Protect yourself against the perceived attack on the private rented sector by the Government and Bank of England with regards to tax hikes, Fill yourself with knowledge to help navigate this ever-changing landscape., Belvoir Bromley believe BTL is still a financially viable form of investment and remains a popular choice amongst professional landlords.
Top tips to keep up with the ever-changing world of Buy-to-Let
Stamp duty changes and cuts to mortgage tax relief on buy-to-let properties may have deterred the less informed investors. However, investing in bricks and mortar still appeals to a majority, and those embracing the change and looking to either add value to existing properties or switch strategies, short-term holiday lets, commercial property, or putting residential portfolios into limited companies to name a few.
If you are considering investing in a property portfolio or you are an existing landlord and wish to make your investments work harder for you, please read some of our top tips
No 1500 word essays here, but if you want your investments working their hardest for you then you need to keep up to date with all that’s going on in your chosen sector. Take time out to read the many property blogs/ media that is readily available. Probably the most talked about at present is the government’s section 24 roll out, whereby landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits. Mortgage interest tax relief is currently being withdrawn in stages, from 2020 to 2021 all financing costs incurred by a landlord will be given as a basic rate tax reduction, on top of this since April 2016, an extra 3% surcharge has been applied to Buy-2-Let or 2nd home property purchases. Getting financial advice on your own tax position and the impact the changes should be top of your ‘to do list’. Keep a keen eye on industry news to keep up with all the latest updates.
Know your rental yields
This may sound obvious but its surprising how many landlords don’t do or know this, its an important aspect that you should pay attention to, remember you’re buying property for an investment; to make money! Rental yield is calculated by expressing the annual rental income as a percentage of the property value. Knowing this figure, you can quickly identify the types of properties and locations that will best suit your budget. Don’t forget to include factors such as maintenance and management costs into your calculations.
Location, Location, Location is key
Keep informed on things like major infrastructure projects, local developments, as these can greatly affect the return on your investment. Current desirable areas are usually well-known but look at surrounding areas as the ripple effect could identify up and coming areas that could be the next great opportunity. Is a town in a commuter belt, or does it have well-regarded schools or good hospitals? You want to ensure your property doesn’t stand empty so check the demand in the area either by speaking to the local agents or running dummy adverts locally. Be conscious of your monthly expenses at all times, always monitor the current markets movers and shakers and price your property realistically, sometimes it’s better to drop the monthly rent/accept an offer to get the tenant moved and get your investment working for you ASAP rather than leave it sitting empty, this may sound like common sense but surprisingly there are many a stubborn landlord out there, this isn’t a bad thing and if they can afford to do it then great, but REMEMBER this is purely a box that earns you money, try to detach yourself personally from it. If you are or planning to be a hands-on landlord, we advise you live within a 30 minute radius so as to deal with any maintenance problems that may arise, or alternatively pay a letting agent a management fee to take care of this.
And of course, choose the right property
Research the local market, get to know the areas that are popular and the types of tenants, Are they families, students, young professionals. Town centres/ close to stations tend to be easier to rent out 1 bedrooms, whereas in the suburbs a 3-bedroom property with a garden is likely to appeal to a family, always consider the tenants you are looking to target for your chosen strategy. Families will want to be in the school catchment areas/ quiet neighbour hoods, whereas young professionals will want to be nearer the town centres, commuting hot spots and may be looking for a modern, stylish apartment.
Unless you are in a fortunate position to be a cash buyer, a buy-to-let mortgage is the most common way to raise funding. However, the market has changed a lot over the years and there are several specialist lenders out there now offering intuitive ways to borrow money, most mainstream banks don’t consider properties such as those in need of renovation, requiring extensive works so un-mortgageable, development opportunity. This is where the specialist lenders come in to their own, as well as providing access to popular finance sources, they offer a broad range of options and niche market products plus they are happy to look at complex applications; from those with varying income streams, retired people, to those with a less-than-perfect credit rating, to give just a few examples.
Why not join us at our next FREE informative property networking events, next date is 15th May 2018 see our facebook events page for full details.