Advisers have a key role to play in helping first-time landlords who lack knowledge and experience
A growing trend of so-called ‘accidental landlords’ is seeing older people entering the buy-to-let market who don’t have a full grasp of what’s involved, suggests Paresh Raja (pictured), CEO of specialist lender Market Financial Solutions.
Brokers have a role to play in ensuring that non-professional landlords get quickly up to speed, Raja urges. Pointing to recent data indicating that over two-thirds of landlords in the UK - 63% - are aged 55 or over, he notes that while many of them are professionals, some are becoming first-time landlords due to factors such as inheritance or downsizing. He refers to them as ‘unexpectedly stumbling’ into the market.
“The issues arise when those who become accidental landlords are thrust into a sector where they don’t have a complete grasp on the regulations and complexities that go hand-in-hand with owning a BTL property,” Raja told Mortgage Introducer. “It remains crucial that those who are new to the sector quickly get up to speed with the requirements that landlords must adhere to. The challenges they are presented with are complex and come in the sector's more technical areas. Landlords are required to keep up-to-date with tax and regulatory reform, how they should finance their assets, and the natural complexities of the BTL market - having to comply with ever-changing standards and regulations in the private rental sector - in particular, the incoming EPC rules.”
Accidental landlords may have to finance renovations or improvements for which they haven’t been preparing or budgeting, making the process even more challenging, Raja warned. “We wouldn’t want a large section of the BTL market letting properties that don’t meet regulations,” he said. “If the property still requires financing, securing a BTL mortgage is a fresh experience and can be daunting for those going through it for the first time. Added to that is the need to be well-informed and understand the shifts that take place when it comes to regulation and tax, for example the Renters’ Rights Bill that is currently going through the House of Lords, and it’s vital that landlords are aware of the legislation’s progress.”
So what, in Raja’s view, is the role that brokers can play? “It all comes down to support, education, and preparation,” he said. “For those individuals who stumbled into the BTL sector, understanding everything that comes with being a landlord prior to embarking on the journey should make some of the complexities they are presented with more manageable. Brokers and lenders need to make this a part of their offering.”
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The need for greater understanding of accidental landlords
According Raja, there has to be an understanding within the specialist finance sector and the buy-to-let sector as a whole that not every landlord is a professional. “Accidental landlords will not have the knowledge or experience of all that goes with being a BTL landlord,” he said. “The specialist finance sector, therefore, needs to ensure that it prioritises educating and supporting new landlords from the start to the end of the process and not just expect everyone to have the same knowledge base.
“This is especially true now, as some lenders in the market are still hesitant about working with those who have less experience, such as accidental landlords. I believe specialist lenders and brokers have a significant role in including them. By tailoring products and support according to the needs of each individual, they can make the first introduction into the BTL sector more accessible and easier to navigate. Not only does this help them, but it also helps the BTL sector as a whole to diversify.”
Indeed, Raja, whose business, Market Financial Solutions, provides buy-to-let mortgages and bridging loans, believes the trend of non-professional landlords is good for the market. “I certainly think it’s had a positive effect on the BTL market as a whole,” he said. “The BTL sector is an essential strand of the property market, and the more people who want to be landlords, the better. In fact, it’s not uncommon for accidental landlords to expand their BTL portfolio once they have had a taste of letting their first property.”
What, then, is Raja’s assessment of the buy-to-let market currently? “The appeal of owning a buy-to-let property remains strong, as the UK property market continues to show resilience despite economic uncertainty,” he observed. “Ultimately, rental income and the potential for capital growth remain realistic for landlords, making investing in BTL properties attractive.”
