Podcast Summary
Historical impact of 95% mortgages on housing market: Understanding historical trends and rental arrears is crucial for informed investment decisions.
While there may be concerns about the potential impact of 95% mortgages on the housing market, it's important to remember that such policies have historically led to a boom before a crash. This was highlighted in a recent news article, which while raising valid concerns about the obsession with homeownership and the importance of renting, failed to mention the role of interest rates in driving house prices and the inevitable property cycle. Another headline that may not seem as exciting but could have significant implications is the ongoing discussion about rental arrears and the importance of choosing the right investment area. While some areas may have lower arrears, others may have higher rates, and it's crucial for investors to stay informed about these trends to make informed decisions. Overall, it's essential to approach news stories with a critical eye and consider multiple perspectives before making investment decisions.
John Lewis enters private rental market: John Lewis aims for 40% non-retail income, building high-standard rentals with added perks to stay competitive in the build-to-rent sector, amidst rising standards and COVID-19 impacts.
John Lewis, known for its retail business, is expanding into the private rental market by building and furnishing homes on land they already own. This move is part of their long-term goal to secure 40% of their income from non-retail activities. The properties, which will include John Lewis furniture and a Waitrose food delivery service, are expected to attract tenants with their high standard and additional perks. This trend signifies the increasing competition and elevated standards in the build-to-rent sector, emphasizing the need for individual landlords to up their game to remain competitive. Additionally, the impact of COVID-19 on rents and rental arrears has highlighted the importance of staying informed and adaptable in the property market.
Rent Arrears During COVID-19: The COVID-19 pandemic has led to a significant increase in rent arrears, with over 14% of tenants falling behind on payments as of September 2020. The average amount of arrears has risen to over two months' worth of rent. The long-term outlook remains uncertain due to ongoing economic instability from factors like the end of the furlough scheme and Brexit.
The COVID-19 pandemic has led to a significant increase in rent arrears, with 15.8% of tenants falling behind on payments in May 2020. This figure has since decreased slightly to 14.1%, but the long-term outlook remains uncertain due to ongoing economic instability from factors like the end of the furlough scheme and Brexit. The average amount of arrears has also risen, reaching over a two-month's worth of rent in May (121%). Although some tenants may have started paying again after securing employment or reaching agreements with landlords, the potential for further job losses could cause arrears to spike up again. As we await October's data for more insight, it's clear that the unemployment situation will continue to influence the rental market. The initial 9% figure from January, which was higher than expected, indicates that arrears were already a concern before the pandemic.
Tenancy Arrears on the Rise in the UK, Northeast Witnesses the Highest Increase: The UK rental market is experiencing a surge in tenancy arrears, with the northeast region seeing the largest increase (3.8 percentage points) since the start of the pandemic. The economic uncertainty and court reopenings for evictions are contributing factors, affecting both tenants and landlords.
The number of tenants in rent arrears across the UK has significantly increased since the start of the pandemic, with some regions experiencing much higher rates than others. For instance, the northeast currently has the highest percentage (24.2%) of tenancies in arrears, which is a significant increase from the January figure (21.4%). This trend is expected to continue as courts have recently reopened for evictions, and the economic situation remains uncertain. The consequences of this situation are far-reaching, affecting both tenants who are struggling to pay their rent due to job losses and landlords who are facing financial difficulties due to unpaid rent. The data underscores the challenging times for all parties involved in the rental market. While the situation may seem extreme, it's important to note that the data is based on actual transaction data from a reputable company, and not just survey responses.
Considering rental collection challenges in the northeast: The northeast offers low house prices and high yields, but potential rental collection challenges could lead to significant losses. Focus on real yield and property quality to ensure long-term success.
While the northeast may seem like an attractive investment opportunity due to low house prices and high yields, it's important to consider the potential challenges in collecting rent. The data suggests that a higher proportion of people in the northeast may rely on universal credit, which gets paid in arrears and can lead to more difficulties in collecting rent on time. This could result in significant losses for investors, potentially up to 25% of their annual rent. Therefore, it's crucial to not solely focus on yield and instead consider the overall real yield and the quality of the property and location. The best properties in the best areas, even if they may not have the highest yields, can still outperform in the long run. It's essential to conduct thorough research and due diligence before making an investment decision.
Selecting the right tenant is crucial in today's rental market: Thorough tenant screening and careful property management are essential to minimize financial risk in the current rental market, despite potential increases in rental guarantee insurance costs.
In today's economic climate, carefully selecting tenants for your rental properties is more important than ever. With eviction restrictions making it harder to address non-payment issues, the financial risk to investors in terms of their income stream has increased. Picking the right tenant can lead to better capital growth and resilience, even if it means sacrificing slightly on yield. A good letting agent can help ensure the right tenant is selected and negotiate rent payments if necessary. However, the cost of rental guarantee insurance has also risen, and investors must weigh the potential cost against the tenant profile risk for their property. Ultimately, thorough tenant screening and careful property management are essential for minimizing financial risk in the current rental market.
Celebrating the first step in property investing: Taking action and learning from resources can lead to success in property investing. Find solutions to common annoyances for a smoother journey.
No matter where you are in your property investing journey, every step, especially the first one, is important and worth celebrating. Tom's success story, shared through a podcast review, highlights the impact of taking action and learning from resources like the Rob and Rob podcast. The biggest step in property investing is often going from 0 to 1, and once that's achieved, things become easier. The hosts also shared a practical tip for a common online annoyance - cookie pop-ups. A browser extension called "I don't care about cookies" was recommended as a solution, making internet usage more pleasant. Overall, the episode emphasized the importance of taking action, learning, and finding solutions to common frustrations.
Embracing Creativity, Innovation, and Collaboration: Stay adaptable, resilient, and curious. Embrace uncertainty, new ideas, and strong relationships. Build networks and leverage technology to facilitate communication and collaboration.
The conversation ended with a reminder to enjoy life and take care of oneself, but the main focus of the discussion revolved around the importance of creativity, innovation, and collaboration in overcoming challenges and achieving success. The speakers emphasized the need to embrace uncertainty and be open to new ideas, as well as the value of building strong relationships and networks. They also highlighted the role of technology in facilitating communication and collaboration, but warned against becoming too reliant on it and losing touch with the human element. Overall, the conversation underscored the importance of staying adaptable, resilient, and curious in today's rapidly changing world.
