The New-Build Landlord Opportunity: Selling Up vs Refocusing Your Rental Business
The Tod Anstee team speaks to landlords, tenants and property managers daily and appreciates that property professionals have a range of challenges to contend with:
- Ever-changing regulations that can be difficult to keep pace with.
- Higher property running and management costs.
- Lower tax-deductible allowances impacting profit margins.
While these factors are a reality, landlords often aren’t aware of the scope of the support available and the underlying strength of property as an investment asset – which may mean that selling up is a costly error.
Here we run through a few of the initiatives we believe could be of benefit and an outline of one of our successful strategies that can transform a West Sussex property portfolio from one with waning revenues into a booming business.
The Rental Property Regulation Challenge
It’s difficult to pin down one primary reason many landlords have decided to sell up. Still, a common element is that they may have inherited a property or became an ‘accidental landlord’ (as strange as that term sounds, it’s a fairly regular occurrence).
Investing in a property can feel like an uncertain prospect with recent changes to things like safety ratings. In our earlier articles, you can catch up on the new EPC Band C Rating rules and the Renters Reform Bill. But, alongside stricter requirements to safeguard tenant welfare, the government has also announced a raft of initiatives and grant schemes to shoulder some of the compliance cost burdens.
Please get in touch if you’d like further information about schemes that may be suitable, but examples include EV Charging Point Grants and the Boiler Upgrade Scheme.
One of the most attractive approaches, particularly for landlords who don’t have the time or capacity to spend on monitoring regulatory standards, is to consider a reinvestment approach – which in West Sussex could be very profitable.
Older homes are notoriously more expensive to maintain and upgrade, but in a seller’s market can command exceptional value, with steep competition to secure family homes in one of the highest-demand regions in the country.
Reinvesting in Fully Compliant Rental New-Builds
Tod Anstee lettings continue to see high levels of demand. Landlords frequently have waiting lists, as quality tenants wait for a home to become available in Chichester and the surrounding villages and towns.
Now is undoubtedly a favourable time to sell, but reinvesting in a buoyant market is a wise move, with returns far exceeding every other savings or investment approach.
As an indication, in 2021:
- The average investment portfolio returned a 5.1% gain.
- Savings produced returns of just 0.06%.
- Property assets grew by 10.8% in the year to April 2022.
With over double the profitability of comparable routes, property is a safe investment.
Many of our longstanding landlord clients have taken this opportunity to restructure their investment portfolios, sell properties that would command extensive investment in the months and years ahead, and purchase fully compliant new builds.
Developers are always keen to secure sales or off-plan sales, and residential buyers often steer clear of new builds assuming that the property will immediately depreciate once it has been bought. That is partially accurate since a brand new home has a price premium attached, BUT the returns as a rental property are lucrative.
The New Build Property Portfolio Opportunity
Why a new build? Let’s run through some of the facts and figures:
- The average new-build market price is currently at around £350,000.
- Average property values in West Sussex are £440,895.
- Rental earnings on new builds are roughly 23% higher than on older properties.
That means that a landlord with an existing rental property can sell up, charge a premium for the location, and reinvest in a comparably sized new build at a lower cost – or, in some scenarios, buy two new-build assets with the proceeds. The benefit is that new properties are built to modern specifications.
You can stipulate that the developer incorporates all the features and safety elements you need to be 100% compliant with the regulations being introduced in the next few years. For example, a new build will meet the minimum EPC Band C rating, although this won’t be legally required until 2025, or 2028 for existing tenancies.
As a landlord, you can enjoy a higher rental yield, expand your portfolio, or even opt to retain some of the sale value from your previous asset to reinvest or use as you wish.
The Advantages of Reconfiguring Your Rental Property Business With an Accomplished Local Agent
The property market is always likely to twist and turn. Still, there is no doubt that bricks and mortar investments are a stable, long-term way to outpace inflation and secure ongoing returns that outperform other savings or investment options.
Although the pandemic may have been a blip, the longer-term trends show that property across the UK increases by an average of 4.3% every year. Homes in the south and east have reached between 4.9% and 5.1% annual growth for the last 11 years.
Working with Tod Anstee means that every aspect of property management and maintenance is taken care of, with our professional lettings team handling:
- Tenant applications, screening and deposit collections.
- Rental payments, credit scoring and arrears.
- Inventories, inspections and maintenance.
- Communications and repair requests.
- Marketing, publicity and rental valuations.
- Compliance, including ongoing monitoring.
Alongside our wealth of experience in achieving an excellent price for your existing rental property and identifying the ideal new build to add to your portfolio, we aim to maximise your profits for the years to come. Presenting a low-maintenance, energy-efficient and modernised new build to the rental market is an offer that the best quality tenants will quickly snap up.
Please contact the Tod Anstee lettings team for support with any of the information contained within this guide. We are on hand to discuss your current rental property, propose ideas and suggestions, and construct a robust plan to help you secure first-rate rental returns and property appreciation while navigating legislative changes with ease.