Despite changes to tax policy, buy-to-let remains a hugely popular life goal for many people as one of the safest long-term investment strategies. Property feels real with tangible, visible and stable assets that shares, crypto and foreign exchange simply can’t match.
Nonetheless, the upfront costs of buying an investment property are some of the biggest barriers for landlords. Buy-to-let finance requires higher deposits than standard mortgages, and the second-home Stamp Duty supplement adds another large sum.
So the big question is: can you reduce your upfront buying costs for starting or expanding your lettings portfolio? Fortunately, the answer is yes, and in this week’s blog, we’ll show you how.
Did you know that if you’re married or in a registered civil partnership, you’re penalised over couples who haven’t yet tied the knot?
So if your plans include marriage as well as becoming a landlord, you could be thousands of pounds better off by buying a rental home before your wedding day.
If one of you doesn’t earn enough to get a mortgage on their own, look into Joint Borrower Sole Proprietor mortgages. These allow you to pool your joint incomes for greater buying power, with only one of you listed as the registered owner, thereby avoiding the extra Stamp Duty for second homes.
Despite all the makeover shows on TV, most buyers don’t want to live in a building site, particularly families and busy professionals. This often makes the market for unmodernised property sightly less frantic than for homes that are ready to move into.
Fixer-uppers cost less, which means lower Stamp Duty when you buy. They also give you the chance for potential extra equity if the combined purchase price and refurbishment costs are less than the value of the property after you’ve renovated.
Caution: employ an expert for works like wiring, installing a boiler, knocking down walls or anything that needs a safety certificate or building regulations. The DIY saving could cost you dearly if things go wrong later on.
While most buyers are chasing Victorian, Edwardian, 1930s or brand-new homes in the poshest streets, the smart and thrifty landlord can look at other options.
Tenants are usually far more flexible than buyers on exterior style and precise location, so why not use that to your advantage?
If you’re already a homeowner, the cheapest way to own your first rental property is to turn your home into a buy-to-let.
And if you’re freelancing or permanently working from home, you could use your freedom to experience new lifestyles and locations as a digital nomad. Fancy swapping the big city for country life, saying farewell to mountains and hello to the sea, or even a stint abroad? It’s all possible with a laptop and wi-fi.
Remember that buy-to-let mortgages come with lower loan-to-value ratios that generally top out at 80%. They’re also mostly based on the monthly rental income being at least 125% of the mortgage payments.
One of the main obstacles for landlords in starting or expanding their portfolio is the level of purchase tax. As well as the standard Stamp Duty rate, landlords pay a second-home supplement that adds an extra 3% to the purchase price - a significant upfront sum.
However, things change dramatically when you buy a limited company that owns investment property among its assets. Stamp Duty on shares is just 0.5%, with no second-home tax
Further ongoing benefits of owning your rental homes as a limited include:
While finance for limited companies isn’t as widely available as regular buy-to-let mortgages, more and more high street names offer products alongside specialist lenders. Speak to a financial adviser to get the full picture of what’s available to you.
What’s your next step?
There’s nothing we love more than working with local landlords who want to create and grow a profitable and popular buy-to-let business.
Give us a call on 01722 580059 or drop us a line at info@piccoloproperty.co.uk to talk about the lettings market in the Wilton & Salisbury area and how we can help you achieve even more success.
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