January 27th, 2016. Ben Lloyd
A Guide to being a Landlord in 2016
2015 saw a lot of new laws and regulations announced that would have an impact on how landlords deal with their buy-to-lets in future. In fact, these changes have been so severe that around 10% of landlords have decided to sell up. But these changes don’t mean that you need to abandon your commercial property portfolio; if you have the determination and foresight to enter this market, then there is still a lot of money to be made in property.
Let’s take a quick look at the changes that will be coming in, and what this means to you.
Changes to Governance
As of April 2016, landlords will have to pay an extra 3% Stamp Duty on top of what’s already being paid. That means that the initial costs of purchasing a property are going up so, if you’re in a position to, now is the time to buy.
Landlords will also have to go through the same checks that a typical mortgage applicant goes through. This means that you will need to prove that the rent you will receive will make up more of the mortgage repayments and costs. But even if you do prove this, you may not have access to interest-only loans as the government is trying to curtail this type of financing.
What’s more, from 2017 landlords will no longer receive mortgage interest relief on their rental properties. That does mean that each property will be a little bit less profitable, but with a clever financial plan behind you this doesn’t have to be a negative change. We’ll also see the wear and tear costs being replaced with a new system that only allows landlords to deduct the exact cost; this is to stop people from cheating the system.
A more positive change is that landlords can now carry out Right to Rent checks. This means that you can now be sure that you’re letting your property to someone who has a right to stay in the UK, helping you to avoid a £3,000 per tenant fine if they’re illegally residing here. This should be carried out on all new tenants from February 1st 2016.
Being a Landlord in 2016
The good news for you is that 45% of landlords are planning on raising the cost of their rent in 2016, which means that you can too without much drama. This means that even though tax rates are going up, you can compensate for this by increasing the rent – how easy this is for you to do however, will depend on the contract you’ve created.
Additionally, you’ll be glad to hear that there are no other major changes to being a landlord. Health and safety regulations remain similar, which means that they need to be maintained and updated as necessary.
No changes have been made to the way in which tenancy agreements should be drawn up, what should be included or how to contest them etc. If you’re not sure about your obligations as a landlord then check the government website for more information.
All deposits still need to be done through a Tenancy Deposit Scheme, failure to do this could result in you having to pay your tenant three times the value of the initial deposit. This scheme really is in your favour, as it helps to reduce disputes and encourages your tenants to look after the property.
And, despite any changes in the market for landlords, the demand for buy-to-let properties will continue to be present in the coming years.
A report from PwC, conducted last year, highlighted that by 2025, there are likely to be more people renting that owning property with a mortgage.
It is expected that over the next 10 years, more than half of those between the ages of 20-39 (labelled as ‘Generation Rent’) will be privately renting – which is obviously great news for landlords.
If you’re looking to expand your property portfolio or enter the buy-to-let marketing, then get in touch with our expert BTL commercial mortgage brokers now; we’ll find the best deal possibly for your situation.
Article By Ben Lloyd
January 27th, 2016
Ben is the Director and Co-Founder of the Pure Group and Managing Director of Pure Property Finance.
Following a career in Barclays, where Ben was in the real estate finance team for 8 years, he decided that the market needed a more forward-thinking type of commercial brokerage so founded Pure Commercial Finance (now Pure Property Finance), the first company within the Pure Group.
Ben has extensive experience across the real estate sector and has participated in over £2bn of real estate transactions during the course of his career.
Ben oversees the general strategy at Pure Group and works with the senior leadership team to drive the Group forward. Ben is also on the Executive Committee of FIBA.See more articles by Ben