EXCLUSIVE: Big landlord to sell ‘low-yield’ properties as interest rates rise

Higher interest rates have forced one of the UK’s leading guaranteed property cash buying firms to rethink its investment strategy.

The Open Property Group plans to start offloading properties, says MD Jason Harris Cohen (main pic). He tells LandlordZONE: “We aim for a 7% yield but with borrowing costs of 6%, the only way to make it viable is to look for high yield properties.

“We’ll be selling off some of our lower-yield properties when they become vacant, especially those that wouldn’t meet the proposed EPC targets, but when there are opportunities to buy from landlords, we are still actively investing – albeit cautiously.”

Harris Cohen says rising inflation is pushing up the cost of contractors, building materials and sending round a plumber – all of which the landlord has to absorb – potentially making the HMO with all-inclusive bills model unviable, particularly due to higher energy costs.

Rent increases?

Landlords are also having to then weigh up whether to increase the rent or keep good tenants. With a void period, they might have four weeks without rent which is the equivalent of any rent increase, says Harris Cohen.

“It makes sense to keep the existing tenant in place, so we’re having to negotiate rents but at the same time making tenants aware of the support available.”

The company has just sent out a cost-of-living letter to all its tenants as it expects to see an increase in rent arrears this winter, possibly even worse than that experienced during the height of the pandemic when there was more government support.

“We appreciate that some of our tenants – the majority of whom are on housing benefit – will have to choose between heating, eating and paying rent,” he adds.

“We’ve reminded them how important it is to pay rent and explained the support available and that we will help them where we can. However, we have our own financial liabilities with 150 properties.”

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