In particular, the changes to mortgage interest tax relief for rental properties held in an individual’s name – even though introduced on a phased-in basis – have meant that many landlords have needed to seriously consider the profitability of their property investment, and consider how they might take this forward.
A significant number of, what we might call, amateur landlords – those with a very small number of properties perhaps held in order to boost retirement income – might well have concluded that the current negatives outweigh the positive and decided to make their exit. It is however something of an irony that their properties are much more likely to have been bought by other landlords, rather than the first-time buyers who the Government might have hoped to have benefited from this supply of property.
However, overall, what we’ve tended to see is a hardening of landlord attitudes and involvement in the private rental sector. The costs of adding to portfolios might have grown – especially with the increase in stamp duty for additional property purchase – but landlords are nothing if not adaptable. We’ve seen this in the far greater utilisation of limited company vehicles in order to house and purchase property, and for those landlords reading this and considering how they might broaden their portfolios, it’s essential to get an understanding of how a limited company might work for you.
With the increase in running and administrative costs for landlords – let’s not forget landlords have been targeted in a number of other areas, both in terms of being able to secure affordable finance and ensuring they meet new tenant-friendly regulations – it’s perhaps not surprising that there is an ongoing search to ensure profitability remains sound.
Part of the way that landlords are judged to have done this is by increasing the yield obtainable from their portfolio – perhaps they have increased rents, or they have changed properties to illicit greater rental yield, or have looked to purchase properties with a greater opportunity to secure larger rents.
However, what has perhaps been overlooked is the ability to rework the existing portfolio’s finances in order to benefit from increased lender/mortgage competition in the market, secure cheaper rates, and thus increase yield and the return on investment.
There’s no doubting that portfolio landlords with quality properties and excellent tenants are much in demand from the specialist lending sector. Indeed, we might go as far as to say that they have never been catered for as well as they are now. Specialist lenders active in this area are not just highly knowledgeable but are also flexible, and they have a commitment to keep the administrative burden down and ensure portfolio landlords get the mortgages they want and need.
We’ve also seen, what you might call, more mainstream buy-to-let lenders entering the more specialist sector. The Mortgage Works – part of Nationwide Building Society – now offers limited company buy-to-let mortgages and this has reshaped the market. It may well be as a landlord that you can significantly reduce your finance costs because you now qualify for these mainstream buy-to-let lenders and the rates they offer.
Plus, even if you have more specialist circumstances, there has been a knock-on effect in terms of those new entrants and the changes they have generated from the rest of the market. It’s likely that your circumstances have changed and, certainly for portfolio landlords, there will be a strong opportunity to rebalance your high LTV properties with the lower LTV ones. [AS1]
Rates are incredibly competitive, particularly for five-year deals which are now touching the level of two-year products of recent times. The important point is to be able to analyse your current portfolio, its financial and mortgage situation, and to be able to secure access to the mortgages on offer.
Luckily, with technology platforms such as Lendlord, this can be done for you – add in the details of your portfolio and you’ll be automatically updated on remortgage opportunities, alerted when your special deals are about to expire, and you’ll receive research and analysis on when it might be best to move, what rates are achievable, and what this might mean to the profitability of your portfolio.
Financial costs are likely to be the biggest drain on profitability but, with today’s highly competitive market, you need to ensure you’re getting the best rates available. You, as a landlord, are much in demand – make sure you make the most of it.
