How Can Landlords and Tenants Work Together to Endure The Cost of Living Crisis?
The rising tide lifts all boats. Well the same applies to the economy. Rising inflation lifts all prices. It currently sits at 10.1% in the UK (August 2022). This is slightly above predicted forecasts of 9.8% and has been the highest inflationary period since February 1982. Add on top of this, the Bank of England rising base interest rates to 1.75% and rising utility costs.
This current increase in the cost of living is due to a number of global events. Firstly, the pandemic shut down the world’s economy and government resorted to printing money to fund the furlough scheme. Throw on top of that the invasion of Ukraine by Russia. This has driven the cost of fuel and energy sky high due to sanctions and a reduced supply. People are now having to spend more on heating and powering their homes and traveling to and from work or leisure. As the costs of shipping goods increase, business are having to offset their rising costs onto the consumers by hiking their prices too. From feeding themselves, getting to work and to maintaining a roof over their heads, the average consumer is reminded of the cost of living no matter where they turn.
What Aid Is Available for Landlords and Tenants?
With domestic and global government decision making getting us into this mess, it only seems fair that our government helps the tax payer where they can. Here are just a few options available.
- Help With Energy Bills.
The government is providing a £15bn energy bill rebate package, giving the 28 million households around £550 each.
- Zero VAT for Energy Saving Materials.
Equipment and materials used to help make homes more energy efficient such as solar panels, roof insulation, heat pumps and more have been given a temporary freeze on VAT. This will hopefully incentivise landlords to invest in properties and make them more energy efficient, especially as new EPC regulations are soon to take place.
- Household Support Fund.
This will provide financial support to households that aren’t eligible for other benefits to help fund necessities such as food, clothes, and bill payments. £1.5bn has been pledged by the government and the scheme is set to run until March 2023.
- The Warm homes Discount.
As much as 2.2.million low-income households will receive a £140 rebate on their energy bills.
Property is Still Your Strongest Asset
Even through the pandemic and the current cost of living crisis, property still remains a strong, appreciating asset. According to the Office of National Statistics (ONS), property prices increased by 12.4% on average in the year to April 2022, great news for landlords looking to increase equity within their properties.
Average Property Price:
2018: £243,000.
2019: ££251,000.
2020: £256,000.
2021: £264,000.
2022: £281,000.
Along with property price increases, private rental prices also increased. According to Homelet Rental Index, From July 2022, the average UK rent is now at £1,127. Up 9.5% from the same time in the previous year and up 1.3% from the month before, June. London has seen the largest annual growth of 13.6% with an average rental price of £1,868 PCM. Outside London, the average UK rent price was £948, 8% higher than the year before and 1.3% higher than June.
This data shows that tenants have been able to keep up to date with the incremental rises in rent. However, with the compounding effects of inflation, and rising fuel and energy costs, both landlords and tenants are going to feel the squeeze in the coming months and sadly, this may push some over the edge.
What Can You Do To Keep costs Down?
As costs are on the up, it’s not just regular businesses that will feel the crunch but landlords as well. Property investors, lettings, and management companies will all see increases in:
- Mortgage interest rates.
- Materials and Labour costs for repairs and renovations.
- Maintenance services
- Professional service fees such as legal payments and surveys.
Here are several steps Landlords can take to reduce their monthly outgoings with regards to their properties.
Breakdown all your expenditures.
Before you sort out your finances, it is best to check all of your in and out-goings for your business and personal life. Take a note of all of your different revenue streams and outgoings. We recommend printing off several months of bank statements and highlighting incomes and expenditures. Is there anything you notice that you can cut back on or renegotiate? From phone contracts, entertainment, insurance and utility bills, most suppliers are willing to renegotiate on price if you are in a position to do so. This applies to both landlords and tenants.
For landlords, the cost of heating is going to be the largest expense, especially when energy suppliers hike their prices this autumn. Shop around for new providers and benefit from new customer discounts on offer.
Consider installing gas and electricity smart meters. Their accurate readings mean you only pay for what you use and not what the utility company estimates. Being able to see how much you’re using and paying is useful for both landlords and tenants too.
We also recommend communicating with your tenants over how both of you can reduce the monthly cost of utility bills. A lot of savings can come down to personal responsibility and changes to lifestyle. Becoming more aware of your daily energy use can lead to small but significant savings throughout the year. Discuss what prices you intend to increase with your tenants and hopefully you can come to some conclusion.
Check you have the best deal on your mortgage.
The mortgage is the landlords largest expenditure and even a small increase in interest rates can drastically increase the monthly payments. As well as the Bank of England’s hike of the base interest rates, mortgage lenders are having to factor in their added costs into the interest rates they offer to customers.
If your current deal is coming to an end, then it is advised to speak to a speak to a buy-to-let mortgage broker who can help with any questions you may have about your next steps.
They will be able to find the best mortgage offers available to you depending on your personal financial circumstances.
With rising interest rates, now might be the time to remortgage on your property and release some equity. If you would like to discuss your situation with a dedicated team of professionals, then London City Auctions asset management team are happy to help.
Keep up-to-date with your property maintenance.
Although the idea of saving onto as much spare money you have may seem like the smart thing to do, it is important to note that having inefficient rental properties will have you wasting money in the long run. We advise on allocating a set amount of your profits towards the maintenance and upgrades of your property.
If and when you have the money, consider upgrades such as:
- Installing insulation within the floors, floors and roofs.
- Installing solar panels.
- Installing smart meters.
- Swapping the windows for double or triple glazing.
- Replace halogen light bulbs for LEDs.
- Replace white goods for more ecofriendly and efficient models.
- Install an energy efficient boiler.
Although this may be an annoyance for some, you are legally obligated to maintain your property to a good and livable standard. Showing your tenants that you look after the property will encourage the tenants to stay and if they do leave, a well looked after property will entice new tenants. And when it comes to selling the property, you will receive more profit from the sell. Spend money to make money.
Stay up to date with your competition too. Look online at properties close to yours and compare the quality. Aim to make your property better however you can to attract more potential tenants.
Advise Your Tenants how they can look after your property.
Hopefully you have a pleasant relationship with your landlords or tenants and that both are doing what they can to look after the property. If tenants are cutting back on heating and keeping the windows shut to keep the warmth in, then the risk of damp and mold developing throughout the property will increase. If left untreated, these can cause serious damage towards the property and pose a health risk for the tenants.
Periodically ventilating the property by opening the windows, turning the heating on and turning the extractor fan on whilst cooking can help maintain a healthy, damp and mold proof environment. Preventative maintenance beats corrective maintenance every time.
If you’ve already taken the steps mentioned earlier to make your property more energy efficient, then this should not cost too much. In the long run, it can help you save on expensive repairs by stopping pipes from freezing and bursting or having to repaint mold infested walls.
Maintain good communication.
Communication is crucial between landlords, tenants and mediators in order to keep the property as healthy as possible. We advise you or your property management company to check in with the tenants periodically to see if there any issues the tenants are having that can be resolved.
If tenants are struggling to keep on top of their rent, which is likely in the near future, you can always speak to them about creating a payment plan. As long as it’s not a long-term issue, being understanding and empathetic towards your tenants can go a long way and will be highly appreciated. Word of mouth goes a long way and if people know that you were able to help them through these tough times, then that would give you an edge over other landlords.
Seek help from the professionals.
Running a business is hard. It takes a lot of time, money, energy and sacrifices to become successful with it. This same sentiment applies towards being a landlord. Despite the mainstream press spreading negative attention towards landlords and having the population think that they’re just lucky, greedy capitalists, most landlords today worked hard, sacrificed a lot and put in the money to be able to afford their first or second buy-to-let property. Working with a professional property management team can help run your buy-to-let property effectively and efficiently and save you more time. They can also help your property achieve higher profits.
Working in conjunction with a property management company can:
- Market your rental property: Hiring a property manager can help market your property and fill it sooner, reducing the vacant time. A skilled property manager will be able to take high quality photos of your property, write rental ads and help you set a competitive price.
- Filter out problematic tenants: Experienced property managers deal with thousands of applicants for rental properties. They will be able to tell who is a valid potential tenant just by looking through their paperwork. Offloading this task onto a property manager can help improve your chances of finding a reliable tenant.
- Act as middleman between tenant and landlord: Things go wrong. They always do. Accidents happen and things need fixing or replacing. Instead of tenants contacting the landlords, property managers will act as the chosen point of contact, leaving landlords in peace.
- Make sure rent is paid on time: Using a property manager will help keep rent payments regular and consistent. As their fees are deducted from the rent, this incentivises the company to keep on top of payments and enforce and legal action that they can if payments aren’t made.
- Avoid or enact legal authority: Experienced property managers remain up to date and well-rehearsed within property law, and tenant and landlord rights. They will be able to advise you and help you avoid legal action being acted upon you. This can save you time and a lot of money in solicitor’s fees.
- Reduce the stress of running your property: Having a team of professional property managers can greatly reduce the stress of complications, misunderstandings and problems that occur when becoming a landlord. If having less stress and more time to do the things you want in life is appealing to you, which we hope it is, then finding a great property management company is a valuable asset.