Market dynamics change according to the change happening in the surroundings. In light of the new regulations, lending rules, and tax scenario, the buy-to-let market expects several changes.
If you are a landlord (or potential investor), then it is all the more essential to minimize overheads by cluing up on the obligations.
Pursuing knowledge about the rental yield, house prices, PRA and MESS rules and market statistics would make you capable of understanding the things better.
Here are some vital aspects that could be immensely useful:
Change in the Mortgage Interest Tax Relief
As per earlier rules, landlords were entitled to deduct the 100% mortgage interest cost from the income while calculating tax liability. However, in the new scenario, they are entitled to the deduction of 75% maximum.
Tax experts say that the figure will gradually drop by 25% per annum and in 2020-2021, they will be able to avail the basic rate tax reduction only.
Experts say that as the prices increase in London, it is a good idea to get the property re-valued. By doing this, you will be able to recalculate the LTV (Loan To Value). If the value is lower, then the interest rate you get is low.
Are you a portfolio landlord? Then you should know the new PRA rules
If you own four or more buy-to-let mortgage properties, then you are a portfolio landlord. Experts say that the new rules hit hard as far as portfolio landlords are concerned.
Why do they say it? Well, now onwards lender will check the entire property portfolio when you apply for a mortgage. If all other properties generate rent that is sufficient to cover mortgage but one property doesn’t, then the application will not get through.
Minimum Energy Efficiency Laws for landlords
Does your rental property meet the minimum energy efficiency standards? Do you know about the new rules? If not, then it is a high time to know about it and make the property compliant.
Every property that comes in the scope of MEES must get the energy performance certificate rating of E. In the absence of it; you will be liable for heavy penalties.
Being the landlord, you should get an updated EPC assessment on the rental property. Call a consultant to improve the energy efficiency if the EPC rating of your property is below E.
Acquire knowledge about the rental yields and house prices
Statistics show an annual price drop of 3% per annum which is quite disheartening fact to investors. However, it is equally true that the drop was more prominent in the expensive central boroughs of London. In the affordable boroughs, there was an increase in the price.
It is important that you grasp the concepts well before you put the hard earned money in properties. Investment experts recommend that people should give equal importance to capital appreciation and rental yield. It guarantees a successful investment. Location is an important aspect. The city of London has shown several comebacks after recessions. Hence, it is a forever right choice.