their business may be more competitive when considering a larger portfolio mortgage rather than a standalone product.

Much depends on your financial position and any borrowing products secured against a rental home. Still, there are often a few options that can be advantageous, even during a period of high-interest rates.

Meeting Market Demand to Improve Property Portfolio Returns

The next area to consider is the income your portfolio provides and assessing how the costs of running and owning a property have changed over the last few years. We recommend landlords and investors compile detailed budgets to have comprehensive oversight of their margins, looking at:

·         Maintenance and repair costs.

·         Council tax and utilities.

·         Borrowing interest and product fees.

·         Gas and electricity safety inspections.

·         Landlord licences for HMOs.

·         Insurance coverage.

Once you have a clear picture of the costs, it becomes easier to evaluate whether the rental yields currently achieved are sufficient, and alongside a valuation, can help you make informed decisions about the best way forward.

The biggest cost driver is void periods, where a portfolio property that is not generating an income can swiftly become a drain on your broader investments, given that most of the operational costs remain, regardless of whether the residence is untenanted.

Working with an accomplished and highly regarded lettings management team can improve your prospects significantly, advertising properties to the right demographics, using outreach marketing to reduce the duration of vacancies, and ensuring your rental property is presented in a professional and appealing manner.

Modifying Portfolio Properties to Boost Income Revenues

Finally, there may be opportunities to increase demand, interest and the rental market value of a portfolio property, although we recommend owners consult a local agent in the first instance to ensure they understand which upgrades or changes are most relevant to the local rental market.

Options may include, but are not limited to:

·         Permitting tenants to take up residence with a pet, incorporating the safeguards around damage and maintenance within your tenancy agreement documentation.

·         Making improvements to the condition, décor, exterior or space inside the property – this may range from simple refurbishments to more sizeable extensions or incorporating off-road parking and dropped kerbs to enhance accessibility.

·         Investing in the energy efficiency of a portfolio asset, where tenants are keen to secure rental properties that are future-proof, low-cost to run, and have an excellent energy performance rating.

The right solutions will vary and should be tailored to your portfolio, the location of your property assets, and any shortfalls in your rental yields you wish to address. However, even where costs are rising, property investors can make astute, targeted decisions to ensure their portfolios continue to deliver the returns they expect.

For more advice about managing your property portfolio in and around West Sussex, please contact the local Tod Anstee – Estate Agent in Chichester office to arrange a convenient time to talk.

Information Source: - https://www.todanstee.com/latest-news/how-to-protect-your-property-portfolio-from-rising-inflation/