Should buy-to-let investors 'stick to their knitting'?

Whenever I think of our former CEO, Bob Young, I tend to think of a phrase that he often used when asked about whether Fleet might expand into other product areas.

While never ruling it out, he tended to say, “We like to stick to our knitting”, which I’ve only just realised was coined by Tom Peters and Robert Waterman in their management book, In Search of Excellence, which came out in the 1980s.

Now, of course, if every business just ‘stuck to their knitting’ and did nothing else then it would be a rather boring business world, but that said, there is a lot to knowing what you’re good at and continuing to do it the very highest standards possible, wherever that might be.

It’s relevant to us as a buy-to-let lender, it’s certainly relevant to those advisers who we work with, but it’s also relevant to your landlord clients, especially those who have been invested for a long time and see the long-term value in doing so.

Of course, ‘sticking to your knitting’ in the buy-to-let space as a landlord, doesn’t necessarily mean that you buy all your properties in the same region as you’re based, or you buy the same type of properties as the first one you bought, or you look for the same types of tenants for those properties.

This is a broad marketplace, and what we’ve certainly seen over the past few years, is a landlord community that understands what it’s knitting, but is more willing than it used to be to add some splashes of colour to their needlework.

Hence, for example, why we’ve seen landlords increasingly looking beyond their home ‘turf’ when it comes to their rental property purchases. When rental yield is so important to so many landlords – particularly in an environment where mortgage and other property costs have continued to rise – it’s unsurprising they are more willing to look at regions/property types, etc, where a better yield can be achieved.

Our recent Rental Barometer research – and indeed this has been the way for a number of years – shows that it tends to be regions in the North of England (and Wales as a whole) where yields are leading the way.

The North East has been the ‘star performer’ yield-wise since we began collating these figures, and currently has an average yield of 8.8%, while the North West (7.4%), Yorkshire & Humberside (7.7%) and Wales (7.6%) are not so far behind.

Landlords are aware of this, of course, and those who might previously have kept their properties to perhaps areas in the South, the Midlands, etc, have been much more willing to ‘Look North’ in order to pick up a property (or three) that can deliver them a better yield, but also fits with their other Southern-facing properties which might be more inclined to see greater capital values.

It is a mix and match approach but one that works for many landlords who have properties within their portfolios from Whitley Bay down to Brighton and all points in between.

There is further good news for landlords who adopt this approach, because again according to our most recent Rental Barometer, yields rose in pretty much every single region in which Fleet lends in the last quarter, compared to Q1 last year, and that’s clearly needed if we are have mortgage costs continuing at this same level for some time.

In that regard, there is also further good news. Despite what is happening to Bank Base Rate, swaps have stayed relatively stable, and as a result, longer-term fixes have got more competitive. We’re still off where we were pre-Mini Budget, but the more competitive we can be product-wise, the better the situation is for advisers and their landlord clients.

Overall, it’s important we stick to the knitting while also recognising how we can adapt and grow our offering, whether that’s for example, more green options or it’s helping advisers support those clients who want to branch off into higher-yielding property types in higher-yielding areas of the country.

There is much we can offer in a specialist world, and we’ll try to do all this and more in order to help those clients who continue to see the value in buy-to-let and delivering greater levels of property to the PRS. It certainly needs it.