The Challenges –
- Stamp Duty
Until now, property buyers would pay stamp duty progressively based on how much over the stamp duty threshold their purchase is.
You would pay no stamp duty on the first £125,000, then 2 per cent on £125,001 to £250,000 and 5 per cent above £250,000 to £500,000, with rates continuing to step up above this.
However…this is set to change for buy-to-let landlords. From the start of April 2016, individuals buying rental property or second homes will now have to pay a minimum of 3 per cent on top of every purchase.
Stamp duty will be 3 per cent on homes between £40,001 and £125,000, 5 per cent up £250,000, and 8 per cent up to £500,000, with rates stepping up above that.
How We Overcome The Challenges-
- We have to negotiate harder on the purchase to ensure that we can continue to maximise the returns on each investment.
- Tighten up property purchase criteria- Become extra vigilant when offering. Select properties to reflect the increase in the spend via stamp duty changes. (e.g if you have a choice of x2 properties; select the property which will require less cash outlay after completion (requires less work) to be prepared for the rental market.)
- Purchase a property in an area with a mix between owner occupied/tenanted properties. It has become a lot more important to do this; not only should you focus on the yield and return, you also need to consider that better areas will offer a greater opportunity for future rental increases and property value increases.
The Positives –
1.There will always be a demand for rental properties.
Today a fifth of households rent from private landlords, according to Respublica. This could be because of rising house prices and a lack of affordability or just because people want flexibility.
Tenant demand remained high in the last quarter of 2015, according to Kent Reliance.
Of the landlords surveyed, 43 per cent indicated that demand was either ‘growing’ or ‘booming’, up 3 per cent on the previous quarter.
- Record-low mortgage rates
Mortgages in both the residential and buy-to-let sector have fallen to record levels, helped by the historically low Bank of England base rate of interest.
Landlords are also benefiting from increased choice of home loans as with no signs of interest rates rising in the near future there are plenty of competitive deals to snap up. There are now more than 1,000 buy-to-let mortgages on the market, up from just over 800 a year ago and 486 in 2012, according to Moneyfacts.
3.Rents will increase
According to Rentify, 70% of UK landlords believe that rents will increase due to low supply of properties available on the rental property market.
The majority of business people recognise that buy to let is a long-term investment that requires forethought and careful assessment of risk and reward. Those who are able
to adapt their strategy as circumstances demand will prevail. The demand for rental property is not going anywhere, and forward-thinking landlords will continue to be able to run profitable and successful businesses.
My Message To All Landlords –
“Keep On Keeping On! Putting A Roof Over Someones Head Will Never Go Out Of Fashion”