How Private Landlords Can Begin To De-risk Their Business
Posted: 1 yr ago
Read time: 3 mins
Private landlords are facing a rapidly evolving landscape, marked by rising interest rates, increasing costs, and shifting regulations. These changes will continue to shape how landlords operate. To navigate this new environment successfully, landlords should focus on three key areas to mitigate risks: financial management, property maintenance, and operational efficiency.
Real estate investors must remain vigilant, as the future trajectory of inflation and interest rates remains uncertain. Private landlords with four or more properties should consider allocating a portion of their cash flow to reduce mortgage debt where possible. If prepaying mortgages is not an option or is too costly, landlords can place funds in fixed deposits, earning returns of 3% to 4% to help offset higher interest payments.
Over the past two years, interest rates have surged due to the Bank of England's aggressive monetary policy aimed at curbing inflation. Although recent indicators suggest inflation is slowing, central banks worldwide, including the Bank of England, have signalled that high interest rates may persist.
Several external factors also pose risks to price stability. Global wheat prices remain volatile due to the ongoing conflict between Russia and Ukraine, and OPEC+ continues to maintain tight oil supply conditions, affecting energy costs. Additionally, wage inflation remains a concern, especially with continued public sector strikes. These factors could sustain high price levels, even amid economic slowdowns.
As the Renters Reform Bill progresses through Parliament, landlords should prepare for stricter housing quality standards. The government aims to elevate living conditions, likely extending the Decent Homes Standard-currently applicable only to social housing to the private rental sector.
To comply with potential new regulations, landlords must ensure their properties:
The government will provide further guidance on these standards through a new property portal and other initiatives. However, it is likely that a property ombudsman will play a significant role in interpreting these standards.
Additionally, landlords should anticipate higher property wear and tear as rental criteria expand. Under the new bill, landlords cannot refuse tenants who receive benefits or have children, and they must allow tenants to keep pets. While landlords can request pet insurance, they should still budget for increased maintenance costs associated with these changes.
Given rising costs, landlords must explore ways to streamline operations and reduce expenses. Leveraging technology can help landlords manage properties more efficiently without significantly increasing financial outlays.
Key areas for operational improvements include:
Various property technology solutions can assist in these areas, but landlords should carefully assess their options. While some software providers offer all-in-one solutions, they may not excel in every function. Others specialise in a single service but may be more expensive. The key is to find a provider that balances cost and quality effectively.
For example, DocEndorse offers electronic signature solutions that facilitate document signing, document collection, and payment processing-helping landlords enhance efficiency at a competitive price (see our e-signature page for more details).
As landlords adapt to an increasingly challenging operating environment characterised by higher costs and interest rates, they must prioritise innovation, productivity, and financial prudence. By improving financial management, increasing maintenance budgets, and leveraging technology, private landlords can position themselves for long-term success in this evolving market.