Changing times

According to a new survey 44% of landlords are planning to make changes to their present circumstances in direct response to tax changes imposed on the sector over the last 18 months. Since April 2016, three major tax changes have impacted landlords. Second home buyers have had to pay a 3% stamp duty surcharge, increasing tax on a £300,000 property from £5,000 to £14,000.

This was followed by the abolition of landlords’ ability to claim a 10% tax break for “wear and tear”, only letting them deduct the costs they incur. In a further blow, changes to mortgage interest tax relief were brought in from April, meaning landlords can only offset 75% of their mortgage interest against their profits. This will fall to 50% in 2018, 25% in 2019 and to zero by 2020 when it will be replaced by a 20% tax credit.

The vast majority of landlords are individuals who own one or two properties and use buy-to-let as a part-time income supplement, they are less likely to keep tabs on legislative changes. Worryingly the survey found 26% of respondents said they were unaware of changes affecting mortgage interest tax relief and a further 23% did not know about the additional 3% stamp duty payable on buy-to-let and second home purchases.

Landlords should act now!

The National Landlords Association (NLA) is urging landlords to re-mortgage, before it becomes a whole lot more difficult. Be sure to seek professional advice as it is not always best advice to re-mortgage as your existing deal may have penalties.

Obtaining new finance

The newest measures follow earlier attempts by the Bank of England's Prudential Regulation Authority (PRA) to cool the buy-to-let (BTL) market. And indeed, it's already having an impact, as 43% of landlords recently surveyed by the NLA stated that the process of obtaining finance has become more difficult since the start of the year.

Long term tenants

Whether you’re a seasoned investor or about to embark on your first buy-to-let property, the value of having good long-term tenants can never be under estimated. However, getting such tenants is not always simple, nor is it easy. Landlords can suffer from a high turnover of unsuitable tenants and the time and effort taken to replace occupants can be expensive. The ideal scenario is to have long-term tenants for your property who you can trust and get on with well.

What are the benefits?

The primary benefit of having long-term residents is that it establishes regular income from the property (negating any vacant periods where you won’t earn) and saves you the hassle of constantly advertising for prospective tenants. Furthermore, having a lower turnover of people living in your property means less chance of encountering a bad tenant, for example, one that neglects the house and causes expensive damage. Adding to this, you will not have the cost of cleaning and redecorating the property after each tenant moves out too.

Moreover, it helps to develop a trusting working relationship with the tenant and having happy ones can, in turn, result in good referrals, which is especially useful if you have multiple rental properties.

Good relationship

It is important when a new tenant moves in that you are there to deal with any initial queries or issues. Check in with them regularly and really listen to any concerns they may have, rather than dismiss them. It may slightly dent your pride to see that a tenant has issues with your property, but no house is perfect. If you need to visit the property for any minor fixes, it is a good opportunity to see how they are settling in and whether they are treating the property with care.

Assistance required?

If you are looking for a new or re-mortgage please make contact and one of our advisers will be happy to help.

Landlords still increasing portfolios

[It is very clear to us that all the recent unwelcome news regarding taxation of BTL’s has not dampened most landlord’s enthusiasm. In fact, a recent poll showed that one in six landlords are looking to increase their portfolios within the next 12 months. The poll also showed over 50% of landlords have or are considering incorporating their properties to protect long term profitability.

The demand for good quality rental property seems to increase monthly, a local estate agent in the South East said, “if the rental property is in good condition it won’t be on the market for long, especially if its 2 or 3 bedroomed and reasonably priced”.

Mortgage and re-mortgage business in this area is very active with investors in the main looking to re-mortgage to fix a rate for the longer term. The choice of buy-to-let mortgages is vast and still every week we are seeing new products coming onto the market especially in the corporate sector.

One of our advisers said, “It’s very obvious the investor is concerned by the potential rate rise with fixed rate deals being very popular”.