Is Property Development the New Buy-to-Let?

You don’t have to be an experienced landlord to have heard about the many new restrictions that have come into place for the buy-to-let industry in recent years. However, what you may not know is that many investors are now looking for alternative ways of making money – one such being in the development or flipping of property.

Person in yellow shirt painting a grey archway

So, is property development the new buy-to-let?

Recent Changes and Developments to Come

Stamp Duty on Buy-to-Let – As of April 1st 2016, the UK government has charged a higher rate of Stamp Duty Land Tax (SDLT) on purchases of additional residential properties. This has resulted in a 3% rise for Buy-to-Let property investors.

Tax Reliefs for Residential Landlords – As of April 2017, the amount of Income Tax relief landlords can receive on residential property finance costs has been restricted to the basic rate of tax. Finance costs are no longer taken into account when working out taxable property profits.

PRA Underwriting Buy-to-Let Standards – In September 2017, lenders must implement changes to the way Buy-to-Let mortgage applications are underwritten for portfolio landlords. This will likely mean more in-depth affordability assessments where a lender may ask to see a business plan and/or portfolio schedule if you already own multiple properties.

 

Read more: Could Buy-to-Let Changes See HMOs Surge in Popularity?

Why Property Development?

Although some property investors have been scared off by the buy-to-let changes, the majority have stuck around. Some are even diversifying and rethinking their strategies slightly to concentrate on developing property rather than simply investing and renting it out.

The reason for this could be the fact that there is a higher potential profit to be made in construction, than rental yields or market appreciation.

Furthermore, there has been much talk in the news of the housing shortage. Therefore, building or redeveloping and expanding existing property could help this deficit, as well as provide much needed jobs.

Of course, the downside is that property development will likely require more funds than purchasing and maintaining a buy-to-let. However, with help from an expert commercial finance broker, this could be attainable.

So, is property development the new buy-to-let? Not quite yet, however it is certainly becoming increasingly desirable.

Considering Property Development and Need Funding?

If you’re considering changing the types of investment you make, or are a novice in this sector, and require funds, our property development finance team can help. Learn more by reading some further content or get in touch to speak to one of our brokers direct on 02920 766565.

Article By Ben Lloyd

August 30th, 2017

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

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