Buying property to let is a popular investment strategy. However, finding success in the market has become difficult in recent years due to changing regulations and economic uncertainty.
According to data from estate agent Hamptons, there has been a 120,000 person decrease in the number of landlords working in the UK over the past three years. The same company also found that in the first half of 2018 investors spent £5.2 billion less on buy-to-let property than in the first half of 2015, which amounted to a decrease of 30%.
These are changes that can, at least in part, be put down to the challenging conditions landlords are facing. Some of the regulatory changes landlords have had to deal with over the last few years include:
Despite this, many buy-to-let investors are still seeing profits from their investments. This is in part due to the resilience of the market, and in part due to landlords finding innovative ways to stay profitable.
Five Ways Landlords Can Innovate to Stay Successful in the Market
Choose the Right Investment
The most important thing people planning to buy-to-let can do is choose the right investment in the first place. This can be difficult in a changing market where traditionally strong locations like London have seen slight rent decreases.
However, there are always opportunities. May’s Your Move Rental Tracker found that while rent in London and the east of England decreased, the West Midlands boasted rent rises of 4% in April 2019 compared to the same month in 2018. This is significantly more than the nationwide average of 0.5%.
Additionally, investors could find joy by searching out property in areas that are likely to see values rise. Manchester, for example, currently has a strong property market and is outperforming other areas.
Choose the Right Loan
According to Moneyfacts, there were 2,396 buy-to-let mortgage products available in June, a rise of 142 when compared to the previous month.
While it’s not all good news — the average rate of a buy-to-let fixed rate mortgage increased slightly over the 12-month period — this shows that there is an abundance of options out there for buy-to-let investors.
With all these options available, it is important that landlords shop around in order to find a product that offers the best value. Choosing a mortgage with the most competitive rate could make a huge difference when it comes to staying competitive.
Start a Limited Company
Landlords with multiple properties may find that they pay less tax when they hold their properties under a limited company, rather than as an individual. This is because when you create a limited company you will pay corporation tax on your profits, i.e. after mortgage payments have been taken out.
However, the decision shouldn’t be taken lightly and there are significant costs you’ll have to balance out.
For example, mortgage rates for companies are more expensive than for individuals. This will eat into any potential tax savings.
Additionally, you’ll have to pay stamp duty when you transfer the property from you to your business. Finally, you’ll still need to pay tax if you pay yourself a dividend from your company.
Buy a Property and Increase its Value
Despite stalling house prices, it is still possible to negotiate a cheap price on an unloved property in a poor condition at a low value and then do it up.
While the process of renovating a house can be time-consuming and expensive, sometimes costing tens of thousands of pounds on top of the price of the house, if planned well it can still be cheaper than buying a house in a good condition.
You could also use this as a chance to optimise your house for your target tenant. When doing up the house you can put in place features that will make it more appealing to these people. This can help you maximise rental income once the renovation is complete.
If You Need a Loan, Reparo Can Help You Move at Speed
When you find a suitable buy-to-let property it can be important to move at speed to ensure the opportunity isn’t lost. Unfortunately, the process of applying for a mortgage can be long, sometimes taking up to an average of 60 days during high-volume months. This timeframe can become even more stretched if there are irregularities on your record.
This is where Reparo can help. As an independent lender with our own team of experts, we can quickly assess applications and complete deals within tight timeframes.
Additionally, our flexible service can help borrowers who are struggling to receive investment from traditional lenders. One of our team will always look at the specific circumstances of each applicant, ensuring a thorough due diligence process. To see how Reparo can help your business and discuss a loan of between £25,000 and £1 million, get in touch with one of our team on email@example.com or 0161 451 5710.