Is being a landlord still worth it?

0:01Hey everyone, Rob B here with Rob D and you are listening to the Property Podcast. Is it still worth being a landlord in 2026? Everyone will have an opinion and opinions are interesting but you know what really matters is data and using that data to come to a calculated conclusion. Well we're very lucky this week that we've got Richard Donnell back on from Supla because he's going to help you understand if being a landlord is still right for you in 2026. and beyond.

0:37Welcome to the Property Podcast. Thank you for joining us. We run a business that helps clients invest more than£100 million into property every year. You can find out about that at propertyhub.net slash invest. But while there are lots of people listening who are going in all guns blazing, full of enthusiasm, there are lots of others thinking, should I? Is now the time and plenty, plenty more who were already property investors wondering if that still makes sense. And Rob, you said it, there are opinions everywhere, often very strongly expressed opinions as well. But not all of those opinions are worth listening to.

1:08And one that definitely is, is someone who has a whole world of data at his fingertips. Yes, and that's Richard Donald, the Executive Director of Research at ZUPLA. He has all that information. Yeah, and as this is Richard's second time on the podcast, we felt like we could skip the small talk and get straight into the tough stuff. Richard, I'm not going to go in gently. I'm going to ask the big question, the question that we all want to know. We're not going to save this to the end. With all the data that you have in front of you, is it still worth being a landlord in 2026? Yes, if you treat it as a business where you focus on providing good quality homes for the future and focus on the rental income over the long run, being a landlord has a place as part of a balanced investment portfolio.

1:50But I think it's no longer a market for sort of short-term speculation, hoping for rapid house price inflation to drive your returns, basically. And the reality is investing today is about putting down a sort of sizable chunk of equity and focusing on that long-term income. And it's a different business model to maybe how a lot of landlords got into the market over the last 10, 15 years or so. Something that's been all over the headlines for a long time now is the landlord exodus. Landlords supposedly heading for the exits in droves as a result of the Renters' Rights Act, among other things. To what extent is that true?

2:26Are landlords selling? And if so, which landlords are selling? And what's happening to those properties? There's not an exodus, because an exodus sounds like literally everyone is sort of leaving the room. If we look at it at a headline level, the total number of private rented homes in Britain is the same today as it was 10 years ago. So really, we've got static overall supply. and that really means that landlords who are leaving are being offset by landlords coming into the market so they're still landlords buying they're buying in less numbers and there are some landlords rationalizing their portfolios maybe homes that are going to be hard to retrofit for minimum energy standards or they're just costing too much money to kind of repair and maintain and so i think landlords are sort of doing some portfolio rationalization and the landlords that have been leaving i think are the ones who have never really got into it for the business of being a landlord.

3:15You know, government surveys show that 40 % of landlords bought their first property to live in and then ended up renting it out because of various needs and requirements. So I think it's the smaller landlord who never really got into it as the business of being a landlord and focusing on the cash flow. And the people who are investing are the people with larger, more mature portfolios. They treat it as a business. They're interested in that long-term income and cash flow. And they're the people who are kind of really investing in the market at the moment. And if you're a landlord selling, you know, if it's a flat or a small house, it's going to be bought by a first-time buyer who doesn't mind buying a house that might be a bit tired and needs some money spending on it.

3:54If you're selling a kind of three-bed house, four-bed house, then it's very likely to be a home buyer who probably will think the same way. Of these investors who are buying, what patterns are you seeing in what and where they're buying? What does the data tell you? I think the data basically says that yield's really important and yields are higher in the north of England and Scotland. Just because we've got higher interest rates, we've got higher bond yields. At the end of the day, investing in properties, like investing in anything, investors want to get a kind of return. So we're not seeing a lot of investment happening where yields are really low, particularly in London and parts of the south of England.

4:33But I think investors are getting around these yields by also buying properties that are pretty tired and ready to be developed. So I think a lot of landlords now almost expect to buy a property that needs some work. They can get it to an EPCC if they need to get it there. They can spend the money to kind of add value to the property. They could potentially offset that, probably could offset that against any gains they make in the future when they come to sell the property. And that means they get a property that hopefully costs them less money to manage in the long run. And they can get the average or slightly above average market rent.

5:08and they can almost refurbish the property specifically for the purposes of renting and potentially designing out certain things or changing the finishes of certain features so that there's a little bit more wear and tear for renters rather than maybe the finish for an owner-occupier. What's your data showing about yields across the country? Because we've spoken before about how rates of rental growth or rents are doing are very different across the country. How are you seeing regional variations in terms of the yields that are on offer? Yes, I think yields vary reasonably widely, but maybe less than rental inflation.

5:38I think the average gross yield, that's gross rental income over a year divided by the capital value of a property. So right about just over 5 % in London, the southeast, kind of over 8 % in the northeast. But within regions, you can find real different pockets of yields. and i can say if you were to buy a property really well at auction or a property that's in poor condition you know you could probably get a potential yield that's much higher than that but clearly you've got to invest capital and spend money on the property and i think a lot of landlords where i see the investment happening it's pretty clear that landlords are buying properties that need quite a lot of work and they're almost adding value to them through capital improvements that they can offset against tax down the line but then they get a property that they can rent out and hopefully have lower running costs or more wear and tear for tenants, basically.

6:29So the investment's going in those high-yielding markets. We've probably got more landlords maybe cashing in their chips or looking to exit the market where yields are lowest and house price inflation has been quite subdued. And that's typically in London. One of the things that's grabbed the headlines over the last few months is the Renters' Rights and certainly the build up to it. And a lot of landlords were worried about losing control of their properties when it finally came into play. What's the reality? What's the data showing about its impact so far against the fear? So what's the reality?

7:06What's actually playing out? I don't think the rents are actually having a huge impact on the market at the moment. Nothing really material is coming through from the data. I mean, I think that's the biggest changes now that tenants can appeal to the first tier tribunal where they think the landlord has increased the rent too much and so they can go and appeal and so we've started to get the first raft of kind of cases coming out of that so that's probably one change and again i think has a big impact on how landlords think about setting their rents the evidence they have when they come to potentially put the rent up within a tenancy but as for landlords deciding to kind of leave the market.

7:42There's no big increase in landlords looking to sell or not sell. You know, I think a lot of landlords, this has been so heavily trailed for so much time now, particularly the ending of the old section 21 notices, that those that remain in the market have accepted the changes. And again, if we've got more landlords thinking long-term, steady rental inflation, let's offer a good property to a good tenant, we'll take decent rental growth, we'll take what the housing market gives us on house price inflation, those people must have nothing to fear from the renters rights act yes there's more paperwork there's more regulation there's a bit more compliance but if you're a good landlord with a good property and you kind of know what you're doing and you're well trained then i don't think the renters rights act is that much of a game changer it's really designed to i guess put more pressure on landlords who maybe want to act a little bit faster and looser around some of the regulations i think for me a factor that has it's probably under discussed when talking about landlords heading for the exit i think people say it's because of the renter's rights act i think renter's rights is a factor but i think another factor is just age in that we if you look at the people who uh would have been buying in like the golden age i suppose of property when you really could just like buy anything and watch the value of it fly up sort of in the early 2000s they'll probably be coming up to retirement age now will have had a really great run and go oh well i'm not getting the capital growth now it's all looking a bit harder maybe it's the time to get out but my question there would be well what are those people doing now and more generally property has been sort of like the default investment in the UK for such a long time and now it seems like we're saying well it can still work really well but you have to be a specific type of person doing it in a deliberate way rather than you just buy one property and don't think about it too much.

9:33Do you have any insight on what people are doing with the money they're taking off the table or even what people are doing instead? If not property, then what? You know, house price inflation, when it used to run in sort of, you know, when you're getting five, six, seven percent a year compound house price inflation, property made money for everyone, whether you're a homeowner or a landlord. And I think because we've now entered an era of much lower house price inflation, because inflation's lower and earnings growth is lower, we've had a step change in just how much house price inflation any investor or homeowner is going to get and look two or three percent a year is fantastic over 20 years 25 years but it might not deliver the returns over five or ten years that you know people might have got in the past and i think that we do know that quite a lot of landlords about three quarters of landlords are aged over 60 they're probably looking at their rental portfolio against other investments if you've been a landlord for 15 or 20 years you've probably seen a lot of you know house price inflation you're sitting on, you're seeing a lot of capital gains.

10:32The government's been changing and shifting tax regimes. There's always, at the moment, unfortunately, speculation around wealth taxes and equalising capital gains tax with income tax, etc. So maybe some landlords are thinking, look, I've got my kids, I need to get on the housing ladder. I need to maybe think about changing my lifestyle, adapting what I do. Because actually being a full-time landlord is quite a lot of hard work as well, basically. It's probably close to being a full-time job for some people if you have quite a few properties. So I just think people, again, we do have an older age profile of landlords, as you say, got into this maybe 20 years or so ago, 15 years or so ago.

11:07They've probably done very well. And just like with any portfolio, as you get older, you just need to rationalise and shift it around. And I think that's what's happening. One or two banks have reported that they've started to see more younger landlords coming into the market, basically in their 30s. And I think that's the big question really is, you know, I think we have got a bigger group of landlords who've got bigger portfolios and are treating it as a business. I think it's positive to see small important signs that there's kind of a new breed of landlord appears to be kind of returning to the market, but they have to come through with this kind of cash flow, long-term stability, more than relying on house prices to drive their returns.

11:43You hear a lot about the landlords who are getting out, but not much about the landlords who are coming in. And they are still coming in because the listeners of this podcast are disproportionately in their 30s and 40s and thinking about property in the new way that you've outlined and looking at it as something for the long term. I think that is there and property still has its attraction for someone who has that view. For that kind of person, something that's, you touched on taxes and regulation, that's something that because there's been so much going on over the last decade or so in terms of how property is taxed, how property is regulated, it's a constant fear for investors, I think.

12:24Every time the budget comes around. It's like you're watching through your fingers, you go, what are they going to do now? There's all the speculation about wealth taxes and capital gains, as you've said. I know you're not in the business of predicting what government is going to do, but I'm just curious about whether you think the government's going to feel like, well, this is job done now. We've kind of, we've curbed capital growth. We've stopped it from being a speculative asset that everyone can get involved with. That's enough now. Or do you think that there's going to be the pressure for them to keep going?

12:51Because it's a group where you could always turn up the taxes on and no one's going to cry to pull them too much? Well, I think it's a great question. I think there's two sides to this, whether it's homeowners or landlords. And people over the age of 50 do own an incredible amount of housing wealth. And so, you know, does government wait to try and get its hands on some of that through a wealth tax in the short term, or does it wait to get it through inheritance tax? So I don't think that really differentiates for me between landlords or homeowners, basically. Obviously, homeowners still got capital gains tax-free over their lifetime, which is a huge tax break.

13:25It's one of the biggest tax breaks in the country. The government wants more home ownership. It doesn't want a lot of people retiring, renting, because it just adds to the housing benefit bill. So there's always going to be debates, unfortunately, swirling around, around, you've got this hugely valuable housing market. Should we, you know, and look, housing is a big, you know, 75 % of the nation's wealth, right? So anyone who wants to sort of promote and talk about taxing wealth is going to, housing's naturally going to fall into it, whether it's as a landlord or a homeowner. But equally, I think government recognises the fact that it hasn't built enough rented housing.

13:56The private rented sector has been static for a decade in size. The social rented sector has been static for 30 years. Again, the fact that 80 % of all private rented homes are owned by private landlords and a third of people in the private rented sector are on housing benefit, the private rented sector has almost become an extension of the social rented sector and it's providing essential housing for workers. People want to move here, come and study here. So I think the government does realise that the private rented sector plays a really, really important role in a kind of balanced housing market.

14:31It supports economic growth. I do think, you know, George Osborne and the coalition government at the time was concerned that landlords using interest-only mortgages could effectively outbid a first-time buyer. And, you know, most governments are always keen to sort of help people into home ownership. So, you know, I think those tax changes, there's a political reason for them. They're well-priced into the market now. It's got a change in emphasis of landlords who are now buying. Well, being a private landlord owning property, you know, it's an investment. It should sit alongside all your other investments.

15:02And, you know, the landscape for pensions is going to change a lot when they become part of inheritance tax calculations in 2027. So unfortunately, in a world where governments need to raise money, there are political choices about kind of where and which sectors, but the importance of the private rented sector is there. And I think that's why the government's come out, Andy Burnham becoming prime minister, and immediately kind of ruled out rent controls because that would lead to the private rented sector shrinking and landlords leaving. And so that tells you quite an important signal that they realise the importance of continued investment in making sure we have a large and hopefully growing private rented sector, because that's actually what renters really need.

15:42So we've had a lot of scaremongering. And based on what you said, Richard, the data suggests nothing has really transpired that should concern anyone, at least yet. So we always need something to worry about. And landlords, at the moment, one of their favourite topics is EPCs and being ready for that. But the fact is that landlords do, some landlords, do own properties that are tired and do need upgrading to meet the future requirements of EPC. So should those landlords be investing that money? Do you think it's a worthwhile endeavour for them to do that? Or should they be considering selling?

16:18I appreciate it will depend on the individual property and it's quite a broad question, but I think just because it's such a hot topic, it'd be interesting to get your view. Yeah, I think it's all about the cost. I mean, landlords are getting, you know, they're sitting on an investment, it's generating a certain income every month. And look, you know, getting to an EPCC, which is what the regulations are, you know, quite a decent proportion of properties are ABC already. There's a very large chunk of properties that are a D. And so, you know, when we chat to big agents we work with, and they do portfolio analysis for landlords to help them kind of work out, you know, what their recommendations would be across the portfolio.

16:56And on average, to get to a C is around about£10 ,000. But look,£10 ,000 is a lot less money if you own a half a million pound property in London than if you were to own a£150 ,000 property up in the Northeast. So there's a capital expenditure there. And then the real question is, obviously, you can offset that capital expenditure potentially against tax down the line. But actually, are you going to get more for your rent? And there's some evidence that rents are a little bit higher for EPCCs versus EPCDs, but only about 4 % on average. And so it's really about, have you got the money? And is this a property that you want to almost double down on and invest in, basically?

17:37And it will vary across the country. So it might be a cost that's too high, especially if you've got an E or an F rated property, it might just be not worth it. And so, you know, though people might be looking to sell those properties. Luckily, there's only a small proportion of those. And I'm sure a first-time buyer would snap it up or a developer would snap it up. Or maybe another landlord would snap it up, but they'd want to sort of factor all these costs into what they paid for it. So it is a factor. People have just got to look at the cost and work out, is this the right investment for me to keep investing in this property?

18:10But I'm not sure the level of extra rental growth you're going to get is going to pay for this. And I think it only probably really works for people who are still got a kind of long-term window for owning the property. So we've talked about a lot of the different factors and the things that people are thinking about and that weigh differently for different people. But if you put all the noise aside, for you, what would make it worthwhile for you to own property today? What's the version of property investment where you go, okay, with everything that has happened and everything that might happen, this still stacks up, this still makes sense compared to anything else I could go and invest in?

18:46I think the big attraction of UK housing is this link, this long run link that's been there for 20, 30 years is that over the long run rents rise in line with earnings. And for anyone who might not have access to a sort of amazing final salary pension scheme, but is looking to sort of, you know, their sort of later life and what income can support me. The fact that rents track earnings over the long run makes, you know, residential property a kind of great hedge against your future kind of liabilities of wanting an income that rises in line with earnings, basically, or at least keeps track with the cost of living, which is inflation.

19:24So that's the long-term reason. But then look, you've got to treat it as a business and it's got extra costs and you've probably got to get more educated on it all and decide whether, you know, do I want to use an agent or do I want to try and back myself to self-manage? And then it's all then about buying the right property that is going to be, you know, easy to retrofit to an EPCC or maybe even higher. it's always going to be in high demand and you'll never have a void period. And it's a property that's really well built and you'll have low running costs and maintenance. And so it's treating it as a business proposition.

19:56You can't just buy really any old property now and rent it out. You just need to think about buying the right kind of homes that really work for this focus on long-term cashflow. So for me, it's definitely still part of a, you know, if you're wealthy enough and have enough, you know, have enough assets and you've got choices, it's definitely for me for something to be part of a balanced portfolio but it is an illiquid asset taxation will always change but it changes for everything and i think it's that that long-run link to earnings that makes it quite different to other types of investment so good to have richard on the podcast and he mentioned the rental estimate tool that we put together at zoopla and it is well worth checking out zoopla are not paying us we always want to send you towards useful tools and there's nothing much more useful than being able to get a rental estimate based on local data so you know what rent you could be charging.

20:41That's zoopla.co.uk slash landlord and we'll link to it in the show notes as well. Now we know many of you have done this now, tens of thousands of you, but if you for some reason haven't signed up for Property Pulse yet, then you're a bit mad because it's absolutely free. Go to propertyhub.net forward slash Pulse. It is by far, in my humble opinion, the best newsletter you can receive on property in your inbox. I actually think it's the best newsletter you will receive each week in your inbox anyway. But if you have any interest in property and the fact you're here listening to this now, suggests that you should make that happen.

21:12So go and do that now. Go to propertyhub.net forward slash pulse. And make sure you subscribe if you haven't because we'll be back next week with another incredible episode where we'll be going through everything that's happening in the market right now. And we'll be back with Ask Rob and Rob on Tuesday. So until then, take care. Have fun. Bye-bye. Bye-bye.