Landlords looking to invest in buy-to-let property could enjoy huge opportunities by looking for investments outside of London and the South East.
The latest LendInvest buy-to-let index says that rental properties in London offer less attractive opportunities for investment when compared to other parts of the UK. The index takes into account the landlord’s stamp duty bills following recent tax changes and compares average house prices and rental yields to see what investors can buy for several different budgets.
For instance, the index reveals that landlords who buy multiple properties in the North West and North East will tend to generate the same, if not better, rental yields than landlords who buy one property in London for the same price. The Northern investment will also attract 50% less in stamp duty, too.
Landlords can buy as many as ten similar properties for the price of one in London
The chief executive of LendInvest, Christian Faes, said: “It is no surprise to find a landlord can buy as many as 10 similarly sized properties in some towns for the price of just one property in London. It is surprising that the non-capital properties offer an impressive rental yield and the smaller stamp duty bill, too.”
The current market for property in the UK is offering 'cross-country landlords' a huge opportunity to buy homes in other cities rather than where they live. Mr Faes added: “Thanks to their transport links to London, places like Southampton and Brighton are becoming more popular with commuters while the HS2 development will boost the Midlands and beyond.”
Landlords forming limited companies in order to grow
Meanwhile, buy-to-let landlords are increasingly likely to set up a limited company for their buy-to-let portfolio in the future than they are now, says Foundation Home Loans (FHL). The announcement comes after the lender revealed that it was tightening its buy-to-let lending criteria along with other finance firms.
FHL's commercial director, Simon Bayley, said the attractions for forming a limited company will become increasingly clear once mortgage interest tax relief changes begin to be felt. From April next year, the amount a landlord can claim against tax for mortgage interest will be reduced to the basic rate of tax - however, those who operate as a limited company will not be affected by the change.
Mr Bayley explained: “For a greater number of landlords, the option of a limited company is beginning to gain ground.”
