If you're thinking of making a buy-to-let property investment this year then there's certainly plenty to think about. For example, how will Brexit impact your investment, and what about the effect of the mortgage interest tax relief changes? This is our guide to your essential considerations for 2017...
The stamp duty surcharge
The now ex-Chancellor George Osborne successfully made himself quite unpopular last April by introducing an additional 3 percent surcharge on the purchase of second homes. This is how the new stamp duty land tax on second homes is calculated:
â— 3 percent on the first £125,000
â— 5 percent on the portion between £125,000 to £250,000
â— 8 percent on the portion between £250,000 to £925,000
â— 13 percent on the portion between £925,000 to £1.5 million
â— 15 percent on anything over £1.5 million
There have been many calls on current Chancellor Philip Hammond to cut or reverse the charge entirely, but for the time being you should certainly factor the extra costs into your buy-to-let property budget for the coming year.
Price versus value
Buying the right property type in an in-demand location is crucial to the success of your investment. Infrastructure changes, such as new developments and amenities nearby, as well as new travel links, have a knock-on effect on property prices, so do your research to find a property that'll produce a good yield now, and in the future.
The right finance type
How will you finance your second home property purchase in 2017? The two main options for BTL investors are to use the equity in an existing property, or a buy-to-let mortgage. Some investors choose to remortgage their first property and pay for the investment with the equity this releases. Alternatively, you could look at a BTL mortgage, in which case you'll need to prove to the lender that you can afford two mortgage repayments. You will also typically need a deposit of 25-40 percent to access the best deals.
Mortgage interest tax relief
This is a big change and something that could impact the profitability of your investment. From April 2017, new tax relief rules for landlords will be phased in that reduce the level of relief higher tax payers can claim on their mortgage interest repayments. Currently landlords can also deduct the cost of certain items from their rental income, such as estate agent fees and repairs, and this is also set to change.
New build or resale
There are a number of advantages and disadvantages associated with each. New build properties are likely to be more energy efficient and have modern appliances and materials. They can also be bought without becoming involved in a chain. However, you will have to pay a premium.
Resale properties have the benefit of being in an established neighbourhood and may have more character and charm. You'll also usually have more room to negotiate on price. The downside is that resale properties can be inefficient in terms of their energy usage and expensive improvements may have to be made to make them attractive to renters.
What about Brexit?
The Brexit factor really is the elephant in the room for lots of prospective buy-to-let investors. What impact will Brexit have on things like rental demand, rental price and property prices? It might not have any impact at all, but it is possible that curbs on migration into the UK could reduce demand in some areas, while a weak pound could lead to an increase in property prices as foreign investors look for a bargain.
Help is at hand
If you're thinking about making a buy-to-let property investment this year then help is at hand. At Martin & Co. Camberley, we will help you find the most in-demand property types, in the most popular areas for renters, to maximise the return on your investment.
t: 01276 691510