The Broker: Mortgage advice from the experts mouth - Should I bank on Buy to Let now?
Posted on 4 November 2016
After all the changes that have occurred over the last few months, is Buy to Let still the right move for me? With the publication of the PRA's consultation paper, you'd be forgiven for thinking that anyone who's contemplating entering the Buy to Let arena must have been living on Mars for the past couple of years.
Changes to the tax relief landlords could claim, a three per cent stamp duty surcharge, increasingly tightening criteria and rental calculations has hardly made Buy to Let look like the investment of choice over the past few months. This was certainly not when compared to the past six or seven years, when soaring property prices and attractive rents encouraged more people to be landlords. Gradually the tide has turned, especially in London and the South East, where rental yields have fallen and landlords are having to put in larger deposits to meet rental criteria. Plus, with house prices not forecast to carry on rising at heady levels, the time has come to get serious. It looks like the era of the 'amateur landlord' is over, and the new age of the 'professional landlord' has begun.
It's more important than ever to have a plan. So, what are you looking to achieve? Start thinking about how many properties you are planning to have, over what period and whether you should buy them in your name, or as a limited company. If you're looking to use this for retirement planning, when you hope to say goodbye to work in, say, 15 to 20 years' time, then it's most likely you need to look for property that will offer you good capital growth, rather than the highest rental yield. Then, once retirement approaches, it would be time to sell the growth asset and buy the one(s) that will produce the yield to boost your retirement income.
With all the changes looming, the choice of product is vital, too. In recent times, the two-year product has been exceptionally popular as prices have boomed and at the end of each period, landlords could take advantage of a new lower loan-to-value to release equity and maybe buy another investment property.
As price growth is slowing this scenario is going to become increasingly unlikely and with the best rental calculations almost certainly to come from the rates of five years or more, landlords are going to be looking at taking a longer term view.
Taking the correct tax advice is crucial, as there are so many considerations when deciding what is your best option. It is so important that all parties work towards the common goal and not in isolation.
It might not be as easy as it has been in the past, but as a broker working together with you and your tax adviser, Buy to Let is not something to steer clear of.
Interested in becoming a buy to let investor but not sure where to start? Call our experts now on: 0344 346 3672
The blog postings on this site solely reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.