It’s no secret that the job of being a landlord has changed significantly in the past few years as a result of legislation, taxation and access to finance. Whether an accidental landlord due to inheritance or a career landlord with a portfolio of properties, the walls have been closing in forcing landlords to re-think how they operate.
Being a landlord today is two-fold; you’re an investor and you’re a landlord with responsibilities and legal requirements. Landlords have been motivated to acquire buy-to-let properties for various reasons; one third saw their holdings as a form of pension, another third looked for income and capital growth and 27% said property was better than other investments according to a recent profile by the Council of Mortgage Lenders. The ‘gold rush’ of the past saw many people with some extra savings, an inherited property or access to cheaper money rush in and buy a second property.
However, over the last two years, the bloom has gone off the rose as landlords have been hit with an exhaustive list of government tax hikes including changes in Stamp Duty Land Tax, capital gains tax rates and the tapering of landlords’ ability to deduct interest paid on b-t-l mortgages. This is on top of the requirement to fulfil a multitude of legal responsibilities. The impact is already being felt as a new study from Retirement Advantage shows a decline in the proportion of people willing to become new buy-to-let landlords. Just 35% of respondents said they were likely to consider it, with 62% saying they were unlikely to.
It therefore appears that the sector is at a remarkable tipping point where demand continues to rise but supply is potentially waning – due to an ever-growing band of reluctant landlords facing an uphill struggle. However, in the face of adversity there’s always opportunity and it’s reassuring to know that a quiet transformation is taking place that is not only trying to re-invent the way landlords and buy-to-let investors operate but is also disrupting the traditional residential property market model.
The innovators who are at the forefront of re-designing the buy-to-let market include a number of start-ups, industry stalwarts and property professionals who have recognised that the current buy-to-let market is broken, and that technology can provide some of the answers and support new ways of doing business yielding a very different style of landlord.
The future of BTL
These are the crowd-funding or fractional investment platforms where you sign up to buy a property with a group of other people instantly becoming a buy-to-let landlord. There are already a handful of groups who are having success with this new model such as Vesta Property, Property Moose and the Property Award winning Property Partner. The positionings vary slightly, for example Property Moose states it has 28,150 members for its crowdfunding platform, Property Partner offers commercial as well as residential and Vesta’s focus is fractional investment with tenants-in-place.
However, what is common to all is that properties are professionally managed so the investors experience the benefits of buy-to-let ownership without landlord duties such as everyday tenant management, the legal implications and pressures of the job, buy-to-let mortgages or complicated tax structures.
Could we all be future buy-to-let landlords? I believe yes. Thanks to fractional investment platforms, property investing is truly democratised making it accessible to everyone and breeding a new generation of landlords. Without the headaches that come with being a traditional property owner, there’s now a good chance that we could all become buy-to-let investors from the comfort of our own sofa while we quietly accumulate a welcome dividend on a house that we’ve never seen, tenants that we’ve never met in a part of the country that we’ve never visited.