Why buy-to-let is cheaper than ever
When it comes to letting property, the news is filled with doom and gloom: landlords selling their portfolios, and news of yet more regulations making letting property trickier. With this in mind, why on earth are we suggesting that now is actually the best time to invest in the buy-to-let market?
In 2015, mortgage tax relief was abolished for landlords as part of the Section 24 Finance Bill, and this will start to have an impact on buy-to-let investors this January. Not only that, the criteria for buy-to-let mortgages were toughened towards the end of 2017. The effect of these changes has made many landlords stop to consider whether investing in property is still viable for them. Recent research from the National Association of Landlords (NLA) noted that 20% of landlords are planning to reduce or sell off their portfolios this year.
Our own Mortgage and Protection Advisor, James Grace, stated: “There is a lot of confusion in the buy-to-let market at the moment. This is down to the abolished mortgage tax relief for landlords, which has hit many investors. At the same time, lenders have toughened their criteria in terms of buy-to-let mortgages, and there have also been changes in legislation regarding Houses of Multiple Occupancy.
“At the moment, there is a lot of rejigging in our local area in terms of what people want from a buy-to-let. On top of that there’s also the extra stamp duty of 3% that was introduced a few years ago.”
We asked James: why is buy-to-let cheaper than ever?
“Buy-to-let is cheaper than ever because, despite the toughened criteria for lenders, competition has seen some interest rates drop to the lowest they’ve ever been for buy-to-let properties. Previously, you’d invariably have a mortgage that would be 1%, maybe 2%, more than a normal residential mortgage, whereas now we’re seeing that those rates are pretty much on par with what a normal residential mortgage would be.
“Despite all of the uncertainty in the buy-to-let market, the ONS are predicting that one in four people in the UK will be privately renting by 2021, so there’s a great opportunity for buy-to-let landlords to grow their property portfolio. Rents will rise by 3% as well, therefore landlords should increase their income.”
Are you finding landlords are becoming more positive about the market?
“Yes, if the business is set up properly as a limited company. For the majority of cases, that’s what I would advise. But, like anything, people need to seek proper professional advice and that’s something a mortgage broker can help facilitate.
“A broker can get you the best deal for your circumstances, and will also be able to refer you to an accountant and solicitor who will be able to set your business up properly so you can maximise the income that’s available to you.”
The local rental market
“At Alexander and Co, we cover a wide range of areas. I’m based in Dunstable and Luton, and we are seeing high demand for two and three-bedroom family homes, whereas in Aylesbury there are quite a few commuters that will be looking for one and two-bedroom apartments and flats, and it’s more expensive. We have a real mixture of rental properties across our portfolio.”
Final advice from James
“All of the changes in legislation will take a bit of time for people to understand, but there’s also a fantastic opportunity for people too. If you’ve got a good mortgage broker, if you’ve sought proper professional advice in terms of accountancy and setting up the company, then there are great opportunities out there. Before you take action, seek professional advice rather than sticking your head in the sand.”
If you’re looking for advice on how to maximise the potential of your lettings portfolio, call James on 01869 228400.