Insight 17 | Landlords Are Leaping

15th December 2015 by Daniella Quaglia

For the past month we have been talking about how the Chancellor’s autumn statement looks set to reshape the property-investment market. Our Head of Sales and Lettings has put together his musings on the matter.

If by the end of the article you want to invest in a buy-to-let property before April 2016 we have a selection of suitable properties on our books. These aren’t all advertised on our website, so you need to give us a call on 0330 111 9766 to enquire. E.g. For Sale | Coventry | £120,000.

The extra 3 percent stamp-duty tax on second properties from next April plus the abolition of mortgage-interest relief for landlords from April 2017 could look as if the government is trying to curb the rental industry. Not so. We believe the moves are designed to favour large institutional investors, including pension funds, and other professional investors financing the development of a high-quality, custom-built rental sector. We also think that small landlords can continue to make excellent returns but only if they invest wisely and manage their investment with an agent who helps (that’ll be us then!).

The writing is on the wall for so-called accidental landlords, in exactly the same way as it was for student landlords. Legislation on multiple occupancy pushed the student market towards custom-built blocks by dedicated developers backed by private institutions. Over time this squeezed out the smaller private landlords, it didn’t make it impossible for them, but more difficult, so many sold their properties, which were often more suited to be family homes, to home-buyers. The students got much better accommodation, if more expensive, that they are willing to pay for. The same is poised to happen in the residential rental market. So whether you are now a landlord or not, how can you benefit from the coming rental revolution?

Weighing up the costs

It is important to note that the extra stamp duty is only paid on new purchases of buy-to-let and second-home properties, so a property you own now is not affected, unless you try to change the title deeds (by putting the property into a company).

There is still nothing to stop people who want to buy property to rent out from doing so, they still can and it can still be very profitable. Potential landlords will need to calculate whether they can afford to absorb the extra costs into mortgage payments, see yields decrease a little or whether the market will allow them to increase rents.

A property with attractive yields is Swan Lane, Coventry. View it here

Potential loopholes

Although much of the fine detail has yet to emerge, there are very few potential loopholes. One might exist when buyers upsize and, instead of selling, decide to rent out the property they are leaving.

Others have raised questions over downsizers who often buy a second home but retain their original home until they feel ready to move renting the new home in the interim or student accommodation bought for offspring which is empty, and ripe for rental, during a gap year. We understand that if, for example, a person buys a new home, but retains their original home, they will pay the additional stamp duty, but will be able to reclaim it if they sell their original home within 18 months.

Set up a buy-to-let company

If you want to buy properties for rental and avoid the extra stamp duty you will need to buy within a company. Rolling existing properties into a company will incur costs, including stamp duty, as the title deeds will need to be changed.

The Chancellor has said there is likely to be a stamp-duty exemption for companies buying more than 15 rental properties. So you will either need to buy 15 properties with your company or find 14 friends who also want to buy a property to join your company. This latter option could be complicated, with disputes over rights and equity. If you are not careful it could also constitute a fund and attract the attention of the Financial Services Authority.

According to the Buy to Let Britain report, the changes announced in the budget — lowering the tax relief for mortgage-interest payments for landlords from April 2017 — have already caused an increase in the number of landlords seeking to incorporate. Kent Reliance saw applications from limited companies surge immediately after the July budget. This has accelerated as landlords have absorbed the impact of the tax changes; in September, applications tripled year on year. One quarter of all buy-to-let mortgage finance demand is now through limited companies, up from 13 per cent a year ago, according to the report.

Buy a house boat

If none of the above appeals but you still fancy a second home or buy-to-let property, then forget bricks and mortar and buy a houseboat, caravan or mobile home — all are exempt from the new tax premium.

To discuss renting out a property, discovering more about our property management services or finding a new property to rent please call 0330 111 9766 or visit

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