This enables us to back up our policy positions, strengthens our position with Government and stakeholders and generally makes the Association a more ‘useful’ partner to those who make policy.
It also means that we sometimes uncover interesting, if occasionally surprising, things about the UK’s landlord population. For instance, since the Association established a quarterly survey panel, two simple truths have been evident:
(1) Not all landlords make a profit, many just break even, some even make a loss. Not that everyone believes this – particularly against the backdrop of headlines implying that every rental property is accompanied by a license to print money.
(2) The more properties you have, the more likely you are to make a profit. Not rocket science, but generally true.
Of course these aren’t the surprising results. The element of surprise comes from the fact that over recent months even some large portfolio landlords have started to declare a loss.
For the first time since the survey began the percentage of portfolio landlords (>20 properties) making a loss is on the rise – reaching eight per cent for the last quarter of 2011.
So, how come I keep reading in the newspapers that landlords are ‘raking it in’?
A lot of this seems to stem from a simple misunderstanding about the costs of providing housing.
A former Secretary of State recently asked the NLA to explain how we could argue against the accusation that landlords are guilty of profiteering. He based this on a simple rental yield calculation which illustrated that gross return can indeed be quite attractive considering the Base Rate remains welded to 0.5 per cent.
Give it a try with this calculator:
However, what good is knowing your gross yield if you then ignore all of your costs. It is akin to running your household budget purely on your salary before tax.
I suggest that anyone interested in the true income most providers of housing can expect take a look at the next calculator instead.
Bearing in mind this ignores countless other costs from management fees and service charges to local licensing fees. (Without even beginning to consider tax liability).
Next time I’m asked why landlords can’t simply lower their rents I’ll certainly point out the difference between these two results.
Note: These calculators are intended as a very basic illustration to add a bit of fun to an otherwise dry subject, they are not a business planning tool.