Thinking of becoming a landlord?

Are you thinking about trying your hand as a landlord? Figures show there has been an upsurge of interest in the last 6 months even with all the new tax laws on buy-to-lets. Or perhaps you a seasoned property investor looking to expand your portfolio? Whichever you maybe it is still an appropriate time to be considering your options.

Research has revealed that not only are there a record number of deals available they are still very keenly priced with fixed rates leading the way. This month alone has seen the number of new buy-to-let (BTL) mortgages available increase.

More people are considering this area of investment due to the poor returns traditional savings accounts are currently offering and have been doing for the last 5 years.

It is noticeable existing landlords are re-mortgaging to raise capital to increase their portfolios. One landlord interviewed said, “I have just re-mortgaged three of my properties and saved over £800 a month in interest payments plus I raised enough capital for a deposit on a new property.” “With property values still increasing every year I will be reviewing all my current deals as they expire.”

Demand is still growing for quality rental properties

Demand for quality rental property continues to grow, this year alone it’s grown by 7% against figures issued for last year. All the measures the Government have taken to curtail the buy-to-let market really don’t seem to of had the desired effect.

The problem is now that supply of properties has fallen by 13.8% in the same period. On average for every quality property available to rent in a Town/City location 3 people are in competition for the occupancy. As you can see this is causing great concern for prospective tenants across the whole of the UK, especially in the major Town/City areas.

On top of all these disturbing figures it is expected that the demand for rental properties is likely to increase well into 2018. Although there has been a significant increase in first time buyers securing a property many still cannot raise the necessary deposit.

Tax allowance loss begins to bite

Most landlords will know only to well that the loss of tax allowance benefits has started to take effect. To minimise any lost profitability landlords could adopt three ideas listed below. One solution, of course, may be to increase rents so that the extra cost is passed on to tenants - but this solution is far from ideal. Most tenants are already paying as much as they can afford, and you risk pricing yourself out of the market. However, if you think you will be affected, there are a few other things you can try.

1) You could switch your mortgage to a fixed rate deal to get lower rate of interest, please remember this is not always best advice and it’s recommended to seek professional advice.

2) You could place your property portfolio in a limited company structure. You would then pay corporation tax (which is lower) rather than income tax on your profits.

3) If your spouse pays a lower rate of tax, you could transfer ownership of one or more properties to them (taking care this does not lift them into a higher tax band).

Lenders are capping rate rises

Lenders are absorbing more costs to keep their buy-to-let rates competitive, according to data just released. Buy-to-let (BTL) lending margins have been squeezed throughout 2017, according to the latest results of the BTL Mortgage Costs Index.

BTL lenders, whose margins have been diminishing since July 2016, chose not to pass on the increases to borrowers. Instead, it seems they opted to squash their margins further, as they competed for every customer in light of the year-end lending targets.

The data revealed that, between the beginning and the end of 2017, average lender margins over swaps had declined by 0.53% points.