Letting out a property that has been bestowed upon a client following a death in the family might seem like a straightforward decision.
Those fortunate enough to be given a property might feel like going down the rental route as a way of generating an income or if they do not want to sell the house outright.
But becoming an ‘accidental’ landlord is a job that should not be taken lightly.
Moreover, recent government changes which have specifically targeted the buy-to-let market have made it harder for ‘amateur’ landlords to make a profit.
David Hollingworth, associate director at London & Country, points out that clients who inherit a property may want to keep it for the longer term as an investment property, while others could find themselves struggling to sell the property at all and therefore deciding to become a landlord.
“Accidental or otherwise, it will be important to consider the situation carefully rather than only focusing on the potential for income and capital appreciation over time,” he says.
“They will take on the mantle and responsibilities of being a landlord so will need to understand the expectations and costs of the role.
“They may not have a mortgage to contend with but if the property is not local, for example, they will need to have an agent not only to let the property, but also to manage any issues arising, which will come with a cost.”
He adds: “They should certainly look carefully at the likely income and outgoings. But, even before that is the question of whether the property is likely to be a good rental property and attract tenants.”
Before making the leap to renting, potential landlords will need to be aware of the recent changes which directly affect buy-to-let properties.
One of these is the stamp duty surcharge on additional properties owned by the landlord, at the same time as changes to mortgage relief are being phased in.
“The buy-to-let sector has been hit by a number of punitive changes to the tax system,” explains Sam Mitchell, chief executive of Housesimple.com.
“The additional 3 per cent stamp duty charge on second homes has put off many landlords who would have entered the market. And then the government cut mortgage interest tax relief, slashing rental profits overnight.”
According to the latest figures from Arla Propertymark, April saw the highest number of landlords selling their buy-to-let properties since 2015, with five landlords per branch of letting agents leaving the market, up from four in March this year.
Those who are staying in the market continue to hike rents.
Arla Propertmark reports the number of tenants on the receiving end of rent increases rose to 26 per cent in April – the highest since September 2017, when 27 per cent of landlords put rents up for tenants.