How Can You Make a Huge Profit From Buy-To-Let in the UK In 2017 – Tips from Experts

How Can You Make a Huge Profit From Buy-To-Let In the UK In 2017

In the UK, many people, especially those who are nearing their retirement, choose the option of investing in a buy-to-let property. This is a smart move, as it ensures that you receive a regular profit and add another stream to your existing monthly income or pension. Renting a property is always a good investment, but if you rent a room or a floor of your house, you may not find it comfortable to live in with the tenants. This is also one of the reasons why buy-to-let property in the UK is such an appealing business venture.

However, recently, the recent tax changes relating to the buy-to-let property in the UK has shaken some people and many have now decided to sell their properties instead of going along with the buy-to-let business. Many people are now left to wonder if investing in a buy-to-let property would be a good choice for them or not.

The tax changes, which were revealed in 2015 by former Chancellor George Osborne, will be phased in from 2017 and will be fully implemented by 2020. The landlords will not be able to subtract the mortgage interest, and instead, they would gain profit from a tax credit that is 20% of the cost of interest. In layman terms, this means that the taxpayers who pay a higher rate will be paying more tax.

Let us look into the tax changes in more detail.

The Tax Changes Relating to Buy-to-Let Property

The Tax Changes Relating to Buy-to-Let PropertyThe tax changes that will be applicable on buy-to-let properties would provide these scenarios:

  • The tax will not be on the profit, but on the turnover. This means that landlords will have to pay a higher tax rate now and there will be no reprieve if the rents do not rise but mortgages rates do
  • In some cases, the tax would exceed 100% as they would not only have to pay off all the profit in tax, but also some more tax, leading to a loss
  • Landlords who pay higher rates of tax would have their profits wiped out by the year 2020
  • Landlords who pay additional rate tax would have their profits wiped out when the mortgage rates rise to 68% of the rental income
  • Landlords who pay basic rate tax would be compelled to pay more tax

With all these gloomy scenarios, it is not surprising that many people are deciding to sell their properties that they have bought to rent.

However, it is not the end of buy-to-let in the UK, and there are still some ways to generate profits from your buy-to-let in 2017. In this post, we will be discussing just that.

How to Make a Profit from Your Buy-to-Let Property in 2017

There is one thing that you need to remember about a buy-to-let property: it is a business, not an investment. If you want to make sure that you keep reaping the great profits, you need to make sure that you are doing your best to keep the property in top shape and that you are not following the path of a scary landlord. You need to see and treat this as a business, and make clear, unemotional decisions. It also means that you will have to spend money on it regularly and not just leave it to be. When you are renting your property in the UK, you have many responsibilities that you need to take care of, and some of it includes paying for the repairs and any damages that might occur while the tenant lives under the roof.

1. Invest in a Property in a Good Location

Invest in a Property in a Good LocationA good location makes a huge difference. If the location provides a nearby access to transport, the neighbourhood is safe and friendly, then the rent can be charged for more, and if you offer some additional amenities, then you are sure to receive a hefty profit regularly. Thoroughly check the houses listed on property portals like Rightmove, Zoopla, PrimeLocation and NeedAProperty, and make a calculated choice about the property you need to buy-to-let in 2017. Many people mistakenly believe that a great house means one that is huge and beautifully constructed. Instead, the value of the house mostly lies in the area where it is located. You need to research the market a little bit, and scour the areas where the rents are likely to rise in the near future. While browsing the properties on sale, look for these important factors that affect the value of a house:

  • Are there train and bus stations nearby?
  • Are there any good schools in the area?
  • Are there any local parks in the area?
  • Is the neighbourhood safe?
  • Are there any restaurants, cafés or convenience shops nearby?

Understand that a good location would attract good tenants. If your house is located in a great area, you can get away with fewer furnishings in the house, too. Just make sure that the house that you select to put up for rent is the type of house that matches the needs of your target market. For instance, the students would need small, simple, affordable rooms, while families would require more features (bigger rooms, garden etc.) and would be likely to pay more, too.

2. Get a Good Buy-to-Let Mortgage

Getting a good buy-to-let mortgage is one of the most important ways to make profits. It is usual for the buy-to-let mortgages to be higher than the usual mortgages because they have more risk associated with them. They also need a higher deposit amount as well, with 25% being the minimum rate and 40% being the threshold rate for the better deals.

Despite this, there are some great buy-to-let mortgages available which you can make the use of. You only need to search for them. You can compare the rates of different mortgages here.

3. Structure as a Company

If you have bought your house under a company, then you will be able to pay a lower rate of tax than you would if you are buying to rent individually. All you have to do is to set up a special purpose vehicle to buy the property (it takes between £20 and £75) and select the Standard Industry Classification (SIC) code. If you have already bought the property, then you can transfer the property into a company.

One thing to be noted here is that if you structure as a company, you will have fewer options for buy-to-let mortgages.

4. Hire a Reliable Internet Estate Agent

Hire a Reliable Internet Estate AgentA reliable and trusty real estate agent makes a huge difference to the type of tenants you are able to attract by making sure that you receive proper guidance and feedback about the people interested in viewing your home. An online estate agent will do the job thoroughly and in addition to providing feedback, they will also get a credit check on the prospective tenants, too.

Planning to rent your property is a huge task, and it is always better to get professional help on your side. And what better to do this than an online estate agent? These agents are skilled in guiding their clients to the right tenants and help them in each step of the renting process, from listing the house on the most-visited property portals to the negotiation of the rent with the tenant.

If you are thinking about choosing a traditional real estate agent for renting your property, then take a step back and think again. A traditional real estate agent will not be available to you every hour of the day, every day of the week. But an internet estate agent would. Traditional real estate agents are often not so knowledgeable about managing online marketing, including uploading houses on the property portals, and providing you services that would help push your house on the top of the list among the other houses for rent. But an online estate agent would do this job successfully. Additionally, a brick-and-mortar estate agent would not be able to provide you the affordability online estate agents can offer.

Cost is an issue that you will be facing when investing in a buy-to-let property, and it is better that you go for the option that provides you the best services in the least amount of money. Hiring an internet estate agent would do this for you, as you would only be paying for their services and time. The problem why the traditional agents are so expensive is that they have to set aside money to maintain their physical presence—pay wages to the staff, keep the office clean and tidy, maintenance costs etc. These costs are taken from the amount that they charge their clients. But because the online estate agencies do not have a physical presence, their agents only receive the payment for their time and service, no more, no less. This means that you get the services from some of the most experienced agents and that, too, at an affordable rate!

If you are thinking that people who are working online would have no proper experience, or that they can easily fake their experience, well, there may be these fake agents, too. But the good news is that you can easily pick the legitimate agents in the online real estate business.

How so?

Simply check if the agent that you are interested in getting in touch with is a valid member of the Property Ombudsman or not. Being a member of a proper governing body would ensure that the agent has passed through the official screening process and is a legit agent with all the skills in the real estate industry that you are looking for.

5. Be Careful. Be Very, Very Careful

Be CarefulInvesting your money in a buy-to-let property is a risky business, and you need to make sure that you are able to face the financial risks that are tied to this business arrangement. With the tax changes, it is not a business feasible for any man on the street. You need to be able to comply with regulations before you are qualified to buy property to rent. For instance, you need to be able to earn at least £25,000 a year, and that you already have your own house to be able to qualify for the business of buy-to-rent.

You need to factor in all the various expenses that you will be required before you opt for the buy-to-let in 2017. You need to check your budget, and need to calculate if you can invest the amount that needs to be invested over time in the business. As a landlord, you will have many responsibilities that you would need to take care of, and you need to prepare yourself for that, too. Sometimes, you would need to make repairs, sometimes you would need to make updates in the home, and sometimes, you would need to put money in protecting the house from bad weather.

If you follow the aforementioned steps, you are more likely to make a huge profit despite the tax changes. Buying property to rent it in the UK is a business that you need to take care of, and nurture like a business. You need to constantly put in your efforts to maintain the property in order to keep it viable for the tenants for a long time.

If you are looking forward to rent your home that you have bought expressly for the purpose of renting, and you are searching for a reliable online estate agency to put your trust in, check out these renting packages by iMoveEstates and choose the package that suits you best!

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