Landlords plan to add HMO’s

Over a fifth of landlords, 21%, intend to add houses in multiple occupation (HMO’s) to their portfolio over the next year, according to reports.

More than a third, 40%, of landlords plan to sell terraced houses in the year ahead, while only 8% of landlords intend to sell HMOs.

Data collected shows that HMOs saw the greatest average rental yields in Q2 at 6.3%, compared to the market average of 5.5%.

Currently rental yields are at a nine-year low, with average yields across all property types having dropped by 0.3% in Q2.

Landlords with between 11 and 19 properties saw the highest average yields at 5.9%, and landlords in the North West were the best region for yields, similarly averaging 5.9%.

Protecting the future

For most people, their properties are their most valuable asset. And for anyone with children, the consequence of not having made provision for estate planning may be devastating. Passing on rental property to loved ones, however, can be a complicated process filled with many potential pitfalls. But by taking appropriate steps to mitigate your inheritance tax (IHT) bill as well as avoiding capital gains tax (CGT), you can optimise the value of your property and protect the future income for your family.

Usually, if you want to transfer a buy to let (BTL) property to your children, CGT liability would apply because HMRC states that the parent received the market value of the property - even if the property was handed down for free. That CGT will be based on current market value, minus purchase price, minus capitalised refurbishment costs.

Currently, the rate of capital gains tax to be paid on BTL properties – after using the £11,700 CGT annual allowance – is 18% for basic rate taxpayers and 28% for higher rate taxpayers.

Landlords

Landlords struggling to make the maths work on a new mortgage are being offered the chance to qualify for the easier rules a five-year fixed rate delivers - but without locking in for that full period.

Strict rules limiting the amount landlords could borrow on a buy-to-let mortgage came in almost two years ago, but now one lender has come up with a product that eases the amount of rent a landlord must earn without locking them in for five years.

Since 2017 landlords have had to choose between committing to a fixed term mortgage deal for at least five years or facing stringent affordability rules which limit how much they can borrow in relation to their rental income.

But a new five-year fix from lender Foundation Home Loans allows borrowers to leave after three years without facing any early repayment charges - effectively giving them the flexibility of a three-year fix without the tougher affordability rules.

The deal comes in two forms, up to 65% loan-to-value at 3.30% and up to 75% loan-to-value at 3.55% - both quite expensive compared to existing deals on the market.

In for the long term

The Mortgage Lender has published a report which reveals that 84% of landlords say they are committed to the buy-to-let market and looking to maintain or increase the number of properties in their portfolios over the next 12 months.

The specialist lender’s report named The Landlord Experience, includes research among a panel of residential landlords, it reveals half of all landlords agree tax changes have reduced the number of private landlords.

Meanwhile, just one in eight landlords is seeking out specialist tax advice to help them manage their portfolios while only four in 10 are using a specialist buy-to-let mortgage broker when organising their borrowing.