Living with higher rates in a recession. What landlords need to know.

Living in the middle of a recession with no clear sign of an imminent recovery brings hardships and challenges to everyone.

One of the greatest impacts has been the rise in mortgage rates which obviously hits everyone with a mortgage but is particularly biting for those who have invested in the property market and who may have multiple mortgages in their name.

A Landlord has a choice in what approach he or she may take in such circumstances.  They can cut their losses and try and get out of the rental market altogether, although finding potential buyers may take some time.  They could simply batten down the hatches and weather out the storm hoping to come out the other side, if not totally unscathed but at least afloat.

Or, maybe this present situation, with rising demand for rental accommodation and with first-time buyers struggling to get on to the property market, actually presents an opportunity for some to enlarge their investment footprint and benefit from rising rental charges.

Paul Elliott, Managing Director of Propp, the specialist finance comparison site has noticed that some investors are cashing in on the rise of empty commercial property on highstreets and converting the upper floors into multiple flats.

“This is a great way to manage cash flow and grow your portfolio quickly, as you can sell one flat to release equity for your next project while retaining the other for rent,” he said.

Here are some tips for landlords living with higher rates in a recession:

• Be prepared for higher vacancy rates. During a recession, people may be less likely to move or start new businesses, which can lead to higher vacancy rates. Landlords should be prepared to deal with this by having a financial cushion in place and by being willing to be flexible with rent rates.
• Be prepared for tenants to fall behind on rent. During a recession, people may lose their jobs or have their hours cut, which can make it difficult to pay rent. Landlords should be prepared for this by having a tenant screening process in place and by being willing to work with tenants who are struggling to pay their rent.
• Be prepared for increased maintenance costs. During a recession, people may be less likely to take care of their properties, which can lead to increased maintenance costs for landlords. Landlords should be prepared for this by having a maintenance plan in place and by being willing to invest in repairs and updates to their properties. Costs of raw materials are also likely to increase during this period as well.
• Be prepared for a decrease in the value of your properties. During a recession, the value of real estate can decrease, which can affect the value of your properties. Landlords should be prepared for this by having a financial cushion in place and by being willing to hold onto their properties for the long term.

Overall, landlords living with higher rates in a recession should be prepared for a number of challenges. However, by being prepared and by being willing to be flexible, landlords can weather the storm and come out ahead.

Higher buy-to-let mortgage costs could mean a number of things for the rental market:

• Rents could increase. Landlords may pass on the higher costs of their mortgages to their tenants, in the form of higher rents. This would make it more expensive for tenants to rent properties, and could push some people out of the rental market altogether.
• Tenants could have less choice. If landlords are under pressure to increase rents, they may be less likely to take on new tenants or to reduce rents for existing tenants. This could make it more difficult for tenants to find a suitable property to rent, and could lead to higher vacancy rates.
• Landlords could be less likely to invest in their properties. If landlords are facing higher costs, they may be less likely to invest in their properties, such as making repairs or improvements. This could lead to a decline in the quality of rental properties, and could make it less attractive for tenants to rent.

It is important to note that the impact of higher buy-to-let mortgage costs on the rental market will vary depending on a number of factors, such as the local housing market and the economic conditions. However, it is clear that higher mortgage costs could have a significant impact on the rental market, and could make it more difficult for tenants to find and afford a suitable property to rent.