Want 25 per cent off your subsequent house? Buy an ex-rental… Landlords are flooding the market forward of strict new guidelines arriving this 12 months

Landlords are deluging the market with properties as they desperately try to sell up before yet more regulation and higher taxes come into force in coming months.

Estate agents suggest this could present savvy first-time buyers and home movers with a chance to bag a bargain from landlords keen to sell quickly. In some cases, buyers can shave up to 25 per cent off prices.

However, prospective buyers will need to tread carefully, as not all discounts are the steals they first appear, as these homes tend to need more work and renovations.

An onslaught of new rules and fewer incentives in recent years have made it increasingly difficult to make a profit from buy-to-let.

Landlords can no longer fully offset the interest they pay on mortgages against their tax bill. They also pay an extra 5 per cent stamp duty surcharge when buying properties and they face growing bureaucracy from licensing schemes being rolled out by local authorities.

And from April 6, many landlords have to start reporting their earnings to the taxman every three months, as part of HMRC’s shift towards digital record-keeping, called Making Tax Digital.

Then from May, the Renters’ Rights Act comes into force, strengthening the rights of tenants and leaving landlords facing fines of up to £40,000 if they fall foul of the new rules.

Landlords will no longer be able to evict without good reason or consider offers above the asking rents. They will also no longer be able to tie renters into fixed-term contracts and tenants can challenge rent increases they deem to be above the market rate. From next April, landlords will also be taxed at 2 per cent above normal income tax rates.

Estate agents suggest imminent rule changes could present savvy first-time buyers and home movers with a chance to bag a bargain from landlords keen to sell quickly

‘There has been a substantial increase in the number of landlords deciding to sell their buy-to-let properties, especially when a property becomes empty,’ says Michael Zucker at north London estate agency Jeremy Leaf. ‘Many are determined to leave the market and are prepared to accept a discount because their business activities are no longer viable.’

Guy Meacock, director of buying agency Prime Purchase, says: ‘Since the Renters’ Rights Act was announced, there has been a noticeable increase in landlords getting out of the game as they realise conditions are no longer in their favour.

‘Many conclude that it is not worth the hassle. The erosion of landlord power and the slow contraction in capital values is killing off supply.’

While landlords looking to exit quickly may be happy to accept a lower price for a fast sale, even those who are not rushing may find they have to lower their expectations. That’s because the number of homes for sale is at an eight-year high, according to property website Zoopla – which means buyers have plenty to choose between.

There were eight per cent more homes for sale over the past year than in the previous one, and listings are up 38 per cent on 2019 levels, according to Hamptons. Buyers are more likely to opt for a turnkey-ready home, which means former buy-to-lets that need some work after tenants move out may not shift as quickly.

Jonathan Hopper, chief executive of Garrington Property Finders in London, says: ‘All sellers have a tougher time of it when there’s lots of stock on the market, but things are especially tough for many landlords selling up, especially those with properties that are older and need some love.

‘Typically, homes like these would be bought by other landlords, or first-time buyers who’d take them on as a fixer-upper.

‘But demand from other landlords has cooled and fewer first-time buyers are interested in a project home they need to work on.’

Hopper says it’s possible to get more than a 10 per cent discount in some cases. ‘The condition matters,’ he says. ‘If the place looks tired and has not been cared for by tenants, the price will be lower.

‘A landlord selling a former house in multiple occupation [rented by at least three unrelated sharers] that needs work to turn it back into a family home may also have to accept a lower offer.

‘You might pay 5 to 10 per cent less for a rental property than one being sold by the person who lives there. If the seller is a small landlord and the property is sitting vacant and losing the seller money, you might be able to negotiate a double-digit discount.’

Zucker, of Jeremy Leaf, says types of properties that were once attractive to investors are seeing the heaviest discounts.

He says: ‘Some properties such as flats above commercial properties, studio flats, multiple occupation houses, ex-local authority flats in high-rise blocks or on large estates or in noisy locations, which were previously attractive to buy-to-let landlords because of good returns, can be very difficult to sell in the current market.

‘The discount for them, as opposed to attractive owner-occupied properties, can be up to 25 per cent.’

Homes that have been rented out are often tired or have been configured to maximise the number of bedrooms. This means buyers need imagination about what they can do to a property and must be prepared to work.

Zucker suggests they need to look past the decor and focus on fundamentals, such as the location, layout and building quality.

Meacock, of Prime Purchase, suggests using a surveyor to assess costs involved in taking on landlord properties needing renovation.

Also, not all landlords will be desperate to sell – some are testing the market, knowing they can re-let if they don’t get their target price.

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