How we restructured to become debt free and super tax efficient

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On paper, my spouse and I were worth £3,000,000 but the reality was that we had no savings, no money whatsoever to live on after paying our tax bills, and this was despite having rental income of £300,000 a year coming in.

View Full Article: How we restructured to become debt free and super tax efficient

Quitting landlords could fuel further drop in house prices

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Buy-to-let landlords will influence house prices if a large number choose to sell up, according to rating agency Moody’s.

The firm is predicting that prices will fall by 10% in the next two years due to persistently high inflation and the recent spike in lending rates.

Rental income

Landlords can pass on the costs of complying with regulatory requirements to ensure rental income supports mortgage payments, but for an average mortgage, this would mean raising rents by almost 20%, according to Bank of England estimates, says Moody’s. Rents are currently increasing by about 5% while it points to anecdotal evidence that landlords are choosing to sell properties instead, putting additional downward pressure on house prices.

The turbulent mortgage market has seen HSBC announce a removal of all its new business residential and buy-to-let products, with the deals set to be available again on Monday, with potentially higher mortgage rates. Amid fears of a further interest rate rise, it follows a similar announcement made by Nationwide, which raised fixed rates for new borrowing to maintain sustainability. Nearly 10% of mortgages have been taken off the market due to concerns about increasing interest rates, according to Moneyfacts.

Limited edition

Meanwhile, Paragon Bank has launched a range of limited edition buy-to-let mortgages. Nil fee five-year fixed rates are available for those purchasing or re-mortgaging single self-contained properties, with rates starting at 6.35%, or HMOs at 6.60%. Alternatively, landlords can choose a five-year fixed rate with a flat fee of £2,995, with rates starting at 6.05% for SSCs, or 6.30% for HMOs. The five-year fixed-rate deals are available at 65% loan-to-value on loans up to £500,000.

Commercial director Louisa Sedgwick says: “We’ve listened to brokers who have told us that nil and fixed fee options should appeal to landlords wanting higher loan amounts, up to £500,000, alongside the certainty of fixing rates for five years.”

View Full Article: Quitting landlords could fuel further drop in house prices

Holiday home owners top the rental income chart

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The average annual holiday let income exceeded buy-to-let income for the first time in 2020-21, reaching £15,600 compared with £13,400, according to HMRC.

Ten years ago, holiday lets generated about £9,600 a year compared with £12,800 for buy-to-let but the gulf has grown wider, pushing holiday let income up by an average of 63% in the past decade compared with just 5% for buy-to-let.

Available data

A Freedom of Information request by Hamptons reveals that 63,000 individuals (rather than a company) received income from 65,000 furnished holiday let properties in the UK according to the latest available data — up from 46,000 receiving income from 50,000 properties in 2011-12.

It also wanted to test the theory that some longer-term landlords had moved across to the short-let market because it was more lucrative. The results show that while some have, the numbers are still fairly small – just 1.5% of all landlords are also holiday let owners, up from about 1.3%.

However, the figures will no doubt fuel critics’ argument that investing in holiday properties is driving up prices in rural hotspots and creating a chronic shortage of rental properties. Six mostly Labour MPs are sponsoring an Early Day Motion that would establish a Short Term Holiday Let Licensing Scheme across England.

Business rates

For a property to qualify as a self-catered holiday let in England – let for at least 70 nights a year and available for at least 140 — owners can switch from paying council tax to business rates. However, if their annual business rates bill is less than £12,000 and they only rent out one property, they pay no tax.

David Fell, a senior analyst at Hamptons, says the number investing in holiday lets rose dramatically during the pandemic because so many more people were confined to staycations as a result of international travel restrictions. “While Covid undoubtedly distorted the market, the longer term upward trend in revenue predates Covid, and it’s a trend the government has been increasingly worried about,” he adds.

View Full Article: Holiday home owners top the rental income chart

Should Landlords Sell Their Buy-To-Let Properties in 2023?

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The buy-to-let market has long been an attractive investment avenue for those seeking steady income, but the increasing burden on landlords from legislative changes, market conditions and financial burdens are causing many to sell up. We’ll explore some of those factors to help landlords make an informed decision as to whether to sell or retain buy-to-let property.

A Changing Legislative Landscape

In recent years, the regulatory environment surrounding the buy-to-let market has become increasingly stringent. Landlords face several changes:

EPC Target Changes

As part of the UK government’s commitment to achieving net zero emissions by 2050, it has set new Energy Performance Certificate (EPC) targets whereby landlords must upgrade the energy efficiency in their buy-to-let properties. At present, properties need an (EPC) rating of at least ‘E’ to be legally let. But, starting from 2025, properties must attain a minimum EPC rating of ‘C’. This rule change will initially affect new tenancies, encompassing all tenancies from 2028.

The Renters Reform Bill

The Renters Reform Bill represents the most significant potential legislative change in the private rented sector in decades. A government white paper released in June 2022 outlined the contents of the Bill, which is now going through parliament and includes:

• Scrapping of Section 21 evictions
• Introduction of periodic tenancies
• Prohibition of blanket tenant bans
• Creation of a landlord ombudsman and property portal

These changes will inevitably lead to increased costs, reduced profitability, and extra administrative burdens for landlords. So, it’s no surprise then that more landlords are selling their buy to let properties than buying.

Additional Financial Burdens

Although there are benefits of owning a buy-to-let – a steady rental income and property appreciation over time – recent financial fluctuations have meant landlords have had to bear additional burdens that impact their profitability.

Increasing Interest Rates

Rising interest rates, which are predicted to reach upward of 5% by autumn 2023, will consequently affect mortgage rates. This will hit the two thirds of landlords reliant on a mortgage, meaning those landlords planning to refinance their buy-to-let properties in 2023 should expect higher costs.

Rental Market Stability

The stability of the rental market is a significant factor to consider. Shifting economic conditions, namely the cost-of-living crisis, have resulted in financial strain for renters at a time when landlords need to put up rental prices. This can lead to high tenant turnover, which involves additional costs and expensive vacant periods.

Capital Gains Tax

Recent years have witnessed substantial appreciation in the property market, providing landlords with the opportunity for significant gains when selling their buy-to-let properties. But, the decision to sell a buy-to-let may not be as financially rewarding as expected as landlords may be subject to capital gains tax when selling a rental property for a price higher than the initial purchase cost. Changes to the tax-free allowance for capital gains tax were implemented in April 2023, whereby the allowance of £12,300 per person was replaced by a new allowance of £6,000. From April 2024, this allowance will decrease to £3,000, which means that landlords who decide to sell their properties in the new tax year might face higher capital gains tax payments.

When considering whether to sell or hold onto a buy-to-let property, landlords must assess its financial viability and evaluate their own specific circumstances. Factors such as rental income, expenses, mortgage rates, and potential returns should be carefully weighed against increasingly stringent legislative changes. For tips and advice on selling a buy-to-let property, check out www.quickmovenow.com/advice/selling-a-buy-to-let-property

View Full Article: Should Landlords Sell Their Buy-To-Let Properties in 2023?

Landlord Crusader: Why we shouldn’t keep quiet about the Renters Reform Coalition

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I can’t keep quiet! Two stories on the same day on Property118 highlight what is wrong with the private rented sector – and if everyone concerned took a step back to understand the other side’s point of view, it would make everything a lot better.

View Full Article: Landlord Crusader: Why we shouldn’t keep quiet about the Renters Reform Coalition

PRS landlords feel ‘demonised’ by the media

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A staggering 81% of landlords believe that mainstream media coverage of the buy-to-let market is unjust and inaccurate, research has found.

The Landbay quarterly landlord survey reveals that despite the ever-growing demand for rental properties

View Full Article: PRS landlords feel ‘demonised’ by the media