November 1, 2017
British landlords have faced a tough time over the last 18 months. Those investing in residential property have had to absorb a three per cent stamp duty surcharge on all new property purchases since April 2016 and as of April this year, tax relief on buy-to-let mortgage interest has been cut back.
As an example of the impact of this stamp duty change, if a landlord bought a main residence for £100,000, they would pay no stamp duty as it is under the £125,000 limit. However, as a second home, a landlord would pay £3000.
In addition, newly introduced tighter lending criteria will arguably make it increasingly difficult for some investors to refinance.
It’s easy to overreact to these supposedly negative signals, but all is not lost when it comes to buy-to-let investing. Existing portfolios can continue to produce good income and capital growth, and in a low interest environment with significant geo-political uncertainties, many of the attractions of bricks-and-mortar remain.
Although house prices have fluctuated in recent years, property is still a relatively safe long-term investment and there are still profits to be made if investors can find the right deal.
A growing opportunity seems to be the increased demand for renting single rooms by those that are struggling to get onto the property ladder. A House of Multiple Occupation (HMO) or ‘multi-let’ is a rental property in which three or more tenants share amenities (wc, bathroom or kitchen facilities). These types of properties can appeal to students and young professionals and can generate increased rental income compared to traditional buy-to-lets.
There is also research to suggest that buy-to-let landlords aged over 55 years could access almost £50 billion through equity release. According to a report from Retirement Advantage, equity release could offer a financial boost at a time when landlords are seeing their income fall.
As a nation of property lovers, many who are in a position to invest can overlook commercial property. In recent years, this market has become an increasingly attractive investment and it can offer a relatively safe source of steady income.
The commercial property market is made up primarily of shops, industrial buildings (warehouses etc) and offices. Investors can typically invest directly by buying a fund that holds actual physical property in its portfolio or by buying a property, or indirectly by investing in property companies, developers and housebuilders, or in funds invested in those companies.
Investors can also buy shares directly in a REIT (Real Estate Investment Trust) such as Land Securities or British Land, which runs a portfolio of properties, although this is a far less diverse way to invest as it’s just one company.
As with any investment there are pros and cons to investing in commercial property and investors should ensure they take a well-diversified approach to avoid any sector specific risks.
If you are looking to invest, a financial planner can help you to assess your options and find the right solution for you. As the UK’s largest corporate Chartered planning firm, Fairstone offers a free initial consultation to all new clients.
Fairstone is a national financial advisory and wealth management group based in South Tyneside.
To arrange a free initial consultation email: firstname.lastname@example.org or call 0845 6050680