As the year comes to an end, we know that many industries have been hit hard by the pandemic, including the property sector. The National Residential Landlords Association (NRLA) estimates that around two thirds of private landlords are expected to be negatively impacted as a direct result of COVID-19. Of their over 2,000 members, 56% said they felt less confident in achieving their 2020 goals. This was before the announcement of a second national lockdown, the new tier systems in place and the furlough scheme that is being extended until March 2021.
So if you are a landlord or property investor and feeling the pressure, don't worry. Here are our top five tips to boost your confidence during this time.
1. Take advantage of a positive lending environment to remortgage.
In order to maintain financial stability, growing cash reserves is the way to go. Therefore, you might want to take a look at remortgaging your properties, especially if you're coming to the end of your current contract. Many landlords and investors see this as a top priority because it's the perfect time to take advantage of the lower interest rates currently on the market. Although, be warned that interest rates are changing daily!
Remember that landlords will have to cover the cost if their tenants run into financial difficulties. This is another good reason to build up your cash reserves where possible, especially as the furlough scheme has been extended to March 2021, potentially adding further financial strain to tenants.
In 2019, a number of landlords were looking to guard against risk and it turns out they were right! However, it's also a good time to be expanding your portfolio and taking opportunities to purchase cheaper properties. Prices have already begun to drop, meaning the balance between risk and reward is shifting.
There is also a lot of uncertainty surrounding buy-to-let mortgages at this time. Many took advantage of the mortgage payment holidays this year. Initially, it was said that this wouldn't affect any future mortgage applications. However, this has changed due to the sheer volume of applications. Banks have stated that they are unable to differentiate between those who actually needed the payment holiday and those who just took one as a precaution. Extra checks will be put in place for those applying for new mortgages in the future.
2. Use government grants to subsidise property improvements.
If you need to make improvements to your property, there are grants currently available to help with this. The most popular is the Green Home Grants Scheme, which went live back in September. Property owners can apply for the scheme until 31st March 2022. The scheme claims that these vouchers could help property owners make an average annual saving of £600 on energy bills. For more information on this, check out our previous blog that breaks down everything you need to know about it.
There have also been talks about England adopting a similar system to Scotland and Wales, where loans are offered to struggling tenants. A survey by the NRLA found that around 78% of landlords would support this. Whilst this is more helpful to tenants, it will also help landlords as they won't have to worry about their tenants being unable to pay rent.
3. Use prop-tech to reduce marketing spend and streamline operations.
With many working from home now, the use of property technology (prop-tech) has risen to help ensure the housing market stays alive as much as possible. Buying and selling property was given the go ahead during the second national lockdown, however tech like VR has helped landlords streamline this process.
Virtual viewings are more popular than ever and it helps to whittle down potential applicants faster, saving both time and money. For more about the pros and cons of prop-tech, check out our previous blog that goes into much more detail.
4. Commercial Real Estate Shake-up.
Prime Minister Boris Johnson has promoted the mantra of "build, build and build!" He is keen to see the property market grow in a positive direction and his government has made some huge changes to permitted development rights for commercial real estate.
In commercial real estate, buildings are categorised within use classes, for example Use Class A1, B1 etc. This helps define the purpose of a commercial property and the restrictions that are associated with it such as, being unable to convert a shop (A1) into a residential dwelling (C3) unless you are successful through an expensive planning permission process.
Thanks to newly proposed permitted development rights, a shop (under the new Use Class E), could be converted into a residential dwelling without any planning permission required! However, it is worth noting that this proposal is currently under-going consultation until the 28th of January 2021, so it is not official yet.
Due to the impact of COVID-19, there will be plenty of commercial properties vacant that fall under the new Use Class E. Therefore, this could provide fruitful opportunities or returns for savvy investors!
5. Don't compromise on tenant quality.
This last point is key. Do not rush the vetting process for potential tenants or lower your standards just to get the rental income. Poor tenants can lead to more money being spent on repairs or improvements in the long run. Make sure you take care over the application process and, if using a letting agency, make sure they are clear on your standards as well.
Everyone’s financial situation is different, especially in the current climate. This is why it's important to so make sure everyone is on the same page, ensuring that you continue letting out your property to good quality tenants, rather than taking a risk and having it backfire on you.
We understand that finding the perfect tenants can be a laborious task, so why not reach out to the Normette Homes team and we can do the job for you.
Head to our Tenant Sourcing page to see how we can help you find the perfect tenants.
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Normette Homes specialises in property investment and tenant sourcing.