The past couple of years have seen a raft of changes within the UK’s property market, particularly across the private rented sector, but most buy-to-let property investors are riding the waves.
While the goalposts within the buy-to-let sector continually move with the changing market, and political as well as economic uncertainty surrounding Brexit rages on, the formula for success within property investment tends to stay the same. There are some key steps that all property investors can take right now to maximise their potential profits over the long-term.
1. Stay ahead of the regulations
The law is always changing, and the private rented sector has seen its fair share of new legislation of late. Most recently, the Tenant Fees Act 2019 came into play this month, preventing tenants from being charged by landlords or agents for anything other than a set list of items (see here for more details). Tenant deposits have also been capped, and agents can no longer charge letting fees – a huge change. The regulation has caused ripples within the housing sector, with some speculating that while the rules are there to protect tenants, it is likely that agents will pass on their extra costs to landlords through management fees, who will in turn pass them onto tenants through rent increases.
There are also new rules surrounding the standard of rental accommodation, through the Homes (Fitness for Human Habitation) Act 2018 which came into effect in March this year. As well as this, buy-to-let landlords have seen changes to how much tax relief they can claim from their mortgage payments, which continues to be phased in until 2021. However, for landlords who are prepared to do their homework and stay ahead of the curve regarding the new regulations and legislation, the changes are a positive step towards improving the overall standard of the private rented sector.
2. Consider becoming a limited company
With the Section 24 tax changes meaning that less of a landlord’s mortgage interest payments can be offset against their tax bill, as well as the Prudential Regulation Authority (PRA) introducing stricter lending criteria for portfolio landlords seeking mortgages, operating as a limited company rather than an individual can lead to tax savings for some investors. While it won’t be the right option for everyone, as it does involve some costs at the outset, for some it might be the best way of succeeding in the sector.
3. Choose the right investment
Going back to basics, selecting the right investment will always lead to the best returns. In a difficult and shifting market, this is more important than ever, as go-to property investment hotspots such as London have seen huge dips while regional areas such as the north of England and the Midlands are thriving and seeing massive investment opportunities. Buying at the right time in an up and coming location can make a huge difference, although all property investments should still be seen from a long-term point of view. Some of the best locations to invest, according to the latest reports, include Liverpool and Manchester in the north-west.
4. Secure a good mortgage deal
Lenders are extremely competitive at the moment, with 2,396 buy-to-let mortgage products currently available, according to Moneyfacts – the highest level seen since October 2007. Although rates have crept up slightly, with a two-year fixed rate BTL mortgage rising by 0.17% compared to 12 months ago, now is still a good time to secure a relatively cheap deal. Particularly with the Section 24 mortgage relief changes affecting the bottom line for some landlords, proactively seeking out the most competitive mortgage rates can make a big difference. Going back to point 2, buy-to-let mortgages for limited companies in particular have soared over recent months, widening the options for thousands of landlords.