Limited company buy-to-let is the only way to buy?

Research found that only 17% of landlords with one to three properties plan to use limited company status. This makes perfect sense to us. Landlords with one or two properties can still be professional but their financial situation is likely to be very different from portfolio landlords with 100 properties.

Landlords who’ve opted to use buy-to-let as part of their pension planning; setting up and running a company for this type of landlord is almost certainly not going to be the right approach.

Tax advisers will consider their income position all around, as well as the income position of their partner and if overall income is less than £100,000 between partners, a limited company may not offer any financial benefit. Basic rate tax is now payable up to £50,000. A couple’s combined allowance is therefore £100,000.

That means the ‘loss’ of tax relief may not hit them – as even when the full changes come in, they will still be able to claim a tax credit of 20%. The change in regime does mean this is applied to revenue not profit as tax relief has been, but nevertheless, that’s a sizeable level of income annually to earn.

The second charge market is growing all the time – Landlords benefit

The second charge market known as “seconds” are particularly helpful for those who are struggling to access funds, such as self-employed or those with complex financial backgrounds.

Example, a second charge loan helped a self-employed couple who had been turned away by high street lenders. In the first year of their business they opted not to take a dividend or salary, reinvesting cash in their enterprise instead. This saw them fall outside the remit of mainstream banks. A second charge loan fitted this criterion and at a very advantageous rate, problem solved.

Myth busting the buy-to-let market

There’s been a lot of negativity flying around about buy-to-let, with commentators reeling off lists of woes facing landlords in today’s market.

But I’m not sure that’s fair. From where I am sitting the buy-to-let market is going great guns, with volumes growing steadily and appetite from landlords for both purchase and re-mortgage holding strong.

1st Myth, Landlords can’t remain profitable

This is utter fantasy. Some landlords won’t remain profitable as they feel the impact of losing tax relief on their mortgage interest. But to be honest, the number of landlords for whom this is true is low and getting lower.

The vast majority of landlords knew where their weak properties were and have already adjusted their portfolios to protect their profitability. We’ve seen a range of approaches to improving yields where the tax changes have bitten, including selling up one or two properties from a portfolio to pay more equity into their remaining properties, thus bringing down LTV and mortgage costs.

The long-term appeal

The long-term appeal of bricks and mortar outweighs short-term political uncertainty

Property investors are not letting Brexit get in the way of their strategy, according to research.

Research found nearly two-thirds of investors (64%) have not let Brexit impact their property investment decisions, with 45% having expanded their property portfolio since the EU referendum.

Just a small minority – 7% – have sold one or more homes as a direct result of Brexit.