Scots landlords losing thousands of pounds in income

UK buy-to-let (BTL) landlords are losing thousands of pounds in income according to property management firm, DJ Alexander Ltd.

One of the UK’s largest family-run property management businesses, the Edinburgh-based firm said that many BTL landlords are sitting on old mortgages and loans, unchecked insurance, and inefficient financial management practices which are costing them enormous sums of money and may threaten the future viability of their investments.

While the latest figures from UK Finance highlighted a considerable softening in the BTL marketplace with a 19.1 per cent reduction in volumes and 20 per cent fall in values property remains a sound investment as long as landlords are organised, financially astute, and closely monitoring their investments.

Alan Kent, head of the newly created DJ Alexander Financial Services, explains: “The underlying financing of buy-to-let has fundamentally changed over the last year or so as new legislation and regulations have been introduced which may reduce the potential income from any landlord’s investments.”

“These changes coupled with an increasingly competitive rental market means that landlords face reduced income in the short term and even greater losses in the medium to long term. Landlords need to respond to these changes immediately or they could lose thousands of pounds in income annually and the viability of their investments may be at risk.

“These changes have increased the costs of buying BTL properties; increased the costs of borrowing; reduced the levels of borrowing available; and reduced the tax relief on the operation of a BTL property. The result is that yields have been falling across the UK as landlords’ struggle to cover these losses. Landlords must respond to these changes by ensuring their business is structured in the most financially astute way. For example, we have estimated that one in three landlords are paying too much for their mortgage which is a simple fix and could save thousands of pounds.”

“Being a landlord has become much more complicated in the last couple of years and many people may not realise just how stringent and problematic the impact of many of these changes will be on their investment. Income will be hit as rents remain relatively static or falling across the UK, while costs are rising, and the ability to offset expenses hits profitability. In 2017 only one region in the UK recorded higher yields to investors and that was Yorkshire and Humber. The rest reported static or even falling yields. The result is that many BTL landlords may start to lose money in the next year or so without fully appreciating what is happening. Only by acting now can they offset this situation.

“However, many landlords have yet to experience the impact of the legislative changes or have not reacted to them and need to look at the way their properties are financed; the way they are insured; and the financial controls they apply to the operation of their business. This applies for all levels of landlord from the single property ‘accidental’ landlord to the multiple property-owning professional. There are ways to reduce costs at ever stage and at every level of business, but they don’t magically occur, and owners must examine all financial aspects of their investments to ensure they are maximising their income.”

David Alexander, managing director of D J Alexander, added: “We have established our financial services operation to provide our clients and others with an asset management package which, along with our legal division, means that property investors are kept up to date with legislative and regulatory changes and have the best financial advice to meet their needs from a company they trust.”