Managing rising costs: how landlords can safeguard their margins

For both first-time landlords and those growing their portfolios, one of the main challenges is securing a rental property that generates the margins and profits they’re aiming for. And once that property is up and running, it’s vital to keep monitoring yields, cash flow, and overall returns to ensure the investment continues to perform.

Over the years, rising house prices and the growing expense of legal compliance have meant landlords must commit more capital at the outset of a buy-to-let, which can reduce return on investment. On top of that, when interest rates spiked a couple of years ago, many landlords coming off fixed-rate mortgages faced steep jumps in their monthly repayments - instantly eroding profits.

There are still strong opportunities in the rental market, but landlords need to be aware of potential risks and ‘stress-test’ their figures to factor in rising costs.

Here are five key steps to help protect your margins:

1. Always charge the best possible market rent

Rental income is the cornerstone of your investment, so it’s essential to secure the highest rent you reasonably can within your local market. To achieve this:

• Stay informed about tenant preferences so you can offer the type of property that attracts renters willing to pay more.
• Keep the property in good condition to retain tenants and ensure quick re-lets when needed.
• Review rent annually.

It’s important to be aware of the Renters’ Rights changes: landlords will only be allowed to increase rent once per year, and you won’t be able to accept more than the advertised rent.

2. Keep the property well maintained

A structured maintenance schedule is crucial for protecting both your rental income and your property’s long-term value. This should include budgeting for periodic works like redecorating, exterior checks, and updating fittings.

• Set aside part of your profits each month to cover these expenses.
• Arrange inspections every 6–12 months through your property manager.
• Encourage tenants to report any issues promptly, allowing you to deal with problems before they escalate.

With the upcoming Renters’ Rights changes, reports of damp and mould will require urgent investigation and resolution by landlords and agents, so proactive maintenance will be more important than ever.

3. Review your costs every 6-12 months

Even when overall prices are going up, suppliers often offer competitive deals to retain loyal customers or attract new ones. By reviewing your outgoings every six months, you can often find ways to reduce costs and protect your margins.

4. Use a specialist buy-to-let broker

Mortgage repayments are usually the biggest monthly cost for landlords, so even a small reduction in your interest rate can improve cash flow. A specialist broker can:

• Regularly review your mortgage to keep you on the best available deal.
• Advise you when it may be time to switch products.
• Help you prepare well in advance by starting the process around six months before your current deal ends.

For expert guidance, NRLA Mortgages has a team of buy-to-let specialists who can help.

5. Take out the right landlord insurance

Since the Covid pandemic, labour and material costs have risen significantly, pushing up the price of repairs. Although insurance premiums have also increased, the right cover can save you substantial costs if your property is damaged.

It’s also worth considering rent guarantee insurance, which ensures income continues even if a tenant falls into arrears. This will become even more important once the Renters’ Rights Bill comes into force, abolishing Section 21 and changing the Section 8 rent arrears process.

Want to know more about the lettings services LRG can offer you? Follow the link below to submit an enquiry and quote that you’re an NRLA member to find out more about the exclusive discount we can provide.