The Chancellor has swung his axe, and many landlords within the UK are rethinking their decisions to invest in the buy-to-let business. Impacting the property market are several factors, including mortgage rates, tax, and stamp duty. When the Government decided to review them, panic set in amongst property investors.
To set the scene, investors usually get their money (mortgage) from a bank or some financial lenders to acquire a property. As was previously in place, the Government operated a mortgage interest relief system, which allowed landlords of residential properties to reduce the cost of financing their newly acquired property, but changes to tax relief for residential landlords will see that the cost for finance is restricted to the basic rate of income Tax. And on top of that, the newly introduced Stamp Duty Land Tax means that landlords will now, from 1 April, 2016, pay an additional 3% on any new property acquired.
However, many experts believe that property investment business is still good business in 2016. In fact, The Week reports, “The property portal Rightmove has revealed that enquiries on its website from would-be investors rose by 30 per cent between June and September. It says that the number of new properties being offered for rent rose six per cent nationally and 15 per cent in London during this period.”
With the panic in the sector ebbing gradually, investors could yet gain, but they must learn the tips to investing wisely. Here are five of them.
- Research is the Key
Conducting a full survey of lending rates, tax rates, and capital gains is the first step. You wouldn’t want to buy a property and then discover that your mortgage is due, when the property has not started yielding gains. A survey is necessary since rates are not always stable. Since mortgage rate is crucial to the survival of property investment, you would do well to look at the rates of several lenders before making a final choice.
- Add Value to Your Property
By offering things that tenants are really looking for in a property, you could attract the best tenants who are willing to pay a premium for your property. There are plenty of guides about exactly how to improve your property online.
- Choose Your Target Location Wisely
Manchester-based property investor Robert Jones calls the kick to the property investment sector an opportunity. Rather than buying a property in a place where you want to live, you should consider buying one in a place where tenants are willing to move to. Ultimately, this means researching your prospective tenants’ demographics such as family size, income level, and age groups.
- Investing Professionally
Seeking financial and tax advice from professional property experts is invaluable before making your investment decisions.
- Simon Lambert from Thisismoney.co.uk advises that you go for rental yield. “To compare different property’s values use their yield: that is annual rent received as a percentage of the purchase price.” Say your property’s rent is £5,000 and the cost £145,000, your rental yield would be 3.5%. This method lets you know exactly how much you should gain over a long term basis.
Finally, before you invest in a property, ask anyone you know who has been there and done that. All of these tips will definitely save you from trouble when the grim days come again.