Information For Buy-To-Let Landlords

If you’re a landlord in the Private Rented Sector, there are many reasons to consider the benefits of the Somerset Estates REIT.

Perhaps you’re worried about the challenges posed to Buy-To-Let (BTL) landlords, and are looking for a way to maintain your income from property. Or, you may simply be exploring ways to reduce the stress of managing your property portfolio.

Whatever your situation, it’s important that you can make an informed decision about the future of your investment in the property sector.

Read on, to learn more about new challenges facing BTL landlords, and the ways in which the Somerset Estates REIT may be able to help you maintain a high-yield, low-risk income from property investment.

Challenges Facing BTL Landlords

For decades, many Buy-To-Let (BTL) landlords have cultivated a steady income from their property portfolio. The Private Rented Sector has offered landlords a profitable business environment that was tax-efficient, and unencumbered by high levels of Government-led regulations. However, the landscape is changing for landlords in the UK.

Tax Changes

Since 2015, there have been numerous changes to the way that landlords are taxed. The effect, is that your margins within your existing portfolio are likely to decrease, and the cost of acquiring new properties will significantly increase.

In particular, Section 24 of the Finance Act (no. 2) 2015 has become a cause of great concern to BTL landlords. A key part of this legislation, is the removal of mortgage interest relief: a sweeping change, that the National Landlords Association (NLA) estimates will amount to a loss of post-tax income in excess of £858 million from 2020 across the Private Rented Sector.

As a result of this legislation:

  • The NLA expect over 200K landlords to be affected by Section 24
  • Higher Rate taxpayers will be impacted, and Basic Rate taxpayers may be pushed into a higher tax bracket
  • Margins are likely to significantly decrease, necessitating rental increases

In addition to the removal of mortgage interest relief, BTL Landlords are now subject to a 3% increase in Stamp Duty Land Tax, introduced by the government in April 2016.

  • This will have a serious impact on the cost of acquiring new properties
  • Example: Stamp Duty on a £250K BTL property will now cost you an extra £7,500

Increasing Regulations

There is increasing pressure on landlords to comply with regulations - costing you time and money. In fact, it is estimated that there are now over 160 separate pieces of regulation covering residential property lettings. Examples include:

  • Right to Rent checks: failure to comply can cost you thousands
  • Deregulation Act 2015: it is now harder to evict bad tenants
  • Licensing: all UK landlords should prepare for mandatory licensing, which will increase your business overheads

Tougher Lending Criteria

If you’re looking to grow your property portfolio within the Private Rented Sector, you may find it harder to borrow the necessary funds. From the 1st October 2017 the Prudential Regulation Authority, part of the Bank of England, started to enforce tougher new lending criteria on BTL loans:

  • If you own four or more properties, your entire portfolio will be included in your affordability assessment.
  • The assessment will now include; your' tax liabilities, personal income and risk from possible increases in interest rates.
  • You may be required to provide proof of rent payments and a business plan to support a new application.
  • If your existing portfolio does not meet the requirements, lenders may refuse your mortgage application.

Lengthy exit period OR Owned properties are low liquidity assets

You may not need or want to sell any of your properties at the moment - but what about the future? One of the biggest challenging BTL landlords, is the time it takes to sell a property.

  • Selling a property is notoriously stressful and time consuming.
  • If you need to quickly access the money you invested in your BTL property, you may need to apply discounts to the sale price, in order to speed up the sale

However, shares in the Somerset Estates REIT will be a much more “liquid” asset than a property investment, as they will be listed on the Stock Market.

If you’re a landlord in the Private Rented Sector, and are worried about the challenges you face, the Somerset Estates REIT may be able to help you maintain a high-yield, low-risk income from property investment.

Why Consider A REIT?