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  • Writer's pictureInvestment Synergy Team

Will build-to-rent kill off the private landlord?

The two Robs answer your questions - Rob Bence and Rob Dix - The Sunday Times

Q - I’ve seen lots of stories in the press recently about Lloyds Bank, John Lewis and the like moving into the rental business and building tens of thousands of homes to rent out. How do you think this will affect small private landlords?

I’ve been planning to start a property portfolio for the past couple of years, but when combining this with the government’s anti-landlord proposals I wonder if I’d be swimming against the tide. Margot, Harrogate

A - The “build-to-rent” sector — which, as it sounds, involves companies building properties to rent out rather than to sell — has been growing fast in the UK. However, this is fast growth from a low base. According to the British Property Federation there are 78,000 build-to-rent units that are complete, with another 72,000 under construction. This compares with an estimated 8.7 million privately rented homes, according to the lender Octane Capital.

This doesn’t mean that individuals can ignore such developments. Build-to-rent operators are pushing up standards of service, flexibility and facilities in areas where they have a strong presence. At the moment this is mostly in city centres, where they’re targeting residents at the top end of the market, but they are increasingly branching out into suburban houses targeted at the average renter.

Your point about government messaging is an interesting one too. The cross-party levelling up committee recently criticised the government for being unclear about its views on private landlords, saying that if it didn’t want small landlords to make up part of the housing mix it should say so, and if it did it should revisit some of its tax policies.

On the whole, we’d say that you shouldn’t expect to be squeezed out, but you should have realistic expectations about the level of professionalism and standards you’ll need to meet. Over the past five years we’ve seen lots of long-term landlords selling up as tenant expectations rise and legislation becomes more burdensome. So don’t let yourself be unnecessarily deterred, but before you start do make sure you’re fully informed about the level of commitment needed — and approach it as a business rather than as a passive investment.

Q - I’m lucky to be in the position of having a lot of equity in my portfolio, and the ability to inject further cash to reduce my borrowings if required. With mortgage rates rising I’ve been considering reducing my loan-to-value to access cheaper rates, but it seems that below 60 per cent, rates are flat. Is this right? Are there any advantages to taking my borrowing to 40-50 per cent, which I easily could? Harry, East Sheen

A - You’d think so. However, the risk of borrower default is only one factor that determines the rates lenders set — others include their own cost of financing, their operational costs and the margin they want to make.

They generally take the view that if you have at least 40 per cent equity in a property, even if prices crash and you default on your loan they’ll still be able to repossess it and sell at a price that recovers their cash. If you had 50-60 per cent equity it wouldn’t make their prospects of recovery any stronger, so you’re already in the lowest risk bucket.

You may still feel that there are benefits to reducing your debt: it may increase your cashflow, or simply allow you to sleep better at night. However, you may find that there’s more of a benefit to selectively paying down the mortgage on one property rather than splitting it equally across several.

This is because if you have one property with a low mortgage or no mortgage you can easily borrow against it if you decide you want to lever up again. For example, say prices fall and you see the perfect opportunity: if you have one mortgage-free property you can take out bridging finance or a longer-term loan against it to raise funds for the purchase. If you just had a loan-to-value across your whole portfolio that was 10 per cent lower than it would otherwise have been, this wouldn’t be an easy option.

Submit your questions for the two Robs at

Rob Dix and Rob Bence are the presenters of The Property Podcast. They co-founded the property investors’ community Property Hub and the investment app Portfolio. Rob Dix has written four books on investing and renting, including Property Investment for Beginners

Investment Synergy - questions and concerns, for both the buy to let landlord and the tenants. with property purchase prices in the UK unobtainable now for a large amount of people, renting will (and has) become more prolific... and its a known fact that some private rental properties are not fit for todays standards... and the cost to the private landlords in many areas may become prohibitive - however the need for rental properties increases exponentially

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