Buy to let property investors have become used to increased costs and legislative burdens over the last few years, but the latest tax changes and punitive 3% stamp duty premium must be proof positive that the current Government really doesn’t like small buy to let investors that much.
(Insider wonders in what other area you’d be charged more simply because you’re a property investor. ‘New Range Rover Sir? Certainly, but that’ll be an extra £2,560 because, err, you’re trying to invest sensibly and provide for your future.’)
So what’s the solution for intrepid property investors? Give up and sell up …. or a more positive approach?
At Property Insider we firmly believe now is definitely not the time to roll over. In fact, with demand for accommodation soaring while supply will most likely remain constrained the future still looks very positive for property investors who keep going.
What you do need to do however is address the new property investment climate, and look at what you can do differently or better in future. So in this report we will look at a few ideas for ways landlords can survive and even thrive in these seemingly landlord-unfriendly times:
* Cut out the deadwood. Review your portfolio. If any properties don’t fit in with your longer term plans –or if they are producing a poor return – consider whether you should sell them sooner rather than later.
* Consider whether you need to, or could, refinance your portfolio. Refinancing can be a relatively quick and easy way to make more money from your investments that doesn’t involve any physical changes to your portfolio.
Take independent expert advice on the best way to do this.
* Consider if, and whether, you should raise your rents. Many landlords have been content to leave their rents unchanged over the last few years. But at the end of the day rent appreciation should be a part of every property investment.
As a first step, check asking rents for similar properties in the local area to get a handle on whether you may be underpricing your property.
Remember, in every business, increased costs and taxes are always ultimately borne by the end consumer. Property is no different in this regard.
* Look at whether you should get involved with higher yielding residential property investments. For example, HMOs, student property or holiday property typically returns higher yields (although in return requires more work) than standard buy to let property.
If you are interested in this route look at if your existing property could be converted or, alternatively, at making a new purchase.
* If you are looking to buy more property, be more discerning about what you buy. Over the last few years you could pretty much buy any property and produce a good yield by renting it out – as well as offering good prospects for capital appreciation. Being frank though, these it’s probably unreasonable to expect that to be the case.
In the current climate achieving a good yield is more important than ever, and potentially more important than prospects for capital appreciation. When buying, only buy properties where the yield figures really stack up.
Generally, cheaper properties in cheaper areas offer investors higher rental yields.
For new purchases bear in mind that although the 3% stamp duty ‘premium’ seems high property price rises in most areas of the UK over the next year alone should comfortably match that.
* Look at how you could cut the costs of managing and running your rental properties, in order to mitigate the additional statutory costs and taxes. Could you do it yourself more cheaply than an agent? Could an agent do it more cheaply than you can do it yourself? How could you use new technology to become a more efficient landlord and investor?
* Look at how you own your properties, and whether you should change this approach for existing or new property investments. For example, how you could involve family members or a company to become more tax efficient. For the best results, take the best professional advice.
* Investigate other ways to make money in property. Buy to let has been the number one choice for a decade or more but, 30 years or so ago, it hardly existed at all – shrewd investors still managed to make money in property but used other approaches instead.
Alternative opportunities to consider include adding value to a property, including property development and property renovation.
* Keep tabs on alternative ways to invest in property. Although fairly rare at the moment these are likely to enjoy a higher profile in future.
For example, ownership vehicles like syndicates could become more attractive. Investing in property via crowdfunding may become more popular. Watch this space!