Whether you are a seasoned or novice investor, it’s important to talk to the experts for the right help and advice according to your individual circumstances. In the meantime, we have put together some information that may help you to scale your portfolio in the right way.
This year the UK went into a recession following the pandemic. However, unlike previous recessions this one isn’t driven by finance – instead it has been caused by a health crisis. This is a once-in-a-generation event and although many people have found this year challenging, one area that has remained buoyant is the property market.
When the market re opened in June, all aspects of buying and selling property remained active even throughout the current tier restrictions. With built up demand, the news of the LBTT holiday until March 2021 and a change in buyer/tenant priorities, activity in the market has been unprecedented. Demand for buy-to-let is still high and it appears that property prices have been unaffected – in fact, house price growth predicted to sit at around 4% by the end of the year and is currently around 2% to 2.5% in Glasgow.
Location, location, location
It’s always going to be a safe bet investing in city centres and University towns. At present, houses are more in demand than apartments as people are looking for the option to work from home. According to recent research from Zoopla, five out of the top ten hotspots where landlords can find better rental returns are in Scotland. The property portal compared average rents across the UK for two-bedroom properties with how much they would typically cost for landlords to purchase and found that strong rental yields are clustered in Scotland and the north-east of England. Landlords in East Ayrshire, North Ayrshire, Inverclyde and Middlesborough can typically generate rental yields of 7.7%. In Glasgow and Stirling, typical yields were calculated at 7.6% and 7.5%.
Scotland has some of the UK’s most affordable buy-to-let property, although it does depend on how big a house you’re looking for. Zoopla found that out of the top 10 affordable cities in the UK, four of them were in Ayrshire.
It’s wise to spread your risk across different properties in order to offset any issues you may have with one of your rental properties. You could also diversify by looking at other asset classes within the property market such as HMO’s (which tend to offer very high rental yields) semi-commercial units which will help you to benefit from the stamp duty surcharge which is normally levied on investment properties. You can also consider diversify the geographical area – the location is vital and it’s worth looking at which cities and city regions are performing well.
Major buy-to-let lenders have launched some new products over the last few months, and increased the loan to value of their mortgages with some 75% deals available. Getting advice from an independent mortgage broker is key.
Investing through a Ltd. company
There is an increasing number of landlords who are choosing to register as a limited company to manage their portfolios. When the limited company owns the properties in a portfolio, the company also owns the profits – so as a landlord you may have to pay income tax on any money they’re paid by their limited company.
Limited companies pay corporation tax, not income tax and these rates are lower. As a director of a limited company you must keep accounts detailing all income and expenditure, and all purchases using company money must have a demonstrable benefit to the business.
Talk to us at Newton Letting about managing your property portfolio.