The post that explores the pros and cons of Buy to Let existing in the world.
OK, so that post title is probably a bit inflammatory given that BtL forms the backbone of a lot of financial independence and early retirement plans.
The reason I’ve been thinking about this lately is that Fergus Wilson, one of the country’s most notorious landlords has been in the news again this week. This time he’s planning on evicting 90 households in Kent so he can facilitate his retirement by selling the properties.
Wilson is an easy target if you’re keen on painting the evils of the BtL market. He previously banned “coloured” people from renting his properties because they supposedly left curry smells in the carpets, and his wife (and co-investor), Judith, has been fined for failing to fix the heating and hot water issues faced by a disabled tenant. I mean, just look at his photo in the Guardian. He looks like a Quentin Blake drawing of the villain in a Roald Dahl novel.
And of course, people like Wilson will get short thrift from the Guardian. In Guardian land, BtL investors are agents of Satan. Look at the comments on any article about BtL and you will see that the average Guardian reader won’t even entertain the notion of there being such thing as a good landlord. Even having just one BtL let property puts you in the Tory-enabling enemy camp. As a Guardian reader I admit I have sometimes allowed these views to enter my brain through osmosis. In a previous article I considered whether it is possible to be a Guardian reader and follow the FIRE movement as sometimes it seems that so many of the principles we follow are shouted down by that particular publication.
Yet in reality the only reason that BtL doesn’t feature at all in my own plans is laziness – I can’t be bothered with the hassle of being a landlord. And there’s the small issue that I don’t even own one property yet.
THE CASE IN FAVOUR OF BUY TO LET
Personally I’ve been lucky with landlords. My current landlord in particular is an absolute star. As long as people have access to reasonably priced, decent quality accommodation, with landlords who sort issues out quickly, then I don’t see the issue with the private rental market.
I know that the Guardian would like all rented property to be social housing, but that’s not really feasible. Even if we had a government with the will to do it, it would take a long time to build all the social housing there is a demand for, and even then, are they really going to build social housing so that lawyers such as myself can get subsidised accommodation?
Also, even those who can afford to buy a house may not want to. As I described in my last blog post, I have been obsessed with owning my own place for years now, but when I first moved to London I wouldn’t have wanted to buy a place even if I could have afforded it as I didn’t know if I wanted to put roots down here.
In practice there is a need for the private rental market and a place for it. And unlike what the Guardian would have you believe, being a landlord doesn’t make you a terrible person, being a terrible person make you a bad landlord.
THE CASE AGAINST BUY TO LET
Despite what I say above, I can’t pretend there aren’t downsides to an active Buy to Let market. For example:
- Poor regulation: I describe myself above as “lucky” because I have no renting horror stories. But that shouldn’t be lucky, that should be standard. And yet there are so many people living in inadequate, overpriced accommodation. The government is supposed to take steps to stamp out this behaviour, but reports suggest they are not using the powers they have (yes it’s another Guardian article). A data base of rogue landlords stood empty as at the end of August last year and very few councils effectively use their powers to issue fines or prosecute bad landlords. But this is a failing of the regulatory system rather than BtL per se.
- Uncertainty: most tenancy agreements are 6-month (or sometimes a year) Assured Shorthold Tenancies. This means people live with the insecurity of knowing that they could be evicted from their homes with only two months’ notice, much as Fergus Wilson’s tenants are finding. Fergus Wilson may be doing this on a larger scale than most, but I’m sure there are plenty of landlords out there with only one rental property who, like Wilson, have plans to sell their BtL property to fund their retirement, rather than continue with the hassle of renting it out. My former landlady sold the flat we were renting from her when her (non-rental) business went belly up during the recession and she needed the money to prop it up. Whilst we understood it was a case of desperate times call for desperate measures, it still caused the stress and worry of having to find somewhere else to live (in my case at a very inconvenient time in my life career-wise). Yet I imagine if the UK had the minimum three-year tenancies that many people advocate we might find ourselves with a dearth of private sector rentals as landlords don’t want to be locked in that long (I’m sure some people would consider that a good thing).
- Competition for first-time buyers: As I was looking at properties to buy in 2018 I came to realise how much easier I had it than my friend who was looking in 2013 (although on balance I think she is luckier than me that she could afford to buy 5 years earlier!). When she was buying the market was “hot”. If you got wind of a property on the market you had to drop everything and view it then and there and put in an offer over the asking price straight away. When I’ve been viewing, I’ve had the luxury of being able to go back for second viewings and take my time to really consider the property. This difference isn’t entirely down to BtL (Brexit anyone?), but more than one estate agent has told me that the recent tax changes that have affected BtL have really dampened the BtL demand, which, whilst not exclusively affecting first-time buyers, tends to disproportionately affect the types of properties first-time buyers might be looking at. Estate agents told me that a few years ago, a lot of BtL landlords wouldn’t even bother with a viewing; they’d somehow find out a property was on the market before it was publically advertised and put in an offer before anyone else even knew it existed. So I for one am glad that that competition has been somewhat taken out of the equation.
So I haven’t given a very clear answer to the question posed by the title because it’s obviously not a yes/no answer. Or rather, the answer is probably “no, but at least be aware of how BtL can skewer the market before getting carried away talking about how great it is to have rental income to someone who doesn’t own their own home”. My own view is that there is a place for private landlords but the government needs to be more aggressive in cracking down on the rogue ones. And the BtL tax changes, whilst unpopular in some FI quarters I’m sure, have for me at least, been a blessing.
Is Buy to Let part of your FI/retirement plan? Are you already a landlord and feel the ire of the Guardian burning into you?