Is there a future for Buy-To-Let landlords?27th Jan, 17
Landlords were never the most loved of groups but during 2016 the UK government and the Bank of England seem to have turned very anti buy-to-let landlord so is it still worth becoming a landlord?
I will save you the suspense….
……yes there most definitely is…….
…….but the rest of the article is still worth a read….
All that can be said about the future with 100% certainty is that it will be more complex and tougher now for the buy-to-let landlord than it has been in the past, especially as the government and bank measures being phased in really start to take effect.
For example from 1st April 2016 you are now faced with an additional 3% stamp duty surcharge and you will have lost the 10% wear and tear allowance for furnished properties.
From April 2017 tax relief on mortgage interest payments is going to be replaced with a tax credit. This in itself will almost certainly effecting everyone with mortgaged properties to one degree or another.
If that is not enough the Bank of England has got in on the act introducing measure to tighten up on buy-to-let lending. This will effect anyone looking for new buy to let loans as well as those re-mortgaging (although it will only effect a re-mortgage if you want to release equity at the same time).
Reading this makes it sound all doom and gloom for buy to let investors but should you really scrap all your property investment plans as a result?
In short – of course not.
The important message is don’t panic. Instead educate yourself so you are prepared for these changes or if you don’t want to do it yourself ensure you have picked a trusted partner to look after you.
The question you need to ask yourself is “do I know the impact these changes will have on you?”. If the answer to that is no please take action now.
Always keep in mind that the government and the bank of England both know that people do need places to live and banks need to lend to survive. So these rules are not designed to stop buy-to-let lending but just make everyone stop and think that little bit more.
So far the tax increases announced by the chancellor in 2016 have had some impact but not as dramatic as many had predicted. It is clear then that buy-to-let is still seen as a safe and lucrative investment when done right. The only unknown at the moment is if landlords are doing their sums and preparing for the new future and not keeping their head in the sand only to be shocked when they get their 2017 tax bills.
So what I hear you cry. Everyone tells me if my costs as a landlord go up I will just increase my rent to compensate. That’s great but it is increasingly get to the point now that rents are already reaching the bounds of affordability. In London for example its not uncommon for 70% of an individual’s income to be spent on rent. What effect would a rent increase have on someone like that? How much more of income can be spent on rent especially if you consider wage inflation is at an all time low.
Rather than relying on increasing rents, landlords will be better off looking at ways to reduce their overheads.
Switching to a local but friendly online letting agent from a more expensive high street agent to find and manage tenancies could be a very easy step to take. Other options could include switching to a cheaper mortgage, reducing costs by letting properties unfurnished, and keeping a closer eye on maintenance bills. All aspects a great letting agent will be happy to help with.
Happy property investing and renting.
Written By Bo Ibrahim – Working successfully investing and renting property for himself and his clients.