Landlords’ most expensive mistakes – and how to avoid them!.

According to new research from Together, the specialist property lender, when it comes to their most costly mistakes, 19% of buy-to-let (BTL) landlords said they regretted how much they had spent on investing too much in renovations that did not increase their property value or yield. 16% said they had either sold properties too soon or held on to a property for too long and so missed out on better opportunities.

18% said they had underestimated the level of wear and tear that the tenants would have on my property and 16% said they didn’t realise how much maintenance and repair costs would rack up. A further 11% regretted not asking for a larger deposit to cover damage to their property and 9% said their most expensive mistake was allowing pets.

An additional 16% admitted to Together that they had wasted money by failing to screen tenants properly, by buying too many properties (16%), by failing to account for the rising cost of professional services (e.g., legal fees, property management, etc.) (also 16%).

15% admitted their most expensive mistake was down to buying buy-to-let properties in the wrong location, with 13% also saying this was due to focussing on low yield areas only.

15% also said they failed to ensure they had a financial safety net or appropriate insurance ready which could have helped them cover unexpected costs, with 13% admitting they took on too much debt.

14% said their most expensive mistake was not investing in energy efficiency, with the same proportion failing to anticipate regulatory and tax changes.

Despite the costly challenges experienced by landlords and wider regulatory pressures, the resilience of the market is undeniable. Two thirds (63%) of buy-to-let landlords were positive about the proposed changes to improve the energy performance ratings on rental properties, and landlords were also generally supportive of the implementation of the Renters’ Rights Bill, which would see a new ombudsman oversee disputes and possible eviction cases, with 62% feeling positive about its effect on the buy-to-let sector.

Appetite within the buy-to-let market remains resilient with investors adopting new strategies to deliver returns. Together saw its own buy-to-let lending increase by 16% to 2.2bn by the end of 2024.

Ryan Etchells, Chief Commercial Officer at Together commented: “Although it may be a slightly tougher market at the moment, our research shows that professional investors’ appetites to buy up rental properties is far from dwindling. Individual costs to landlords can be reduced significantly by seeking specialist financial guidance early on in the process to find out what funding is available to carry out the most cost-effective renovations as quickly as possible to create welcoming rental homes.

“Landlords need to do their research on locations, property types and condition and the rental market as well as having adequate savings to cover wear and tear and to deal with any issues such as unexpected maintenance costs or void periods.

“A healthy rental sector is crucial to a well-functioning housing market and there are numerous opportunities for property professionals to achieve good yields while providing the rental homes which the UK needs. However, there are a few key issues which prospective and current buy-to-let landlords need to be aware of before investing or reviewing their existing portfolios.”

Here, Ryan shares his top tips on what buy-to-let landlords need to look out for to avoid any costly surprises:

1. Renters Reform

The Renters’ Reform Bill is the most significant change to the private rented sector in the last 40 years. Among the changes to be brought in will be the conversion of all fixed-term assured shorthold tenancies (ASTs) to periodic tenancies. This would mean that Section 13 notices will be the only way to raise rent, and these can only be served once per year. Section 21, which currently allows for no-fault eviction, is also set to be consigned to history.

Despite the scale of the reform, recent research by Together has shown that just 12% see the Renters Reform Bill as one of the biggest challenges to their property investment ambitions in the coming year. Before the reform becomes law, learning what the changed responsibilities of the landlord as well as the new rights of the tenant will be is exactly what landlords need to do in order to avoid any potential conflicts and fully understand the changed nature of their investment.

2. Increased Costs

While accounting for any property maintenance and administrative costs is part and parcel of being a landlord, overall costs are rising across the board. In response to this Together's research shows that as many as 21% of BTL landlords have been using their rental income to save for potential regulatory or tax changes.

Proving to be a particular thorn in landlords’ sides of late have been damage repair costs. Damage can be caused by tenants’ actions and negligence, and major weather events including storms and floods can also leave landlords with unforeseen bills. Together’s research shows that 15% of BTL landlords rank not having a financial safety net or appropriate insurance for unexpected costs among their most costly mistakes. So that you’re not caught short, it’s vital that strategies for mitigation are considered - these might come in the form of landlord insurance, or investing in waterproofing roofs.

3. Stamp Duty Land Tax

While the total amount of Stamp Duty to be paid depends on the price of the property, buy-to-let landlords do have to pay an additional surcharge. From April 1st landlords will pay an additional 2% surcharge, on top of the 3% they currently have to pay, on each of the four tax bands ranging up to properties valued at over £1.5 million.

When it comes to investing for BTL, margins can often be tight and every penny counts. Landlords (and prospective landlords) need to be aware of this increased cost upon purchase and ensure they have the budget available to account for it.

4. BTL mortgage rates: what to look out for

Whether looking to remortgage an existing property, or mortgaging a new one, keeping an eye on the lending market is critical - and especially in 2025. While interest rates fell over the back end of 2024, and were expected to continue their downward trajectory, a tumultuous global economic environment has injected further inflationary pressure. So far this year the Bank of England has kept the handbrake firmly applied, but two further cuts to the base rate are expected this year, which will have the knock-on effect of lowering landlords’ mortgage costs. Landlords need to assess all their borrowing options, including from specialist lenders taking advice from a qualified mortgage broker to make sure they’re getting the best deal.

5. Speak to lenders to support your property ambitions

With so many responsibilities, considerations and potential for unexpected costs, buy-to-let landlords should consider all property finance options available to them including from specialist mortgage lenders.

While buy-to-let property should rightly be seen as an investment opportunity, Together’s research has identified 16% of ‘accidental landlords’ who unexpectedly came into property, and a further 14% inherited a property and decided to rent it out instead of selling. In these circumstances, specialist lenders like Together can provide a guiding hand in unfamiliar territory. This includes taking into account the borrower’s individual circumstances and laying out the most appropriate finance options available to them.