Neil France: Navigating the Changing Landscape of Property Investment
Neil France, a 68-year-old freelance training consultant, is preparing to sell his extensive property portfolio in the near future to bolster his pension savings. He cites the evolving rules and regulations in the rental sector as significant factors in diminishing the profitability of being a landlord. Currently, he owns five semi-detached houses in the Wirral and three Houses of Multiple Occupancy (HMOs) in Chelmsford, Essex, with his portfolio valued at approximately £2.2 million and mortgages totaling around £800,000.
Initially, Mr. France believed that his private pension would yield an annual income of about £16,000. However, after a review in 2007, he discovered that this amount had drastically decreased to between £4,000 and £6,000 per year. He remarked, “This was a trigger for me. I realized I couldn’t survive on that amount, so I decided to invest in property.” In 2009, seizing an opportunity to assist a relative, he embarked on his property investment journey. “My wife’s aunt in the Wirral moved into a care home, and her cousin was offered a minimal amount for the property. We decided to buy it at the market rate, thus beginning our venture.”
Over the following four years, Mr. France acquired one property each year, leveraging his residential home by remortgaging to raise the necessary funds for 25% deposits. “Most of the properties, except one, are rented to families with children attending local schools, providing stability for both us and them,” he explained.
As a hands-on manager of his properties, Mr. France experienced a decline in profit margins when exiting low fixed-rate mortgages. “You only need one significant expense, like a boiler breakdown, and that can wipe out your profit for the year,” he noted. Although he had never raised rents before, he informed his tenants of a necessary rent increase of between £75 and £100 a month, assuring them he would cover half of the increase. “I’ve given them six months’ notice to find alternative housing if needed, but they all understand the situation and plan to stay.”
While fluctuating mortgage rates are a concern, Mr. France’s primary apprehension lies with the upcoming Energy Performance Certificate (EPC) regulations, which will mandate landlords to achieve a minimum rating of C instead of the current E. “I’ve double-glazed and insulated the properties as best as possible, but they all currently sit at D. We have until 2030 to comply, but if tenants vacate before then, we will consider selling.” He is committed to being fair to his tenants, particularly those with children in school.
Continuing to work and contribute to his pension, Mr. France is also contemplating future changes due to recent budget announcements. “I learned on October 30 that pensions can no longer be passed on without incurring inheritance tax. My initial plan was to pay into a pension to provide for my four adult children.” His revised strategy involves gradually selling off his northern properties to eliminate buy-to-let mortgages on his southern HMOs. “If I sell one property per year to optimize tax benefits, I could clear about £1 million. A rapid sale would lead to significant capital gains and income tax implications.”
In his vision for the future, Mr. France is exploring the possibility of purchasing a property in South Africa to spend part of the year there, citing that “the UK government seems increasingly opposed to entrepreneurship.” He expressed frustration with the narrative surrounding landlords, stating, “There’s a lot of emphasis on a small minority of bad actors. It used to be estate agents, then it was bankers, and now it’s landlords.” He lamented the lack of new entrants into the market, wondering why anyone would take the risk for minimal profit.
Patricia Ogunfeibo: A Veteran Landlord’s Perspective
Neil France is not alone in his concerns; many landlords are reconsidering their investments in light of recent legislative changes. Patricia Ogunfeibo, 61, has been a landlord for nearly four decades, starting her journey by renting out rooms to help finance her law degree. However, she has decided to sell off 50% of her portfolio due to government changes that she believes will “strip landlords of their rights.”
Her first property, acquired in Tottenham for £38,250 in 1986, was transformed into a rental space by converting the sitting room into a bedroom for lodgers. Although she sold that property years ago, it was later sold for over £300,000. In the 1990s, after seeking financial counsel, she decided to expand her portfolio, acknowledging that despite her missteps, the rising property values had favored her financially.
Today, Ms. Ogunfeibo manages over ten properties in London, a mix of one- and two-bedroom units, as well as several HMOs. Initially relying on managing agents, she became disenchanted with their services, prompting her to take control of property management herself in 2015. “I’m somewhat of a control freak,” she admitted, “and I enjoy what I do, transforming neglected properties into beautiful homes for tenants.”
However, with the looming Renters’ Rights Bill, which aims to eliminate no-fault evictions and restrict rent increases, Ms. Ogunfeibo is now planning to divest from her portfolio. “While many agree that reform is necessary, the bill effectively strips landlords of their rights. This will lead to diminished yields, making property too risky as a pension investment,” she said. She has even authored a book titled Be Prepared: Renters’ Rights & Residential Landlords to address these issues.
Ms. Ogunfeibo plans to retain her HMOs and rent her single lets exclusively to corporate clients. Should the demand from these companies decline, she intends to sell her properties rather than reinvest the proceeds into her pension. “I’m currently flipping two properties that would have re-entered the rental market had it not been for the Renters’ Rights Bill,” she explained. Additionally, she has implemented changes to how she manages her remaining properties, insisting on regular inventory checks to prevent issues like mould buildup.
She anticipates that the future of renting may reside with larger corporate landlords, stating, “I had a tenant contact me on Christmas Day about Wi-Fi issues. I replied, explaining that it was likely due to increased usage during the holidays. A corporate landlord likely wouldn’t respond to such queries unless they were urgent.” Despite her challenges, Ms. Ogunfeibo has no regrets about her property journey. “Even in my wildest dreams, I never anticipated such significant appreciation in property values. I don’t mind paying capital gains tax upon selling,” she reflected. However, she is ambivalent about whether investing in property was the best decision for her retirement. “Looking back, I might have diversified my investments instead of putting all my eggs in one basket,” she concluded. “Still, I derive immense satisfaction from property—transforming something unattractive into a beautiful living space is incredibly rewarding.”
