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Is it great to be a landlord at the minute?

You may think I would say yes automatically but let us really look at it.  If we were to split the rental market in to two:
  1. Private rental market
  2. DSS rental market

We are now heading in to a recession.  The private rental market will suffer.  No one knows how much it will suffer by but expect private tenants to start defaulting.  As long as they start claiming housing benefit in time you should not really see too much of a problem. 

If you own properties that you would not dream of letting to DSS (people who are unemployed) then you will have a problem.  So if you are a top end landlord i.e. have flats and houses in the nicer part of town I would prepare these properties for sale.  You will sell them at probably 10 to 15% off their peak prices or be ready for some serious painful voids.

The DSS rental market is completely recession proof.  This is because your tenant is the government!  It is us who picks up this bill.  I am fairly certain the UK government will not go bankrupt (am I out of my mind?!) so the income for a landlord will just keep on rolling in regardless of the state of the economy.

But being a landlord is not about rental income only.  It's about profit.  The main cost to a landlord is his mortgage.  So if the landlord has bought at a good yield then the net profit should be healthy.  But it just gets better.  Heavy recessions mean heavy interest rate cuts.

Expect a 1% cut in November and many more to come.  Mortgage costs are going to drop heavily if you are on tracker mortgages (which a lot of mine are).  I have some fixed and when the rate goes down to 2.5% I will be paying my redemption and getting a good base rate tracker so I can enjoy the trip downwards.

So being a landlord who does not mind renting to the DSS is going to have a great time.  High rents paid by the government and very low mortgage costs mean healthy profits.  You can ignore what they say about buy to let in the press as they are talking about the victims of low yielding new build city centre apartments which in fact made up a large proportion of buy to let unfortunately.  If you have followed my newsletter for a while you will notice we pretty much talk about DSS lets in the not so nice areas.  We sometimes come across new build flats (I have 28 of them!) but they are decent yields for new builds (7%+).

So do you want to become a DSS landlord?  Let me know.

We have been swamped with interest so please be patient.  Expect a call within 5 working days.  We are in the process of recruiting more staff so response times will get better.

Ajay

 

 

 

 


Posted on: 24th Oct 2008




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