Buying a rental property; when the dream becomes a nightmare

I started in property around 2006 and for me the landscape has changed drastically since then, in particular I think it is incredibly challenging for those who want to invest in property on the side while working or running a business full time. The government have put measures in place to limit profits for private landlords, leaving many looking to purchase 1 or 2 properties as a ‘pension pot’ scratching their heads and wondering if it’s worth it? 

Many would-be landlords contact me for advice and are not aware that if they buy an investment property in their personal name, they can no longer deduct the mortgage interest payments from their rental income as a legitimate expense. Many are not making a profit on their BTL but instead are having to pay for the pleasure of renting a property out. It’s a tough pill to swallow when you consider approximately 75% of all rented properties in the UK are provided by the private sector and not the government.

Over the last 10 years there have been changes in legislation for landlords resulting in additional costs. Its estimated that the average cost to run a standard BTL will cost a landlord approximately £1,000 a year per property before they place a tenant. Once rented, there are costs associated with repairs, maintenance and fines imposed if landlords are not compliant which can run into the £1,000’s. In 2020 it was reported that the average rental yield across the UK was just 3.53% and for many its just not worth the hassle.

Over the years I’ve done everything myself from renovating properties to finding and managing my tenants. I’ve heard every excuse from tenants and dealt with all sorts of situations; tenants with mental health issues, illegal activities, tenants running businesses from the property or leaving mid-tenancy and having to pursue them for costs through the courts.  When you are a landlord you see the best and the worst of human behaviour. Once you’re a Landlord you’re never off the clock! If you’re looking for a 9-5 lifestyle, property investing probably isn’t for you!

Today everyone out there is or can be a property investor and it’s a tough industry so you have to be mindful of how you invest your hard earned money. Many companies promote ‘get rich from property’ promising the world but often failing to deliver. I have worked with a number of landlords who have fell foul of the basics and we’ve helped them to rebuild their portfolio so its manageable and most importantly, making them profitable again, but its not a quick turnaround. I’ve also met so many landlords who have built sizable portfolios only to lose it all because they lost control of their business. This is one of the reasons we set up the investment arm of our company; it allows individuals who are cash rich but time (and knowledge) poor to invest in property passively, they receive all of the gains with none of the risk or demands on their time. Our armchair investors benefit from a passive income and as Warren Buffet says ‘you want to be earning while you sleep’. What could be sweeter? and there are not many better ways of doing this than through property investing.

Sara Poskitt, about me: I own a property investment company, we buy and renovate residential and commercial buildings. We work with investors looking for great returns on their capital but want to invest in low risk projects. We typically pay 10% per annum and with a minimum investment of £10,000 - its very accessible to individuals who are tired of not earning anything from their bank. Its the perfect hands-off investment vehicle for those short on time but looking for fixed returns. Contact me sara.poskitt@lomot.co.uk