Online buy-to-let mortgage broker, Property Master, revealed the largest ever month on month increase this year in the cost of typical buy-to-let fixed rate mortgages popular with landlords. 

For many landlords, the default will be to increase rents to offset rates rising. However, landlords should also consider the other costs they typically face such as their letting agent fees. It may be worth sense checking to see if current agents are adding value for money or if there are cheaper alternatives that still provide the service needed. With many agents struggling for stock on the sales front there may be deals to be had on the letting side with agents keen to obtain new business.

My advice? Take steps to make your property green. Come 2025 your properties already have to have an EPC rating of C or better and this date is coming round fast. It has to be dealt with sooner rather than later so if you can do it now, thus reducing your tenants utility bills, you can perfectly justifiably increase your rents accordingly and not even hit tenants in the pocket. Plus you're avoiding the looming crisis being walked in to that is 75% of rental properties are not currently at standard. You do not want to be one of the landlords trying to deal with that at the last minute.

Sole trader landlords could consider setting up a Special Purpose Vehicle (SPV) limited company for their BTL properties. Your mortgage interest payments can be claimed as a business expense, and offset against profits, which is particularly beneficial for higher rate taxpayers.

Rising buy to let rates are a much bigger problem for investors in London and the southern counties, as yields are much lower. Some London post code areas have yields as low as 2-3%. Whereas popular northern towns and cities like Manchester, Bradford, Leeds, Newcastle (and my lovely home town Bolton) still offer yields of 8-10%. So if investors are worried about rising rates, then they need to make sure the properties they invest in have a strong yield and sufficient profit margin between rent and interest payments.

Running a BTL portfolio is a business, and to turn a profit, you must be aware of your income and expenses. Check your assets to identify which ones aren't working. Ask yourself soul searching questions: Can you convert to a multi let which is a HMO (House of Multiple Occupancy), as this may cover your costs faster and create a bigger return? If an existing HMO is not working will it be better as a single let but take care you don't lose the planning status if you are in an Article 4 area. Is there a possibility to increase the floor space to make more money by adding an extension or reconfigure the property to find an extra bedroom? Is it suitable for a more profitable short-term rental in the right area? Will changing the tenant type to a lengthier contract minimises voids and improve profits? Do you need that fancy accountancy software when a spreadsheet may just be as good? Are all these regular costs needed? That direct debit to a landlord’s association is a must for advice but is that monthly subscription to a networking meeting you never go to necessary ? Have you claimed all your expenses to reduce your taxable profit? If married are you linking the rental income to your respective tax codes. If your accountant is not adding value to your business change to one that will. Is the EPC (Energy Performance Certificate) accurate because if you are remortgaging getting a C or better may improve the interest rate offered. Look at the renewal dates of your mortgages and start seven months before their end to see what options you have. The proposed changes where you will need a minimum of C to let out a property from 2025 may impact on your thought process. Don’t put off regular maintenance as that will put future tenants off increasing your rental voids. Consider selling if nothing can be done because losses or breakeven will only get worse. As a business owner be as lean as possible with your expenditure and consider future interest rate rises. If it still works fine, if it doesn’t review your options.

The last thing renters need right now is a jump in their rent, seemingly squeezed from all directions landlords should think carefully before passing on the full cost of rising rates to their tenants. To mitigate potential rent rises landlords should consider ways in which they can help themselves and their tenants reduce costs. That could be in the shape of tax efficiencies from setting up a limited company, reduced energy costs by planning for the 2025 EPC regulations or simply reviewing rents across the portfolio rather than applying rises directly to individual properties.