The buy to let market has faced a series of significant regulatory changes over the past year or so, with some commentators suggesting that the cumulative effect will be to kill it off.
Uncertainty is in the air, and being a landlord is not what it once was. As buy to let mortgage advisor, Grahame R Harwood, suggests. “When property was booming a certain degree of complacency may have crept in, where buy to let was considered an easy money-making option.”
Grahame R Harwood
“New regulations have changed that,” says Grahame. “Now, being a landlord means taking some serious professional advice to make long-term business decisions.”
When calculating their tax bills, higher rate taxpaying landlords used to be able to claim 40% tax relief on their mortgage interest costs. This tax relief has changed.
“As a landlord, the tax relief which you can offset against profits is reducing, and by 2020 it will be limited to 20%” Grahame advises. “Although you will be able to claim a 20% tax credit, this change is hitting high-earning landlords very hard indeed.”
Alongside this change is the end of the wear and tear allowance, and a ban on letting fees due to come in.
“These changes are against a background where buy to let regulation is tightening, and the stamp duty surcharge is biting”
“Being a landlord is becoming much more of a challenge,” observes Grahame.
“Let’s be clear, residential property can still be a very good investment,” Grahame states, “but to make it work, you need to be both strategic and business-minded in your approach.”
As a specialist in buy to let mortgages, Grahame’s role is akin to that of a professional business advisor, as he explains.
“The buy to let market is far from dead, but being a landlord is now more complex, and demanding”
“Property is not just an investment,” suggests Grahame, “it’s a business, requiring clear-sighted analysis and due diligence on the part of buy to let investors. It’s about having the right perspective from the start.”
What Grahame emphasises is that to unlock buy to let’s profitability you must be clear about what you’re investing in property for, and treat buy to let property investing as an acquired skill, which you must understand thoroughly.
“The concept of a casual investor in property is no longer sustainable,” he says. “This is a tough business but one with very attractive rewards, if you’re prepared to take the right advice to make it lucrative for you.”
Change is the one constant in the housing market, but it brings with it opportunity, for those prepared to work for it.
“Rental demand remains high, and many people lead far more flexible lives nowadays. Therefore, investing in buy to let has much to offer the smart investor”