Challenges & Opportunities for the PRS in 2015

1. Challenges & Opportunities for the PRS in 2015 Steve Simpson NLA

2. Agenda • Introduction • National Landlords Association (NLA) • Landlord update • PRS and The Election…. • The Opportunity • Risks and Challenges • Looking forward • Questions

3. Introduction - Me • Steve Simpson • One of 36 Local Representatives across the U K • Local Representative, NLA, North East, Part Time • Run local branch meetings in Middlesbrough, Durham & Darlington • Joint meetings with Local Authorities & others • Work with Sunderland, Durham, Darlington, Hartlepool, Middlesbrough, Stockton & Redcar Councils • Landlord in Chester le Street & Carlisle for 20 years • Worked with finance and mortgages for over 35 years • Retired from Financial Services in January 2014

4. Introduction - NLA • Largest Landlord Association in the U K • Different membership packages • 55,000+ members and associates • To support, protect and improve the PRS • Work closely with National and Local government • A range of services and discounts through NLA services and approved suppliers • Landlord accreditation scheme

5. Why join the NLA ? • Benefit from access to our Telephone Advice Line advisors for immediate issues • Our 24/7 Online Library provides you with up-to-date information, practical advice and legislative updates on more than 70 subjects

6. Members Advice Line • Manned by other Landlords with variety of expertise • 38,000 plus calls per annum and increasing… • 70%+ of calls related to tenants, rent arrears & regaining possession • Also – HMOs, Council Tax, Housing Benefit • And any other issue you can think of… • Will always recommend an approved supplier where appropriate

7. Current Issues Facing Landlords • Selective Licencing Regulation • Universal Credit and Welfare Reform • Cap on housing benefits • De-regulation Bill • Smoke/ Carbon monoxide Alarms • Changes to possession procedures, sections 8 & 13 • Immigration checks • The tax man….. • Increase in reports of property damage • Increase in new/amateur Landlords

8. The PRS Picture – Nationally • 22% - Of the overall housing market • 63% - Positive about own rental business • 53% - Positive about the PRS sector • 35% - Suffered rent arrears in the last 12 months • 29% - Property with a void period more than 3 months • 38% - Increased tenant demand in the last year • 5.7% - average yield

9. The PRS Picture – Locally • 14% - Of the overall housing market (22%) • 49% - Positive about own rental business (63%) • 33% - Positive about the PRS sector (53%) • 55% - Suffered rent arrears in the last 12 months (35%) • 57% - Property with a void period more than 3 months (29%) • 21% - Increased tenant demand in the last year (38%) • 6.6% - average yield (5.7%)

10. PRS and The Election Result • No real change……. • Housing was a key election issue, including PRS • Result mainly good news for the PRS – more relaxed attitude to renting • Already a surge (South East) in overseas investment into housing • Interest rates now more likely to slowly move upwards • Continued welfare reform & benefit cuts

11. Why Do People Become Landlords… • 39% - Additional Monthly Income • 30% - To Supplement Pension • 28% - Better Investment Return • 27% - Main Source of Income for the Future • 23% - Build an Inheritance for Family • 21% - Develop Properties and Add Value • 12% - By Chance – Inherited Property • 6% - Acquired Additional Property when met Partner • 6% - Had Problems Selling Current Property • Pension Regulation Changes ?

12. The Opportunity We are in a growth industry • Housing – continued increasing demand • Little growth in social housing • Need for 250,000 new houses per annum • At best, 175,000 new houses will be built • Tighter qualifying criteria on residential mortgages • Expected grow in the private rented sector

13. Opportunity – North East • Demand for rented property continues to increase • PRS accounts for 1 in 7 homes in the North East • Has nearly doubled in the last 10 years • Market research is vitally important • Property prices generally remain subdued across our region • There is good rental and investment opportunities to be found

14. Renting property is a business My House Your Home

15. Renting property is a business… • Only 48% of Landlords consider their property lets as ‘a business’ • We are providing a home in exchange for rent • Why are you a Landlord? • Make sure you keep records and set a budget • Regular inspections and contact with tenants is vital • Referencing is also key to securing good tenants • Set rents correctly and review each year • Is a good tenant paying a lower rent better than a bad tenant? • Think about future plans

16. The Risks…. • There are over 70 pieces of legislation that affect the PRS • Selecting the wrong property – do your homework • Picking the wrong tenant – referencing is important • Mark sure your property is ‘legal’ to rent out • Gas safety/EPC/Electrical Safety etc. • Ensure you use the correct forms and secure the deposit correctly • Make regular inspections to your property • Carry out a fully inventory – photos/video • Tenants stop paying their rent… • Cutting corners…

17. The Challenges…. • Not to treat renting as a business • Finding the deposit (20 to 25%) to purchase or expand portfolio • A poor personal credit rating • Securing funding for new property • Personal Income Level • Minimum Purchase Prices • Exposure • Limited Company • HMO • Uninhabitable Property • Tenant Types

18. Moving Forward • Private rented sector will continue to grow and presents a good investment opportunity in most cases • Do your homework and research • Ensure you have good support from other Landlords, local authority, NLA • Watch out for market changes and legislation • The PRS is a ‘business’ and run yours accordingly

19. Questions Steve Simpson, NLA Tel: 07842 298495 E-mail – steve.simpson@landlords.org.uk