Latest / The Property Entrepreneurs Podcast with Alasdair Cunningham / Why Renters' Reform Could Be a Rent-to-Rent Opportunity

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Why Renters' Reform Could Be a Rent-to-Rent Opportunity · The Property Entrepreneurs Podcast with Alasdair Cunningham

• 0:04
  SPEAKER_00: Welcome to the Prophet Broad Podcast.
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• 0:35
  SPEAKER_00: Hey, good morning, everybody.
• 0:37
  SPEAKER_00: Welcome to today's Property Entrepreneurs Podcast.
• 0:40
  SPEAKER_00: My name is Alistair Cunningham, and today we are going to be speaking about renters reform.
• 0:46
  SPEAKER_00: And actually, why I believe it's one of the best opportunities us entrepreneurs in property have had for some time.
• 0:54
  SPEAKER_00: Obviously, renters reform, for those of you that don't know, is a policy which I believe it came into effect around May of last year, so May 2025.
• 1:07
  SPEAKER_00: And Renters Reform is essentially a policy that the government have brought in place in their eyes, in their words, to protect tenants.
• 1:16
  SPEAKER_00: So essentially they've given tenants more rights.
• 2:07
  SPEAKER_00: So let's start with a tenant.
• 2:09
  SPEAKER_00: Obviously, because tenants are, you know, they're clapping their hands and they're rubbing their hands together because they think they've won.
• 2:14
  SPEAKER_00: They don't realise yet, but they've not won.
• 2:17
  SPEAKER_00: And they absolutely will not win.
• 2:20
  SPEAKER_00: And you know, I remember when renters reform first came into effect, the amount of Section 21 notices got that got issued the day before Renters Reform came into effect was astronomical.
• 2:32
  SPEAKER_00: Like landlords evicting tenants while they could.
• 2:36
  SPEAKER_00: And you know, the amount of these tenants that were, you know, desperately hoping not to get that Section 21 notice the day before.
• 2:43
  SPEAKER_00: Um, and you know, I think there was something like within the week leading up to Renters Reform becoming into effect, there was like three times the amount of Section 21s issued across the UK submitted through the courts.
• 2:55
  SPEAKER_00: Um, so you know, landlords were definitely worried.
• 2:58
  SPEAKER_00: Now, from a tenant's point of view, they are thinking that they've won.
• 3:01
  SPEAKER_00: And they think that, you know, most tenants believe their landlords are fucking assholes.
• 3:06
  SPEAKER_00: Most tenants believe that, you know, the landlords are just these rich capitalists that have got um portfolios of properties all over the world and they're lapping it up, drinking champagne on a yacht somewhere.
• 3:19
  SPEAKER_00: When in fact, the average landlord um owns 2.5 properties.
• 3:25
  SPEAKER_00: Now, obviously, that's an average, they can't own half a property, but you know, it's an average.
• 3:29
  SPEAKER_00: And the reason why most landlords are landlords is they're actually they're actually they fall into one of about three or four categories.
• 3:37
  SPEAKER_00: The main two categories are they're accidental landlords, and what that looks like is um perhaps they've bought their house when they were young, and then they met somebody, and then the the partner that they met with uh also owns a house, and then they moved into one of the properties and they've got a spare property, so they've become an accidental landlord, or they've inherited a property through a uh you know family member or or whatever.
• 4:02
  SPEAKER_00: Um so they're seen as accidental landlords.
• 4:05
  SPEAKER_00: Um the second category is your lifestyle landlord in the sense of they've saved up their money and they've bought a second property to create a little bit of lifestyle income, okay?
• 4:16
  SPEAKER_00: So, you know, the vast majority of landlords own between two and three properties, okay?
• 4:20
  SPEAKER_00: It's that it's that simple, right?
• 4:22
  SPEAKER_00: You know, tenants seem to think that landlords are the devil, okay?
• 4:29
  SPEAKER_00: But actually, landlords are saving.
• 4:31
  SPEAKER_00: Uh, they're saving a lot of um a lot of tenants from bad properties.
• 4:35
  SPEAKER_00: Yes, there are bad landlords, yes, there are bad properties, but there's also a lot of bad tenants.
• 4:40
  SPEAKER_00: My experience with tenants has not been the greatest.
• 4:43
  SPEAKER_00: So I do have a bit of a negative association with tenancies, and I don't particularly want to deal with any tenants.
• 4:50
  SPEAKER_00: Um primarily HMO tenants, not standard single family dwelling tenants.
• 4:56
  SPEAKER_00: Um, but yeah, HMO tenants definitely have been problematic in the past, okay?
• 5:01
  SPEAKER_00: So I tend to stay away from any sort of tenancies or any sort of tenant properties.
• 5:05
  SPEAKER_00: Now, obviously tenants are sitting there thinking that they're gonna they're gonna win.
• 5:11
  SPEAKER_00: Um, they're gonna have it all their own way and they're gonna win.
• 5:14
  SPEAKER_00: But what really is is happening is landlords now are even more concerned about tenant rights, they're even more concerned about rent arrears, they're even more concerned about misuse of property and you know their asset getting damaged, getting, you know, just not being looked after in a favorable way.
• 5:35
  SPEAKER_00: So what's happening?
• 5:36
  SPEAKER_00: If you're a tenant and you've got a secure EST, you're good, okay?
• 5:41
  SPEAKER_00: Providing you keep paying the bills and you don't mess about, you don't breach contract, you are pretty safe, okay?
• 5:48
  SPEAKER_00: But let's put yourself in a uh situation of you're a tenant and the landlord wants his property back, and you've now got to search for a new property, okay?
• 5:59
  SPEAKER_00: So you've got to search for a new property.
• 6:02
  SPEAKER_00: So you go out onto the market, you start applying for properties, renters reform is in full effect.
• 6:10
  SPEAKER_00: What do you think that means for you?
• 6:14
  SPEAKER_00: Well, here's what it means if you've got any sort of blemishes on your credit report, you're fucked.
• 6:21
  SPEAKER_00: If you've got any sort of bad rapport, any sort of discrepancies in your bank statements, any sort of you know, ad hoc work that's not consistent, again, you're fucked.
• 6:38
  SPEAKER_00: If you've got, you know, a history of financial problems, good luck.
• 6:44
  SPEAKER_00: And here's why.
• 6:45
  SPEAKER_00: Because the rules have changed.
• 6:49
  SPEAKER_00: So why on earth as a landlord would I let anybody who is anywhere sort of a risk in one of my properties?
• 6:59
  SPEAKER_00: Think about it.
• 7:00
  SPEAKER_00: For every property that goes on the market, according to statistics, there's at least 43 applications.
• 7:08
  SPEAKER_00: Now, of course, that's an average across the UK in built-up suburb uh built-up and um you know suburban areas, okay?
• 7:17
  SPEAKER_00: So we're not talking about up in the outer Hebrides in Scotland here, but for every property that goes on the market, on average, there's around 43, sorry, not applications, 43 viewings, okay?
• 7:28
  SPEAKER_00: Now that's an extortionately high number.
• 7:30
  SPEAKER_00: So let's just say 20% of them people go ahead and actually apply for that property.
• 7:36
  SPEAKER_00: So we've got eight applications for every rental property.
• 7:40
  SPEAKER_00: On these applications, you're gonna have a mixture of good and bad.
• 7:43
  SPEAKER_00: So who do you think I, as a landlord, am going to choose?
• 7:46
  SPEAKER_00: Am I gonna choose the person that's got blemishes on their credit report, the person that doesn't have consistent income, the person that might have missed a payment, you know, a long time ago and it's still shown up on their reports?
• 8:00
  SPEAKER_00: Or am I gonna choose the corporate couple who have secure income, they've got perfect credit rating?
• 8:07
  SPEAKER_00: Exactly.
• 8:08
  SPEAKER_00: This is my point, right?
• 8:09
  SPEAKER_00: Tenants are not going to win here.
• 8:11
  SPEAKER_00: Landlords have been more protective of their properties, and then secondly, landlords, because of the new rules, what landlords are doing is they're actually removing their properties from the standard AST model.
• 8:23
  SPEAKER_00: So instead of renting their properties to normal families, they're much more inclined to want to work with company lets.
• 8:31
  SPEAKER_00: So, for instance, I would much rather let my property to uh somebody for a five-year contract on a company basis and let them run it from an Airbnb point of view.
• 8:42
  SPEAKER_00: For me, that's much safer than putting tenants in there.
• 8:47
  SPEAKER_00: Landlords are all thinking the same thing.
• 8:49
  SPEAKER_00: That's why you're seeing two things happen with landlords.
• 8:52
  SPEAKER_00: You're seeing landlords are leaving the marketplace.
• 8:54
  SPEAKER_00: They're saying, do you know what, it's just not worth the hassle anymore.
• 8:58
  SPEAKER_00: And then another thing they're doing is they're saying, Do you know what, it's just not worth the hassle renting to tenants anymore.
• 9:03
  SPEAKER_00: I'm gonna take that property, that three-bedroom property, and instead of renting it to a family for£1,500 a month, I'm gonna rent it on Airbnb and get£120 a night.
• 9:12
  SPEAKER_00: So you're getting many more properties put to, you know, contractors, Airbnb, asylum seekers, working with Circo and Mires.
• 9:23
  SPEAKER_00: They're coming off the open market, which means whenever there's any sort of decrease in supply, the demand is still going up.
• 9:32
  SPEAKER_00: What happens to the prices at this point?
• 9:35
  SPEAKER_00: So if the supply is down, the demand is up, the price goes up.
• 9:38
  SPEAKER_00: Simple as that.
• 9:39
  SPEAKER_00: So what the tenants thought they were winning with actually is going to cost them a lot more money.
• 9:43
  SPEAKER_00: They just might not see it for another year or two.
• 9:45
  SPEAKER_00: But we are already seeing it.
• 9:47
  SPEAKER_00: Like it is already happening.
• 9:50
  SPEAKER_00: Like I know one of my clients, he owns about 20, 25 properties.
• 9:54
  SPEAKER_00: He's moving every single one of them to Airbnb.
• 9:57
  SPEAKER_00: That's 25 properties coming off the market that have all in the last 15 years been rented to normal families.
• 10:04
  SPEAKER_00: So it just is not beneficial for the tenant.
• 10:09
  SPEAKER_00: It really isn't.
• 10:11
  SPEAKER_00: And if you think about it, the people that write the rules also benefit from the rules.
• 10:16
  SPEAKER_00: So the rule the rules are being written by the government, and the government benefit from being landlords.
• 10:20
  SPEAKER_00: So what the government are trying to do right now is they're trying to force small landlords out of the game.
• 10:26
  SPEAKER_00: So they're making it very difficult for small landlords to actually be profitable.
• 10:30
  SPEAKER_00: And what they're doing is landlords who have got two or three properties are now selling up.
• 10:35
  SPEAKER_00: That's why you're seeing the likes of these corporate companies and these pension funds buying, you know, rows and rows of houses.
• 10:42
  SPEAKER_00: And what happens when the corporates get involved?
• 10:45
  SPEAKER_00: Prices go up because they've got the monopoly on the market, and nobody's going to stop it.
• 10:51
  SPEAKER_00: So, renters reform, where's the opportunity for you?
• 10:54
  SPEAKER_00: Well, the opportunity is exactly what I said a little minute ago.
• 10:58
  SPEAKER_00: Renters reform means landlords don't want the risk of dealing with day-to-day tenancies.
• 11:02
  SPEAKER_00: Renters reform means you can go into a landlord, position yourself as the go-to person so they don't have to sell the property, they don't have to worry about the risk of renting the property out, and actually they can make the same profit margin without the risk because you don't rent on an AST.
• 11:20
  SPEAKER_00: If you're doing rent to rent, you'll rent on a company agreement.
• 11:24
  SPEAKER_00: The marketplace right now is full of landlords who are very open to doing rent to rent.
• 11:31
  SPEAKER_00: You just got to know how to position yourself, you've got to know how to speak to these people, and you've got to know how to present the opportunity and not come across as an amateur or somebody that doesn't know the benefits of what you're trying to do.
• 11:46
  SPEAKER_00: And this is where my clients are winning.
• 11:48
  SPEAKER_00: My clients are winning because they understand how to present an opportunity to a landlord.
• 11:52
  SPEAKER_00: So if you want to get more rent to rent deals, understand rent to renters' rights, understand uh all the policies, understand the implications that landlords are facing, and fix those problems.
• 12:06
  SPEAKER_00: Business is simple, guys.
• 12:08
  SPEAKER_00: Right?
• 12:08
  SPEAKER_00: You find a problem in a marketplace that you want to work in, you find the problem, and you find a way to ease that problem from the people that are suffering from it.
• 12:19
  SPEAKER_00: In this case, your client is a landlord, they're suffering with problems right now with rent as reform.
• 12:25
  SPEAKER_00: If you can bridge that gap, they'll let you have the deal, and then you can go on and monetize it through Airbnb, contractors, or any other means that you think necessary.
• 12:33
  SPEAKER_00: Alright, hope you found today's show useful.
• 12:36
  SPEAKER_00: Tune back in for tomorrow morning, 7am, and we'll discuss more hot topics in the world of property.
• 12:45
  SPEAKER_00: That's it for today, folks.
• 12:46
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• 12:49
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• 12:51
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• 12:59
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• 13:03
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• 13:12
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• 13:18
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