Is Buy to Let Really Dead, or Does the Rental Model Need to Change?

The problem may not be property itself

Landlords keep hearing that buy to let is dead. Higher costs, more regulation, difficult tenants and unpredictable repairs can certainly make property feel less attractive than it once did.

But what if the real problem is not owning property? What if it is the traditional rental model, with void periods, agency fees, maintenance calls and hours spent managing issues?

One alternative worth investigating is local authority leasing. Depending on the area and agreement, a local authority or management provider such as Serco may take on much of the daily management. Some arrangements can run for between five and twenty years, potentially removing void periods and reducing the landlord’s involvement in repairs and tenant problems.

It sounds appealing, but there is an important trade off.

Would you accept less rent for fewer problems?

Imagine a property earning £1,000 each month through a normal tenancy. One empty month costs £1,000. Add a £1,500 boiler replacement, agency fees and several evenings dealing with tenant issues, and the attractive headline rent begins to shrink.

Now imagine a longer agreement paying £850 each month, with no void periods and fewer management responsibilities. The gross rent is lower, but could the net result be more predictable?

That does not mean the second option is automatically better. The answer depends on repair responsibilities, finance costs, tax, lease terms and the value you place on your time. A landlord seeking maximum monthly rent may dislike the discount. Someone running a business or working full time may value the reduced workload.

This is why comparing rent alone can be misleading. The more useful comparison is what remains after costs, risk and time are considered.

Could grants change the numbers?

Selected councils and government schemes may offer warmer homes funding, boiler replacement support or grants to bring empty properties back into use. Under certain arrangements, financial support equivalent to Stamp Duty Land Tax may also be available.

The word certain matters. These are not automatic entitlements for every landlord. Availability, property standards, deadlines and eligibility rules vary. Grant funding can also have tax consequences.

Before assuming that Stamp Duty will be refunded or refurbishment will be funded, ask what is available for your specific property, from your specific authority, under the proposed agreement.

What could go wrong?

A long lease may provide more predictable income, but landlords must understand what they are signing. Who pays for repairs? Who insures the property? What condition must it be returned in? Can the agreement be ended early? Does the mortgage lender permit this type of use?

The offer can sound simple while the contract is anything but simple. Legal, mortgage and tax advice should be considered before signing, not after a problem appears.

Next steps

Start by calculating the true return from your existing property. Include voids, agency charges, repairs, finance costs and the time spent managing it.

Then contact the relevant local authority and reputable providers in your area. Ask for written details covering lease length, rent reviews, maintenance, property standards and exit terms.

Investigate grants separately and confirm eligibility directly. Finally, compare the local authority option with keeping your current arrangement, selling or investing elsewhere.

Buy to let may not be dead. Perhaps the more interesting question is whether landlords are measuring the right costs.

Would you accept lower rent for fewer voids and less management, or would the discount make the arrangement unattractive?

Simon Misiewicz of Optimise Accountants

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