There’s no denying that 2017 has been another challenging year for property investors. With more obstacles to overcome and inevitable changes in the pipeline, specialist Landlord Insurance provider Just Landlords looks at the investment choices that landlords have going into 2018…
Be prepared to change your strategy
The buy-to-let sector has faced a barrage of legislative and regulatory changes over the past couple of years, which could have left your portfolio a little worse for wear. In a changing market, you may find that you need to make changes to your investment strategy, in order to make your portfolio more profitable.
To be as prepared as possible for a potential change in strategy, start assessing how well your portfolio has performed over the past year and highlight any areas that need addressing. If you find severe issues, for example, if one of your properties is making a loss, then you know that you need to make changes in the New Year.
Consider moving to a limited company
One change that you could think about making is moving your property portfolio into a limited company structure. This particular adjustment relates specifically to the Government’s reduction in tax relief on landlords’ finance costs. If you operate as an individual landlord, then you may be aware of the changes, which have been brought in on a gradual basis from April 2017.
Next year, further reductions will be applied, so you should start looking at your taxes on a long-term basis, considering whether moving onto a limited company structure could be the best bet for you – limited companies are exempt from the changes.
Think about your whole portfolio
Furthermore, the Bank of England’s Prudential Regulation Authority (PRA) introduced some additional underwriting standards on portfolio landlords – those with four or more mortgaged properties – at the end of September this year. This could make it more difficult for you to expand your portfolio using mortgages in the future.
In addition, buy-to-let landlords also have the Government’s 3% Stamp Duty surcharge to consider when purchasing more properties. However, you must think about whether these short-term hurdles are significant enough to damage your portfolio in the long-term.
Look at how your portfolio is managed
While the Chancellor appeared to give landlords a break in his latest Budget announcement, 2018 is still set to bring with it some regulatory changes in the private rental sector, most notably a ban on letting agent fees for tenants. This could see agents pass these costs onto their landlord clients instead.
If your finances aren’t as healthy as they used to/should be, one option to think about is managing your properties yourself, rather than using a letting agent. However, you must ensure that you have enough time and knowledge to fulfil all of your legal obligations as a landlord before choosing to self-manage.
In such uncertain and shifting times, it can be difficult for investors to stay completely on top of all of the regulations and financial changes that they face. Remember that it’s wise to always seek professional advice before making financial decisions.