Buy-to-let has been going strong for as long as we can remember, and more than likely will continue to thrive as the years go by. But will recent changes to tax relief and stamp duty make buy-to-let a less effective way to invest?
Should you give up on buy to let or, is it still a useful driver of sustainable income? Let’s discuss.
Buy-to-let, as the name suggests is the act of buying something and letting it out to generate passive income. The rules in regards to buy-to-let are very similar to that of regular mortgages etc. however, there are some very specific differences you will need to know.
As much as buy-to-let property or buy-to-let mortgages take centre stage, there are other types of buy-to-let to consider. The most notable being buy-to-let cars, an alternative investment method to buy-to-let properties, but the same principle applies.
The most prominent changes to buy-to-let have affected property most of all, including tax relief, stamp duty and tenant demand.
The world of buy-to-let has changed quite considerably over the years, having seen both numerous positive and adverse effects.
Some of these changes are due to the vitality of the housing market, as a result of the economy and inflation. Whereas some of these changes are as a result of amendments to legislation and policies, both of which are outside of investors control.
One of the most noteworthy changes to buy-to-let is the scrapping of higher and additional rate tax relief on mortgage interest.
In essence, this means that landlords are no longer able to deduct the cost of interest on their mortgage and other loans from their rental income in order to reduce tax. This was gradually phased out and stopped altogether in April this year.
This is especially damaging to additional rate or higher rate taxpayers, as their tax bills will be much higher than they once were. Of course, you will still receive a tax credit for 20% off your mortgage interest payments, however, this is much less beneficial than previously.
Also, since all of these factors affect buy to let mortgages; if you’ve been fortunate enough to buy your property outright, none of these changes will make a difference to you.
A considerable mention also affecting the offsetting of costs, landlords previously were able to offset 10% of their annual rental income against their tax bill to cover the costs of fixing any wear and tear of the property. This is no longer the case.
In 2016, it was introduced that landlords would pay an additional 3% points in stamp duty on each band when purchasing a buy-to-let property.
However, earlier this year, chancellor Rishi Sunak announced a temporary overhaul to the stamp duty tax rates. Originally started in July 2020 and set to continue until March 2021. These changes could mean new buyers saving thousands of pounds, as the minimum threshold has been changed from £125,000 to £500,000.
Although you are exempt from paying stamp duty in a number of limited situations, even when buying to let. This is in the case that the property bought is under £40,000, or the property is a caravan, mobile home or something of similar value.
Despite this, there is still some hope for the buy-to-let investors. According to Rightmove’s survey on the UK rental market, tenant demand grew by 33% in May 2020 when compared to the same time period in 2019.
As property prices appear to be dropping as due to the current circumstances, furlough etc. fewer people are able to afford mortgages. This means that there has never been a better time to invest in both property and buy to let.
With house prices falling, you’re able to purchase/sustain a mortgage when the prices are low and sell when the market returns for a larger profit margin.
Despite mortgage rate changes, there has actually been positive changes in the mortgage sector. According to Buy Association, between May 2020 and June 2020, buy-to-let product numbers have surged by 280.
Rising from 1,455 to 1,735 options for landlords to choose from, meaning buy-to-let is still worth it for long-term investors due to the expansion in variety of mortgage products.
Apparently five-year fixed-rate mortgages have been the most popular, with a rise from 480 to 607 from May to June 2020.
With all these recent changes to buy-to-let, it begs the question is buy-to-let still worth it? Tax relief cuts, changes to stamp duty rates, and rising tenant demand and falling house prices constitutes both an argument for and against buy-to-let investments in 2020.
However, there is a strong case that buy-to-let is still worth it in today’s economy, if you’re smart. The profitability of buy-to-let can rest on a couple of factors.
Location – Of course, not everywhere in the UK is seeing a negative affect at this time. With the right research, you should be able to find the most profitable areas/industries that are currently low and expected to see growth.
Customers – This applies to both property and cars, who are you looking to let to? Who you’re selling to can play a big part in the profitability of your investment, the location, your options and your strategy.
Of course, there are other options if you’re looking for a more hands-off investment style that isn’t subject to fluctuating yield and interest rates.
While buy-to-let cars are often overshadowed by buy-to-let properties, our business model is proved to have worked time and time again, resulting in over 150 happy customers.
In a time when the market is so uncertain and most people are asking themselves “is buy-to-let still worth it?” our investment method brings reliability and high returns to an otherwise foggy table.
The whole premise behind Buy2LetCars is to invest, sit back, and watch your earnings grow without any trouble on your part. We deal with all the nitty gritty details, so you can get on with your life while your money is working hard towards your long-term financial goals.
Here at Buy2LetCars, we work to ensure that your buy-to-let investments are generating high, reliable returns for both residual, monthly income and a large gross payment at the end of the contract period.
Your money is invested over a three year period in which you’ll receive a minimum of 7% IRR, upwards to 11%.
These investments are used to source a fleet of vehicles, which are then leased out over three years to generate the monthly payments, and then subsequently sold on to fund your final, gross payment.
All you need to get started is a minimum of £7,000 to receive an interest rate upwards of 7% IRR. So whether you have £10,000, £20,000 or £100,000 our investments provide the perfect opportunity to prove buy-to-let is still worth it.
The rates detailed at the start of your contract are the same throughout, no nasty surprises, just honest, reliable, strong returns.
Like all investment options, our investments are not without risk. However, unlike the majority of others, our investments have a 100% history of payments made on-time in full. That’s right, we have zero defaults – meaning no missed payments, period.
We pride ourselves on providing a buy-to-let investment opportunity that generates all the strong returns you would expect, all with no stress on your part. We deal with everything from beginning to end, so you can simply invest and watch the money pour in.
Different from other buy-to-let investments such as property/mortgages that are fully hands on, require 24/7 support as a landlord and procedures to be followed to the dot – we handle all this for you.
Many of our investors have realised that B2LC is the best way to invest through buy-to-let. So whether you’re looking to retire early, fund your child’s future, or just move house, our investment is living, breathing proof that buy-to-let is still worth it in today’s economy.
Our investments begin at £7,000 and work all the way up to £100,000 plus. Of course, you’re free to invest whatever amount works for you. Whether you’re investing £10K, £30K or even £50K we provide you with interest from 7-11% IRR.
Using our returns calculator, you can work out exactly how much your money can make.
Buy2LetCars offers investments perfect for buy-to-let novices looking for a new, more sustainable source of income. With a minimum investment of £7,000 you can make up to 11% IRR.
If you are interested in our investment opportunities, contact our team today on 0203 823 1032, or get in touch using our enquiries form. If you prefer a face to face chat, come and meet us at our walk-in centre, found at 1 Bell Parade, Glebe Way, West Wickham, BR4 0RH.
We offer a no-obligation online presentation delivered by one of our experienced Consultants at any time convenient to yourself. Just click the button below to book your appointment.