Buy-to-let – Is buy-to-let still a good investment option and how can I make the most of it?
As expected, we have seen a flurry of activity in the buy-to-let market, with investors looking to complete prior to the 31st March deadline when additional homes purchases will incur an extra 3 percent of stamp duty. The three key buy-to-let drivers continue to be retirement planning, long-term investment or as properties for children to use in the future.
Investors remain attracted to buy-to-let properties due to the prospect of good capital growth. In light of the change to mortgage interest tax relief being capped at 20 percent, however, to be phased in from April 2017, many investors who purchase using debt are becoming far more focused on potential yields.
Investors with larger budgets looking to invest in prime London residential markets are considering spreading their capital across multiple units of lower value, as opposed to purchasing one property for the combined value. This can help reduce your stamp duty liability.
Reducing your void period is also critical. I’d advise landlords to ensure your property is well presented on viewings to attract tenants quickly. If possible, try to market it between exchange and completion, to hopefully arrange a move in as soon as possible after the property completes. The more you can reduce the period during which the property sits empty – and earning no money – the better.
This is particularly relevant when purchasing a new home as a buy-to-let. With a significant pipeline of new-build stock coming to the rental market, prospective tenants have a large variety to choose from, so make sure your apartment stands out from the crowd. A well-dressed property is crucial to maximise the rental value, as you may be competing with other investors who have purchased very similar apartments in the same development.
You can offset some of the costs incurred against tax. Speak to an accountant to ensure you pay the correct amount of tax and, in some circumstances, if a different ownership structure might be more suited to your circumstances. Similarly, if your portfolio is geared (purchased using debt), make sure you have the right mortgage product and be prepared to shop around.