The Landlord of the Future
May 15, 2018
“It was good while it lasted, but the golden age of the amateur landlord may be over” stated an article just a few months ago. While it is true that regulation changes, increases in stamp duty for second homes and the pressures of operating a buy-to-let operation can be onerous, there are changes afoot; not just for landlords but also for tenants and the sector as a whole.
There’s a quiet revolution taking place in the buy-to-let sector thanks to new technology. Proptech is not only reinventing how the residential market operates but is spurring a whole new generation of landlords.
Economist, December 2017
This is good news for weary-worn landlords. Currently, only 6% of buy-to-let property owners see their role as landlords as full-time, and about the same proportion say they make their living from their holdings. We can therefore assume that the majority of owners are either in full-time work or retired with other distractions and obligations in their lives.
However, if we look at what landlords face on a daily basis, both part-time and permanent, then even the most determined could be forgiven for throwing in the towel at this stage. The list is comprehensive and includes not only day-to-day responsibilities such as dealing with tenants and any issues, maintaining health and safety and property standards, keeping up-to-date on legislation but also complying with tax and national insurance requirements. But this is just the start. Longer-term issues potentially include setting of disputes, revising and renewing tenancy agreements, loss of income if tenants move out, searching for new tenants, reviewing references, and the need to follow any procedures as required by the law that can often be complex and lengthy. Then, a 3% stamp duty lies in weight for those that decide to enter the game.
There’s more to come. Licensing is gaining ground and, while the underlying intentions are solid, in practice it could prove difficult to enforce and is an administrative burden for landlords. ARLA Propertymark’s CEO David Cox recently commented that “licensing schemes are not working, and that continuing down the licensing route would be ‘the biggest backwards step to improving the PRS in 20 years’.” His comments, taken from the CLG evidence session, were based on a series of statistics such as Croydon where only 10 licence applications were refused out of 30,000 applications and Newham where 140 officers have only managed 240 prosecutions per year from 47,000 properties – enforcement action of just 0.5%, and less than two prosecutions per officer per year.
Enter stage right proptech and new technologies designed to re-imagine the role of the modern-day buy-to-let landlord. Recognising that the current buy-to-let market is broken, a number of innovators have been trailblazing new models that are designed to make the life of a landlord in the future less stressful by providing them with new options to not only buy and manage but also to invest.
According to government research, more than 6 out of 10 buyers and sellers have experienced stress in the buying process. Currently, there are a myriad of stumbling blocks such as opaque negotiations controlled by a third party, the threat of being outbid at any time and property problems that are hidden during the offer process that only come to light during conveyancing. For an experienced or newbie landlord, this can put a potential landlord off at the first hurdle. However, in the future, landlords will experience a faster, less expensive process – they are firmly back in the driving seat. New online marketplaces such as Vesta Property are powerful tools for buy-to-let buyers and sellers as they provide a transparent platform that reduces risk, demystifies the property process, promotes open negotiations and also prevents buyers from being outbid. For example:
- Valuations and due diligence are conducted before listing; a refreshing approach that is designed to speed up the process considerably.
- Buy-to-let properties are secured by a refundable reservation fee which removes the listing from the Vesta marketplace and protects the sale – no costly gazumping is then possible.
- Possibly most refreshing for a landlord is that properties include tenants-in-place meaning that both the seller and buyer are able to generate income before and immediately after purchase.
For many, the thought of being able to buy and sell residential property so simply, seems impossible because for years we have been ‘trained’ to accept the current model that puts more pressure on the landlord. Now, it’s as easy as browsing tenanted buy-to-let properties online, checking the supplied property documentation, including rental history, valuations and surveys before deciding to make an offer.
There’s no doubt that these models will gain ground fast. Just a few days ago, Housing Secretary Sajid Javid announced that new measures will be introduced to drive up standards in the estate agent market. Part of this was to set up a working group to bring the profession into the technology era and look at developing innovative digital solutions to speed up the home buying and selling process.
For those potential new, and existing, landlords currently put off by the traditional model of owning and operating a buy-to-let property with its associated headaches, the new online marketplaces are providing an alternative option. For example, instead of buying a property, the landlord of the future will simply buy a property alongside a group of other people instantly turning them into an instant buy-to-let landlord.
The beauty of these new online platforms is that properties are professionally managed so the investors experience the benefits of buy-to-let ownership without landlord duties such as everyday tenant management, the legal implications and pressures of the job, buy-to-let mortgages or complicated tax structures. An additional advantage is the ability to invest in properties where rental accommodation is in demand and generating good yields – which could be hundreds of miles away. This means that the landlord could invest in a property that they have never seen or in an area of the country that they have never visited.
The advantages of these new online marketplaces are non-trivial for existing and new landlords. By buying and investing through this new generation of technology-enabled platforms, landlords can save literally hundreds of hours every year freeing them up to get on with their day job, enjoy their retirement, their family and friends.
So, what will the future look like? We’re certain that the word gazumping will be firmly in the history books, houses will be bought and sold in weeks rather than months, happy tenants will be able to remain in their home despite changes in landlord, and the landlord themselves will look back at the past generation of landlords and wonder why they put up with so much for so long.