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Top spots for buy to let named

Scotland has been crowned the best place for landlords to invest as research has shown the average yield for Scottish buy-to-let properties scoops the rest of the UK.

The findings from lettings platform Howsy, published today (October 2), showed Glasgow City was the overall best place to invest in buy-to-let property with a current rental yield of 7.5 per cent.

Midlothian and East Ayrshire, both in Scotland, were close behind with rental yields of 6.8 per cent, while Scottish county West Dunbartonshire was fourth at 6.7 per cent.

“After years of being slammed by regulatory changes making it harder to turn a profit, choosing where to invest has never been more important for landlords.”
Chris Sykes, broker at Private Finance
The research showed Burnley and Belfast were offering yields of 6.5 per cent, while Inverclyde offered 6.4 per cent, followed by Falkirk (6.3 per cent), the Western Isles (6.2 per cent) and Clackmannanshire (6.1 per cent) to complete the top 10.

Wales fared worst among the home countries with an average yield of 3.7 per cent compared with Scotland’s 5.7 per cent.

Landlords in England and Northern Ireland receive average yields of 4.1 per cent and 5.4 per cent respectively.

Chris Sykes, broker at Private Finance, said: “After years of being slammed by regulatory changes making it harder to turn a profit, choosing where to invest has never been more important for landlords.

“Generally speaking, properties further north tend to require a smaller initial investment. Glasgow, which tops Howsy’s list, has an average house price of just £135,121.

“Being a major city and university town, the area also benefits from strong rental demand so this combination of low property prices and decent regular rental income is a winning formula for investors.”

The buy-to-let market grew rapidly after the financial crisis but has since taken a beating as a number of tax and regulatory changes have hit landlords’ pockets.

How the rules changed:
An additional 3 per cent stamp duty surcharge, introduced in April 2016, was closely followed by the abolition of mortgage interest tax relief for landlords.

Landlords then took a further hit when a shake up of rules by the Prudential Regulation Authority meant buy-to-let borrowers were now subject to more stringent affordability testing.

The changes to mortgage relief have been phased into the system since April 2017, but by April 2020 landlords will be unable to deduct any of their mortgage expenses from taxable rental income.

Instead, they will receive a tax-credit based on 20 per cent (the current basic tax rate) of their mortgage interest payments.

Following the changes, landlords who were higher or additional-rate taxpayers would now only get refunds at the 20 per cent rate, rather than top rate of paid tax.

On top of this, landlords could also be forced into a higher tax bracket because they would need to declare the income that was used to pay the mortgage on their tax return.

Mr Sykes said mortgage repayments often represented a large chunk of landlords’ costs, so getting as low a rate as possible was important to achieve a profitable rental yield.

He said lenders were currently offering very competitive buy-to-let product rates, both as a result of the wider low-rate environment and in a bid to attract more business given the slowdown the sector has experienced in recent years so now was the right time for landlords to remortgage onto a “rock-bottom rate” to maximise their overall profits.

Founder and chief executive of Howsy, Calum Brannan, said technology had helped landlords connect with their tenants more easily which meant they were no longer restricted to investing within the local vicinity to keep tabs on their property or forced to pay large fees for an agent to do so.

He said: “This leaves them free to buy in one section of the market and invest in another to maximise their financial gain across the board.

“More accessibility via digital rental platforms now provides landlords with greater empowerment when managing their property portfolio and they can do so anytime, day or night, with greater peace of mind.”

The research also showed which locations offered the highest annual house price growth for those looking to buy.

North Devon topped the list with expected growth of 15 per cent, while Welsh locations Merthyr Tydfil and Blaenau Gwent came in second and third place.

England had the lowest annual house price growth of the home countries at 0.3 per cent, while Wales stormed ahead with 4.2 per cent.

Location:Annual House Price Growth:
North Devon15%
Merthyr Tydfil13%
Blaenau Gwent13%
Caerphilly11%
Camden10%
West Devon9%
Forest Heath9%
Rochdale9%
Monmouthshire9%
Trafford8%
Home countries: 
England0.3%
Wales4.2%
Scotland1.4%
Northern Ireland1.6%
United Kingdom0.7%

By Imogen Tew

Source: FT Adviser

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Average Buy to Let makes a return of just £2k a year pre-tax

The true cost of a being a landlord: Letting platform Howsy has revealed how the profitability of the buy-to-let sector is being squeezed due to the hidden costs of being a landlord, coupled with the financial penalties handed down from the Government via changes to stamp duty tax.

In recent times, the buy-to-let market has been considered a good investment for those with the financial means to operate within it, leading to a number of Government changes to dent this profitability through initiatives such as an increase in stamp duty tax.

Despite this, landlords are still considered to be ‘raking it in’, but Howsy has found that the average landlord is left with just £2,000 from an annual return of £13,000 once the hidden costs of being a landlord are paid for.

However, with the introduction section 24 mortgage interest relief restrictions and depending on the landlord’s tax status it is easily possible for this to be taxed into a loss!

The research shows that the initial start-up costs of Stamp Duty Tax (£6,663) and agency fees to find a tenant (£811) cost the average landlord £7,475 and that’s before the ongoing costs are considered.

According to a recent survey, the average landlord experiences 23.75 days of void periods a year during a tenancy, that’s an average of £535 a year.

What’s more, 73% of landlords buy with a mortgage and each and every year will see £6,921 paid out in interest as a result. Couple these costs with an additional £1,622 in agency management fees, an average annual maintenance and repair bill of £2,077 and you’re talking £11,147 per year.

In a worst-case scenario, UK landlords may also find themselves forced to stump up for additional unforeseen costs, such as the legal process to evict a tenant. While this doesn’t happen to everyone, there is a one in 500 chance that you will have to pay for bailiffs to evict a tenant from your property.  

What’s left?

Based on an average annual rental income of £8,112 divided by the average B2L property cost of £183,278, the average yield available is 4.4% – that’s an annual sum of £8,119.

Over the last decade, the capital appreciation of bricks and mortar has also averaged an increase of 2.85% a year, £5,223 in monetary terms. That means B2L landlords are seeing a return of £13,343 on their investment.

However, leaving start-up costs and unforeseen events out of the equation, once the average UK landlord has paid the ongoing costs associated with a buy-to-let property each year, they’re left with a profit of just £2,140.

Cost HeadingsCost Amount (£)
One-Offs Costs:£7,474.54
Ongoing Costs:£11,147
Average Annual B2L Return:£13,287
Average Annual B2L Return – Ongoing Costs£2,140

Costs Explained…

Cost HeadingsCost Amount (£)Notes/Sources
One-Offs Costs:
SDLT£1,165.00Initial stamp duty owed – Gov.uk
SDLT second home penalty£5,498.34Additional 3% – Gov.uk
Agency fees (tenant find)£811.20The minimum tenant find fee according to Which?
Total£7,474.54
Ongoing Costs:
Void periods£52723.75 days a year on average according to GoodLord
Mortgage Interest£6,920.7373% of B2L landlords have a mortgage according to Which?
Agency fees (management)£1,622.40The average annual management fee according to Which?
Maintenance & Repairs£2,077.00Average cost according to Pennington
Total£11,147
Positives:
Basis:
Avg annual rent£8,112Monthly average rent of £676 multiplied by 12
Avg B2L mortgage amount£132,075According to UK Finance
Avg house price£183,278Average B2L price according to Money Supermarket
Avg LTV72.06%
Avg equity£51,203
Return:
Annual Yield %4.4%Average annual rent divided by average B2L house price
Annual Yield ££8,064Average B2L house price multiplied by 4.4%
Capital appreciation per annum %2.9%Based on average property price change per annum over the last decade
Capital appreciation per annum ££5,223Source: ONS
Average Annual Return£13,287
Ongoing Costs£11,147
Final Annual Return£2,140

Source: Property118

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Further rule changes would damage BTL market

Regulation in the mortgage market is helpful but any more interference may create problems for brokers and their clients, delegates at the FTAdviser Financial Advice Forum in London were told.

In a panel session entitled “Buy-to-let: how professional landlords can overcome tax and legislative hurdles”, Andrew Montlake, director of Coreco, and Martin Stewart, director of London Money, said the current regulatory environment was generally positive for clients.

Mr Stewart said: “Regulation is nothing for people to be afraid of. A good broker with a good moral compass will always do a decent job for their clients. I don’t mind regulation per se.”

Mr Montlake agreed, saying: “Regulation has created an environment where good brokers can demonstrate their professionalism. This shows the public you are responsible and generally I think we are in a good position.”

But he cautioned: “I don’t want more regulation for the sake of it. If it does get rid of the amateur landlords, the charlatans, the so-called ‘dinner party property investors’, then I am all for regulation that helps make buy-to-let a more professional market.

“What I fear is there may be more changes ahead, that makes things more complicated and doesn’t really focus on what the client really wants and needs.”

Both men agreed there had been a change in the mortgage market, largely driven by government tinkering with stamp duty and tighter controls to weed out bad landlords.

This was visible in a slowdown in new buy-to-let enquiries for London Money and some delegates in the room.

Mr Stewart said he was pleased to see more “amateurs” leave the market and free up housing for first-time buyers but he felt regulation could do more to raise standards further.

However, while there has not so far been a glut of housing dumped back on the market by disgruntled buy-to-let investors, a “perfect storm” could be caused due to Brexit uncertainty, new governments and unknown elements that might see more of an exodus in 2021.

Most buy-to-let lenders are regulated by the Bank of England’s Prudential Regulation Authority (PRA).

In 2017, among other regulatory changes that endeavoured to take some of the heat out of the buy-to-let market, the PRA implemented rules on how much can be lent to potential buy-to-let investors, based on how much rent was being charged.

The rule is that when making a loan, the rent must cover at least 145 per cent of the mortgage payment when the interest rate is at least 5.5 per cent.

This followed the government’s reform of the rules governing BTL, which included a 3 per cent stamp duty surcharge for second homes and cuts to landlord tax relief.

As some delegates in the room commented, higher taxes and a lack of upward movement on rents – especially in London – have meant some landlords with smaller portfolios are not making enough of a profit to continue as a buy-to-let investor.

When asked what their clients are doing, some said their clients were selling, going outside of London, creating limited partnerships or getting their residential property exposure through property funds.

“We are certainly having to be much more holistic now as brokers”, said Mr Montlake. “Professionals can really add value to clients.”

By Simoney Kyriakou

Source: FT Adviser

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Bradford Landlord Fined For Failure To Repair Buy To Let Property

A Bradford landlord has been fined £2,500 for failing to repair one of his buy to let investment properties that had a leaking roof.

Bradford landlord, Mohammed Majeen Khan, failed to comply with a notice from Bradford Council ordering him to improve the property he owned.

Tenants of the Great Horton property, a family of six, had complained to the Council after Khan had failed to replace damage to the building’s roof, leading to water leaking in and damp spreading.

When Bradford Council officers visited on June 26 2018 they found a number of issues with the property in addition to the leaking roof. These included the absence of a working fire alarm system, the absence of any linked smoke detectors, and an inadequate number of working electrical sockets.

There were also other issues, including cupboards missing doors and the property was found to be a generally poor state.

The Bradford landlord failed to respond to a number of requests through to late October. He was given a two-week extension, to November 13, to carry out the work, but when the Council inspected in late November the works had still not been done. Another inspection in March found no work had been completed.

Further to the latest visit a prosecution of the Bradford landlord was brought by the council.

Khan, of Aireville Road, was not at court – Magistrates were told that he had phoned the court earlier in the morning to say that although he wanted his day in court, he woke up that morning to find he was not able to move his foot.

However, council prosecutor Harjit Ryatt pointed out that Khan had made similar last-minute calls before important meetings in the past.

He said: ‘Historically when asked to attend police interviews things have followed the same pattern – half an hour before the interview he’ll phone up to say he’s at a hospital appointment or has fallen ill. That is his modus operandi.’

Hearing this, magistrates agreed to go ahead with the case in his absence.

Bradford and Keighley Magistrates Court found Mr Khan guilty in his absence. Along with costs – the Bradford landlord will have to pay a total of £3,490.

Source: Residential Landlord

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More landlords opt for limited companies

Purchasing a buy-to-let property through a limited company is now more than twice as popular as buying as an individual, as more landlords are seeking out the most tax efficient methods.

Research from Precise Mortgages showed more than half of landlords (55 per cent) plan to use limited companies to buy properties in the year ahead — more than double the 24 per cent who intend to buy as an individual.

The findings also showed the number of landlords using limited companies to expand their portfolio was on the up, from 44 per cent at the end of 2018 to 53 per cent in the first three months of 2019.

Limited companies were the most popular among landlords with a portfolio of 11 or more properties — as 71 per cent of landlords in this sector used them for purchases — but it was also the dominant choice for those with 10 or fewer properties (51 per cent).

By comparison, only 27 per cent of landlords with 10 or fewer properties chose to buy as an individual.

The buy-to-let market grew rapidly after the financial crisis but has since taken a beating as a number of tax and regulatory changes have hit landlords’ pockets.

How the rules changed:

An additional 3 per cent stamp duty surcharge, introduced in April 2016, was closely followed by the abolition of mortgage interest tax relief for landlords.

Landlords then took a further hit when a shake up of rules by the Prudential Regulation Authority meant buy-to-let borrowers were now subject to more stringent affordability testing.

The changes to mortgage relief have been phased into the system since April 2017, but by April 2020 landlords will be unable to deduct any of their mortgage expenses from taxable rental income.

Instead, they will receive a tax-credit based on 20 per cent (the current basic tax rate) of their mortgage interest payments.

Following the changes, landlords who were higher or additional-rate taxpayers would now only get refunds at the 20 per cent rate, rather than top rate of paid tax.

On top of this, landlords could also be forced into a higher tax bracket because they would need to declare the income that was used to pay the mortgage on their tax return.

Based on a property yielding £950 in rent and a £600 mortgage per month, the landlord’s income could drop by about 57 per cent after the rule changes, from £2,520 to £1,080, as shown in the table:

Tax yearProportion of mortgage interest qualifying for 20% tax credit under previous systemProportion of mortgage interest qualifying for 20% tax credit under new systemTax billPost-tax and mortgage rental income
Prior to April 2017100%0%£1,680£2,520
2017-1875%25%£2,040£2,160
2018-1950%50%£2,400£1,800
2019-2025%75%£2,760£1,440
From April 20200%100%£3,120£1,080

Source: Which.co.uk

Due to the tax shake up, limited company status is more attractive to landlords as changes would not affect them and they can offset mortgage interest against profits which are subject to corporation tax instead of income tax rates, which is cheaper.

Interest coverage ratios on limited company applications are also lower than for most individual landlord applications, according to Precise.If landlords who are higher rate taxpayers hold properties directly in their own name, in some circumstances this additional tax can wipe out all profits.John Goodall, chief executive at Landbay

Alan Cleary, managing director of Precise Mortgages, said: “Despite the challenges in the market, professional landlords have still managed to grow their portfolios over the past year with the use of limited companies, and it will continue to be the most preferred purchase route particularly for those with larger portfolios.”

Mr Cleary said the increased use of limited company status was further evidence of how the buy-to-let market was changing and demonstrated how brokers and their clients needed “expert specialist support” when buying as a limited company or considering switching.

Traditional buy-to-let mortgages have also become more popular, according to the research, as nearly seven in ten (69 per cent) landlords now intend to fund their next portfolio purchase with such a policy, compared with 62 per cent at the end of 2018.

David Hollingworth, director at L&C Mortages, said: “With the changes to tax relief on mortgage interest being felt by many landlords that pay higher rate tax, there’s likely to be more considering the use of a limited company as they seek to grow a portfolio.

“Being able to set the cost of mortgage interest against income within the limited company will be the main draw and corporation tax is charged at lower rates.

“Tax advice should be a crucial part of the landlord’s decision to use a limited company and help them understand the practical considerations of setting up and using a company as well as the potential for personal tax when withdrawing income from the company.”

Mr Hollingworth added the growing number of mortgage options for those using limited companies would also help to give landlords more choice to improve the rates on such specialist products.

John Goodall, chief executive at Landbay, said he was seeing a significant increase in landlords who were borrowing within a limited company.

“If a landlord holds their buy-to-let properties within a company structure they will be taxed on profits in the usual way, and the interest they pay will be treated as a cost.”

The market has also seen a number of landlords leave the buy-to-let space due to the changes and in May, as research from Arla Propertymark showed the number of landlords selling their properties had increased by 25 per cent.

The number of new landlords coming to market also took a hit and the number of new buy-to-let purchases dropped 9.1 per cent year-on-year in March.

By Imogen Tew

Source: FT Adviser

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Buy To Let Property Rent Rises On The Up

The number of tenants experiencing rent rises in the private rental sector rose in January for the first time since September last year.

According to the latest January Private Rented Sector (PRS) Report from ARLA Propertymark, the number of tenants experiencing rent rises increased in January, with 26 per cent of agents witnessing landlords increasing them, compared to 18 per cent in December.

This is the highest figure recorded since September, when 31 per cent of tenants were experiencing rent rises in their private rental properties.

The year-on-year figure for rent rises in private rental properties is also up, rising by 7 per cent when compared to January 2018.

The uplift in the rate of rent rises in January has come despite the average number of available private rental properties also increasing on a monthly basis, up from 193 in December to 197 in January.

This is possibly due to the increase in tenant demand also registered in the month. Demand from prospective tenants increased in January, with the number of house-hunters registered per branch rising to 73 on average, compared to 50 in December.

ARLA Propertymark Chief Executive, David Cox, said: ‘This month’s results are another huge blow for tenants. With demand increasing by 46 per cent from December, and rents starting to rise in response to all of the cost increases landlords have experienced over the last few years, tenants are in for a rough ride.

‘Last month, there were three landlords selling their buy to let (BTL) properties per branch, and as landlords continue to exit the market, rent prices will only continue to rise.’

He continued: ‘With the Tenant Fees Act passing its final hurdle in the House of Commons and receiving Royal Assent this month, tenants will continue bearing the brunt, as agents and landlords start preparing for a post-tenant fees world.’

Source: Residential Landlord

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Buy-to-let: UK property investment hotspots in 2019

Experts reveal the five places where landlords and property investors could make a tidy profit this year.

With Brexit looming the prospects for the UK property market are even trickier to predict than usual in 2019.

But for those looking to invest in buy-to-let next year, experts believe there are a number of areas that could prove profitable whatever happens at Westminster and in Brussels.

Nottingham

According to the latest figures from Nationwide, the East Midlands property market experienced the second-highest growth rate in the country in the year to September.

On top of that, a student population of almost 40,000, many of whom want to live centrally, means there are plenty of potential tenants.

UK property

“Property prices in Nottingham are lower than the national average while the rental market is strong, making it a lucrative spot for landlords,” says Rob Bence, co-host of The Property Podcast.

“There are also a lot of planning applications currently being considered for major developments in the city meaning 2019 could be an exciting year for it. It’s currently under the radar for property investors, but I don’t expect that to last.”

Recent research by credit report specialists TotallyMoney showed two Nottingham postcodes were in the top five in the country for buy-to-let yields. NG1 in the city centre was the highest rated with an average yield of 12%. NG7 was in fifth place with almost 9%.

South Wales

Swansea and Newport in South Wales could both be hotspots in 2019, according to independent property strategist and investor Mike Frisby.

“Swansea is doing well because it’s always been affordable, yields are good there and demand is picking up,” he says.

UK property

Meanwhile, the recent scrapping of the toll on the Severn Bridge crossing between England and Wales could have a big effect in Newport.

“Getting rid of that charge will make Bristol commutable from Newport and it should lead to a big boost in demand,” Mike says.

The latest figures back up that view too. A recent Housesimple report showed property prices in Newport have risen by, on average, more than 8% in 2018.

“Cardiff is also doing well as a city but properties there are a bit pricier than in Swansea and Newport,” adds Mike.

Edinburgh

Recent figures from Zoopla show that properties in Edinburgh are the fastest selling in the country, taking just 22 days on average to shift.

The city’s housing market is buoyant with opportunities, according to the experts, in a number of areas.
Malcolm Leslie, Director of Residential Agency at Strutt & Parker says: “In terms of buy-to-let the Edinburgh market has been exceptionally strong over the last two years and a lot of that is driven by Airbnb.

“There can be spectacular returns for people investing for that reason. A really good property off the Royal Mile can yield spectacularly. And it’s all year round.”

UK property

But it’s not just about being close to the main tourist attractions and renting on a short-term basis.

“There are new developments going on in the east of the city in the old St James’s Centre,” says Malcolm. “That will pull values up in the east end and anywhere accessible to that.

“There is also regeneration going on in Haymarket in the west end. One area there, Dalry, looks like a very good place to invest.”

Liverpool

Liverpool’s property market was on course to reach a value of £1bn in 2018 and the total spent on house sales has more than doubled since 2012.

That’s according to a report, from property data and technology provider Search Acumen, which found the average house price among Liverpool residents has risen by almost £21,000 in five years, around 16%.

UK property

Rob Bence says: “Liverpool has seen huge investment over the last few years and there are several major development projects underway that will have a massive impact on the city.

“There’s a strong student population thanks to the city’s four universities and the city centre has been given a new lease of life in recent years and now boasts one of the most impressive food and drink scenes in the region, if not the country. Prices are rising but it’s still possible to grab hold of a bargain and achieve a strong yield.”

Birmingham

Birmingham is the UK’s second biggest city but it has lagged behind its competitors in recent years in terms of property price growth. The latest figures suggest that might be changing, though.

Official figures show Birmingham was the number one destination for people relocating from London last year, with over 7,000 making the switch.

UK property

“HS2 is being built to provide high-speed transport links from London and the local economy is strong,” says Mike Frisby.

“Also, a number of head offices have relocated to Birmingham from London and that means there are good job prospects and increased demand for housing.”

It’s not just Birmingham that could do well in that area either.

Mike says: “The whole of the Midlands is looking good because there are an awful lot of distribution warehouses being built and houses springing up nearby. That’s also creating demand for rental properties.

“The affordability there is good too because those areas can be cheaper than elsewhere, particularly in comparison to wages.”

Source: Love Money

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Is buy-to-let property a better investment than stocks?

Buy-to-let property has historically been a very popular for British investors. And in the past, they’ve generally done well from BTL, profiting from both house price appreciation and solid rental yields.

But is investing in a buy-to-let property a better idea than investing in the stock market? Right now, I’m not so sure. Here’s a look at four reasons stocks beat BTL as an investment in the current market environment.

Higher income

With UK property prices having soared in value over the last decade, the rental yields on offer from BTL properties are generally quite low at present. This is because rent prices haven’t kept up with property prices. While it’s still possible to find hot spots that do offer high rental yields if you do your research, the average nationwide rental yield is just 3.6% at the moment, according to insurance specialist Direct Line.

With stocks, you can potentially pick up a yield that’s significantly higher than that with much less effort. As I detailed here, it’s not that hard to put together a simple blue-chip portfolio that yields around 6% at present. Furthermore, if you invest within an ISA, that income will be tax-free. A 6% yield tax-free for doing nothing? That a no-brainer to me.

Less hassle

Another key advantage that stock market investing has over BTL property is that it’s significantly less hassle. With stocks, you can invest in a portfolio and then leave it to work for you. Essentially, you’re letting company management do all the hard work while you spend your time doing what you enjoy.

However, with BTL property there’s a whole lot of things that need to be taken care of. For example, you need to ensure that your property is always tenanted (with good tenants). If your property is without tenants for a few months, or your tenants don’t pay the rent, you may have to fork out the mortgage payments yourself. You also need to make sure all repairs are sorted out promptly. And don’t forget all the new BTL regulations that is making life more stressful for landlords, such as minimum energy ratings. In short, BTL is a lot of effort.

More liquidity

Another benefit of stocks is the liquidity that they offer. If you want to take some profits off the table and free up cash, you can. Hit the sell button and your money will be in your bank account within days. The same can’t be said for property. You can’t just sell one bedroom, can you? If you do want to sell your property, you’re looking at a lengthy process and a load of fees.

Better diversification

Lastly, stocks allow you to spread your money out more effectively than property does. With a BTL property, you’re putting all your eggs in one basket. What happens if UK property prices tank as a result of Brexit? In contrast, with stocks, you can invest in many different companies, sectors and geographical regions, and this can help lower your investment risk.

Buy-to-let property has been a good investment in the past, but with low yields on offer at present and new regulations making life more difficult for landlords, the asset class is losing appeal. In my view, a long-term investment in the stock market could be a better idea.

Source: Yahoo Finance UK

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Buy To Let Landlord Profitability Up In Third Quarter

Landlord profitability rose in the third quarter of this year, as buy to let property investors settled down with their portfolios.

The latest quarterly BM Solutions/ BVA BDRC Landlords Panel found that nearly nine out of ten landlords (88 per cent) reported a profit on their buy to let property portfolios in the last quarter, a rise of 2 per cent from quarter two.

Continuing the positive outlook, landlords are feeling slightly more upbeat when it comes to the near-term prospects for rental yields, the UK private rental sector and their own letting business compared to the third quarter of last year.

Average rental yields actually dropped during the third quarter from 6.2 per cent to 5.9 per cent. However, this followed a rise of 0.4 per cent in the second quarter.

The highest rental yields were enjoyed by landlords operating in the North West and Wales at 6.7 per cent and 6.3 per cent respectively. Rental yields are the lowest in Central London at an average of 5.3 per cent and Scotland at 4.7 per cent.

Tenant demand has also increased to the highest level since the second quarter of 2017, with Central London in particular seeing a 9 per cent rise in the proportion reporting increasing demand for rental properties and a 14 per cent fall in the number of landlords who feel that demand has decreased in the last three months.

The number of landlords increasing rents increased slightly to around a third, and the number intending to increase rents in the next six months was also up from 24 per cent to 27 per cent.

Head of BM Solutions, Phil Rickards, commented: ‘Despite many recent challenges to the buy to let market, it’s encouraging that more landlords have made a profit from their buy to let properties this quarter, and that landlords are feeling slightly more upbeat when it comes to the near-term prospects for rental yields, the UK Private Rental Sector (PRS) and their own letting business compared to Q3 last year.

‘For those speculating about the future of buy to let, the figures supporting tenant demand should help to dispel this myth.’

He continued: ‘Considering the much talked about shortage of housing supply, it is vital that we continue to support a healthy Private Rented Sector and with tenant demand scores improving, or remaining stable across all UK regions, it is clear that the PRS still has a very important part to play.’

Source: Residential Landlord

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4 reasons you don’t want to touch buy-to-let property right now

Buy-to-let property has historically been a very popular investment here in the UK. And that’s no surprise when you consider that in the past, BTL property owners could pocket passive income from rent, write off mortgage interest as a tax expense and, of course, profit from house price appreciation. Many investors viewed BTL investment as an alternative to a pension.

However, the landscape has changed dramatically in recent years due to taxation and regulatory changes, and the outlook for property as a long-term investment is a lot less certain now.

Here’s a look at four reasons why buy-to-let property may not be a great investment at the present time.

Low rental yields For starters, rental yields are quite low at present. This is due to the fact that house prices have skyrocketed in recent years and rental income has not kept up. While it’s hard to get an exact figure on current UK rental yields, research from insurance specialist Direct Line recently concluded that the nationwide average yield is around 3.6%. Of course, some areas will offer rental yields that are much higher than that, yet when you consider that you could easily pocket that kind of yield from a portfolio of stocks or funds, you have to ask yourself whether it’s actually worth the hassle of investing in property for that level of yield.

Falling property prices Then, you have to think about potential property price weakness as a result of Brexit. There’s no doubt property prices have fallen across many areas of the UK in the last year (London prices have fallen in each of the last five quarters) with buyers unprepared to meet sellers’ asking prices. Yet prices are still very high when you look at price-to-wage multiples. Could prices weaken further? I think it’s certainly possible.

Stamp duty Next, consider the stamp duty that you’ll need to pay to purchase a buy-to-let property:

Bracket Standard rate Buy-to-let/second home rate (1 April 2016)
Up to £125,000 0% 3%
£125,001 – £250,000 2% 5%
£250,001 – £925,000 5% 8%
£925,001 – £1.5m 10% 13%
Over £1.5m 12% 15%

There’s no denying those stamp duty rates are off-putting. For example, a £300,000 BTL property will set you back £14,000 in stamp duty.

Increased regulation Lastly, don’t forget all the new buy-to-let regulation that’s making life more difficult for landlords. For example, rental properties with new tenancies or renewed tenancies are now subject to minimum energy ratings, with landlords liable for big fines for renting out properties that don’t meet the new regulations.

Putting this all together, it appears that buy-to-let isn’t the automatic ticket to wealth that it once was. So what’s a good alternative?

Fantastic long-term returns To my mind, the stock market remains one of the easiest, and hassle-free, ways of generating long-term wealth.

While many people see stocks as risky, over the long-term the figures speak for themselves. For example, had you invested £10,000 in the FTSE 100 index back in August 1987, by August last year it would have grown to £106,000 when dividends were reinvested, representing an annualised gain of 8.2%.

When you consider that with stocks, you don’t have to worry about things like bad tenants, property repairs, or minimum energy ratings and that you can also spread your money over many different investments to lower your risk, stock market investing definitely has appeal. In my view, it’s a great alternative to buy-to-let.

Source: Investing