To Let sign outside posh terraces.

Buy to Let landscape in 2024.

02 Feb 2024 | 4 min

The Challenge

The past year has proven a testing time for the Buy to Let landlord. A turbulent economy has sparked a long period of volatility in mortgage rates which, along with the looming threat of even more regulation, has led many investors to take stock.

Some are even selling up, unable to make the figures stack up in the face of these challenges, as they roll off low, fixed-rate deals onto their lender’s considerable higher variable rates.

It’s something of a reality check and comes on the back of successive of Bank of England base rate rises, from a low of 0.1 per cent in December 2021 to 5.25 per cent just two years later. To weather this storm, many landlords have had to push up rents just to cover outstanding mortgage costs.

The consensus of many is that the days of low interest rates are long behind us and rates found in the current landscape are most probably here to stay for the medium term.

And, while the Government scrapped a deadline for landlords to bring their properties up to minimum energy performance standards earlier in 2023, the effect of climate change – and the march towards net zero – will continue. Professional landlords with modern, energy-efficient properties will be in the best position to attract the best yields, while preparing for future legislative change.

The Opportunity

Landlords coming to the end of their fixed rate period face a challenge proving Buy to Let affordability using a minimum income ratio (ICR) and as many look to exit the market this leaves opportunity for less highly geared landlords to expand their property portfolios. For those with a larger amount of equity, the opportunity to diversify into areas of growth can prove to be a shrewd investment move for the year ahead.

Rapid population growth in key city centres primarily fed by growth in net immigration mean that the need for affordable rental properties still very much exists. Student numbers in many urban areas have also created a need for Houses in Multiple Occupation (HMOs) or Purpose-Built Student Accommodation (PBSA) which continues to see a boom to fill severe shortages in the sector.

Demand has also been fuelled by the difficulties that first time buyers face in getting their foot on the home ownership ladder meaning there are still plenty of takers within the private rental sector.

Landlords are rethinking their strategies to navigate new markets to ensure their portfolio stays profitable. Here we share our tips on how to steer the course.

The five step plan for action

Know where to find areas for the best rental yields

Buy to Let remains a good long term investment. As many landlords have looked to leave the sector, some at speed - rental stock is being off-loaded, sometimes at competitive prices which can be attractive to the high equity landlord. Knowing where to find interesting investment opportunities and the right type of asset class is key.

Post pandemic, workers and students are back in towns and cities and in need of accommodation. Be sure to seek out areas with rising rents by looking online for rental indices that record the changes in price and explore areas where rental income will outpace mortgage payments.

Keep in mind that not only are tenants covering your mortgage costs but they’re also funding an investment that should appreciate in value when you come to eventually sell. Keep the long term plan in mind as tenants pay down your mortgage. If property prices increase over the long term a sound profit can still be made when selling it.


Beware of the rules of renting

Take time to understand the landscape ahead of becoming a landlord. Additional stamp duty surcharges and changing legislation no longer allow the deduction of mortgage payments from rental income meaning landlords now have to pay income tax on the full rental income. In addition, second home owners, if operating as a Buy to Let, are also being hit by increased demand for council tax with many holiday hotspots consulting on charging double.

However, landlords can offset any expenses related to the property so it’s important to keep a track of expenses such as upkeep and marketing to off-set against annual tax returns.


Incorporate for an income advantage

Though 70% of Buy to Let landlords are private, 30% operate as limited companies. Government policy continues to push the agenda to make incorporation a more attractive route for investors. As a limited company, all expenses are tax deductible and 100% of a mortgage can be offset. A big advantage for incorporation is that corporation tax is made on profits rather than income, currently sitting at 19%. And, when it comes time to sell, no Capital Gains Tax is required to be paid.


Consider What Tenant You Want

Be sure to find the right tenants for your property by taking the time to consider the audience for your abode. Student, young professionals or family, knowing who is more likely to be attracted to the type of property you’re looking to buy will help you present and promote your place in an effective manner.

Consider longer term tenancies for tenants who you know will have a regular income stream, which will reduce longer-than-necessary void periods. This can also help avoid the expense and administration of letting agent’s fees of finding new tenants.


Seek a lender that understands you

Finding a lender in this new environment is taking some would be landlords by surprise. Proving affordability being a key barrier to some to get their first step on the ladder.

Most high street lenders will want to see previous experience of being a landlord, for example. They may overlook people with more complex incomes, such as self-employed company directors, or they may be less inclined to lend on a property that is deemed ‘non-standard’. This could be anything from a converted barn or thatched cottage to windmills and castles.

Make sure to shop around to find a partner that can support with flexible criteria to maximize opportunities within the market, from lending against different asset classes like HMO and Holiday Lets to providing flexibility on affordability.

Sometimes looking to work with a specialist lender, like Together, where a common sense approach is taken to lending will help realise ambitions which would otherwise have been unmet.


To find out more about how you can get on the ladder as a Buy to Let Landlord, contact our team with details of the property you wish to purchase and discuss your funding needs.

Any property used as security, including your home, may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Articles on our website are designed to be useful for our customers, and potential customers. A variety of different topics are covered, touching on legal, taxation, financial, and practical issues. However, we offer no warranty or assurance that the content is accurate in all respects, and you should not therefore act in reliance on any of the information presented here. We would always recommend that you consult with qualified professionals with specific knowledge of your circumstances before proceeding (for example: a solicitor, surveyor or accountant, as the case may be).

Lending decisions are subject to an affordability/creditworthiness assessment.

All content factually correct at the time of publishing.

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