BUY-TO-LET GUIDE · on a daily basis, this guide has been created to provide landlords and investors with an overview of what is happening now. From hot topics including Brexit, buy-to-let

1UK Buy-to-Let Guide

GUIDETax

Relief Changes

Ask the Experts

Location Guide

Investor Tips

Build to Rent Focus

2017

BUY-TO-LET UK


Hello and welcome to Experience Invest’s 2017 UK Buy-to-Let Guide.

The UK’s residential buy-to-let

market has experienced a shake-

up in recent years. With property

prices, construction and housing

shortages making the headlines

on a daily basis, this guide has

been created to provide landlords

and investors with an overview of

what is happening now.

From hot topics including Brexit,

buy-to-let tax changes and the

rise of alternative asset classes,

this 2017 UK Buy-to-Let Guide

will provide key information,

industry insights and expert

analysis of the sector.

Take part in the conversation online and tag @ExpInvest with the hashtag #UKBuytoLetGuide if you have any questions.


Contents#UKBuytoLetGuide


Ask the Experts: Buy-to-Let Tax Changes

History of UK Buy-to-Let

Should you invest in Buy-to-Let in 2017?

Asset class league

What is Build to Rent and why is it important?

Where to invest?

6-13

14-19

17-23

24-27

28-29

30-31


the Experts: How will buy-to-let tax changes affect

landlords in

2017?

Ask From April 2017, the amount of tax relief that landlords of residential properties can claim for finance costs will be restricted to the basic-rate of Income Tax. With changes to HMRC tax relief on buy-to-let mortgage interest just around the corner, Experience Invest asks industry experts what less income tax relief will mean for landlords, tenants, and investors.

Mark Lawrinson, Regional Director, Portico London Estate Agents

“There’s no doubt the upcoming tax changes will makes things more difficult for landlords, but the first thing to note is that landlords who are basic rate tax payers (earning less than about £40k), or those without a mortgage, won’t be affected at all. Secondly, there are steps landlords can take to try and cut their interest costs. The first being re-mortgaging. Buy-to-let mortgage interest rates have fallen significantly in recent years, so deals currently on the market may well be substantially better than on products arranged a few years ago. “With large increases in property prices in London, another tip is to get your rental property re-valued. This will make your lender recalculate your LTV, and a lower LTV means a better interest rate and a larger choice of lenders.”

Rose Jinks, on behalf of specialist Landlord Insurance provider Just Landlords

“While the reduction in tax relief is spreading panic through the buy-to-let sector, it’s important to note that many landlords won’t be affected by the change.

“We’re certainly seeing that most of our Landlord Insurance policies are still for individual landlords, rather than limited company operators, which should provide confidence to those worried about their investments.“Although swapping to a limited company structure could be beneficial for your business, now is the perfect time to analyse all of your options and weigh up whether moving to a limited company in order to avoid the change will actually be worthwhile. You may find that the higher interest rate on limited company buy-to-let mortgages completely cancels out the benefits of dodging the tax relief reduction. For our customers, it certainly seems that sticking with the traditional structure is the best way to go.”

Isla MacFarlane Digital News Editor Show House

“Changes to the mortgage interest rate relief will irreparably dent the buy-let-let business model. A ban on tenant fees and 3% stamp duty surcharge may have made some wannabe landlords think twice, but most buy-to-let investors are in it for the long term and such costs could easily be recouped over 10-20 years. Not so with the loss of buy-to-let tax relief, which will permanently cripple profitability.

“While investors are free to leave the market in search of higher yields, tenants still need somewhere to live. Fewer rental homes and higher expenses for landlords are likely to translate into higher rents. The obvious way for the government to tackle this is to encourage large-scale institutional investment in the private rented sector. Purpose-built accommodation that delivers a yield premium to investors would boost supply without depriving first-time buyers. Britain’s homeownership dream has been waning for some time, and Build to Rent is a kinder alternative to an under-supplied, over-burdened rental market.”

Paul Routledge, CEO of TenantReferencingUK.com

“Personally, I think that the tax changes will put



Professional landlords, who treat their property portfolio as a business, have already started adapting to try and minimise the negative impact of new changes – mounting legal challenges against Section 24 and incorporating to avoid tax relief cuts. However, “accidental” or DIY landlords are in a very different position and are far, far less likely to adopt the same types of strategies.

“While professional landlords may well look to incorporation and rent rises as a solution, private DIY landlords are more likely to look elsewhere for cost-cutting measures. We are seeing more and more landlords deciding to ditch the traditional full management letting agency service and instead opting to manage their properties themselves. This allows them to recoup the 10-15% of monthly rent that they would be paying their agent, and gives a little more wriggle room to absorb additional tax costs.

“Many of the single-property private landlords we

speak to have incredibly good relationships with their tenants and feel it is unfair to pass on the increased costs by way of a rent rise. As a result of this, I believe we will see more and more landlords shopping around and trying to save money on every aspect of the letting process – from advertising their property to repair costs and everything in between. Unfortunately, even with many landlords viewing rent rises as a last resort, there will undoubtedly be a significant number of tenants who end up as unintended victims of the BTL clampdown.”

Kate Faulkner, property analyst atwww.propertychecklists.co.uk

“The government has decided to make buy-to-let less attractive from an investors perspective and in the meantime, make financial investment more attractive. As a result, it is vital that buy-to-let investors are able to compare what they currently earn from their property, both from an income and

landlords off the UK buy to let market. Landlords are already selling their residential portfolios; I’m actually in the process of selling my portfolio at the moment for this exact reason. “I don’t believe renters will get a fairer deal out of it, as there will always be a demand for rented property and a shortage just drives up the price and drives down the conditions - that’s a simple fact of life when demand outstrips supply.

“I can’t see that first-time buyers will really benefit much either, as there is not one of my tenants that could afford to buy their own home at the moment.

“The most embarrassing thing for me is the so-called government of this country do not understand the most basic principles of life, let alone the ins and outs of the private rented sector.”

Keith Osborne, editor Whathouse.com

“The tax changes alter the very basis of calculating

landlords’ income, and this will have most effect on those who use a property to top up income, where the profit still kept them below the higher tax threshold. Calculating on rental revenue from now on will bring far more of them to the higher rate, with the increased tax fundamentally affecting the property’s worth as an investment asset. With potential new investors having already been put off by substantial stamp duty hikes for the last couple of years, this change looks to put the boot in to existing investors too. Those unable to get a decent return on their modest savings as a consequence of the record low base rate for the last few years now have on alternative to provide a satisfactory yield.”

Nick Marr, Co-founder of property marketplace TheHouseShop.com

“There is no doubt that many landlords are feeling unjustly targeted by the raft of new legislation and tax changes that are heading their way.



potential capital growth perspective, to what they will earn in the future, and then compare this to investing in financial assets – which can be ones which are property related.

“For those that have invested for some time, it may mean restructuring your portfolio to ensure it all remains profitable. For those new to buy-to-let, you must understand the tax implications before investing and also know if you will lose benefits, such as child benefit, if rental income takes you above the tax threshold.”

Karl Hopkins on behalf of Residential Landlords

“Restriction of tax relief on finance costs will not make buy-to-let a less viable form of investment. However the change, which is being phased in over four years, will alter the dynamics for those landlords who have highly geared portfolios.

“In such cases, where mortgage repayments will take up a substantial part of rental income, some careful calculations and probably some re-calibration will be needed. For example, those with unrealised capital gains may find it to their advantage to cut back on the size of their portfolios so as to reduce their gearing and any reliance they may have on the existing tax regime for the sustainability of their mortgage repayments.

“Companies are not affected by the change, which may make incorporation more attractive buy-to-let investment vehicles in the future. However, simply switching from individual or partnership to company status is not likely to be an option for most private landlords, since it would almost certainly mean that property titles would have to be transferred to the new company and mortgages would have to be re-negotiated.”

Dale Anderson, Project Manager at Experience Invest

“In light of tax changes and the 3% Stamp Duty levy, buy-to-let property investors should consider their options carefully to determine what is best for their property portfolio.

“Investors may wish enter an off plan property investment as they tend to be cash only deals and are generally priced at a lower entry level when compared to completed properties. Investors can often secure a discount on off plan properties and benefit from any price growth throughout construction. Although the additional 3% Stamp Duty rate will be applied, investors will not be affected by the new tax relief changes when purchasing this type of asset.

“We have seen more interest in commercial offices, hotels and student properties in recent months as investors seek an alternative way to secure rental returns from property. Our buy-to-let investors have shifted their attention to top performing regional cities such as Liverpool and Manchester, to reduce their initial outgoings and to secure higher than average rental returns.”

Impact of tax relief changes on limited companies Limited companies will not be affected by tax

relief changes. This is perhaps why Kent Reliance

building society reported that 100,000 limited

company loans were taken out in the first nine

months of 2016 – twice the amount taken out in

2015.

Crunch online accounting agency has advised that

landlords should think carefully before going down

the limited company route and suggests taking the

advice of a trusted accountant before taking action.

“With changes to the way buy-to-let landlords are

taxed due to come into force this April, it’s a good

time to review your property portfolio and how it’s

structured.

“One action that could minimise the impact of



the changes is to form a limited company - all

profits will then only be subject to Corporation Tax

(currently 20%, but due to fall to 17% by 2020).

Whether this is best for you depends on your

individual circumstances, but if you’ve more than

one property with reasonably high borrowing,

forming a limited company could be a good option.

“The limited company route is more suited to those

who can afford to leave the profits in the business.

If you need to regularly withdraw the profits, you’ll

end up paying both corporation tax and dividend

tax.

“As always, we’d recommend speaking to an

accountant before taking any action.

“There are other considerations, including the fact

that transferring property ownership to a limited

company incurs costs, such as Capital Gains Tax

(the difference between current market value and

the price you originally paid) and Stamp Duty. You’ll

also be liable to pay any early redemption fees on

your current mortgage deals - your lender will be

able to advise you further on this.”

Ray Boulger from independent mortgage experts

John Charcol

“Now is a good time for landlords to seek specialist

advice as there is not a one-size-fits-all solution.

“The new way to calculate income may push lower

rate tax payers into the 40% tax bracket. There

will be a substantial effect on landlords who

receive child benefits – especially those who have

more than one child – and for those who will find

themselves in the 45% tax bracket.

“Landlords should look for sensible alternatives

which will vary for new investors and established

landlords.

“For new purchases setting up as a limited

company is one option, as properties held in a

limited company structure still qualify for tax

deductible mortgage interest rates.

“However, the impact of Capital Gains Tax and

Stamp Duty Land Tax will often mean it is not

worth switching properties already owned to a

limited company structure.

“Most existing landlords, especially those with

large portfolios, may feel that it is not worth

switching as the sums may not stack up.

“Buy-to-let fixed rates are at lowest ever levels and

so re-mortgaging will cut costs for many landlords.

“Lenders have adapted to the new legislation

and are now offering a better range of buy-to-let

mortgage products compared to a year ago for

properties owned by a limited company, and also

setting up as a limited company will often boost

the maximum level of borrowing.

“Couples who own buy-to-let properties may also

consider switching the property into joint names.

However, there may be tax implications such as

Stamp Duty. I would imagine that in most cases

couples who own buy-to-let property would have

already purchased in the most tax efficient way.”

• Attempt to reduce void periods by finding good tenants who aim for long-term lets. If this is not possible, try to keep track of all repairs and maintenance and advertise before the contract is up for a quick rental

turnaround.

• Take a tip from Portico and get your property revalued. You may end up with a better interest rate and a larger choice of lenders.

• Carefully consider if it is worth setting up as a limited company. Seek professional advice to see if this strategy is worthwhile in the long-term.

• If you are a property investor, consider asset classes which are not affected by the changes. Diversifying your property portfolio could help reduce

risk.

• You could reduce outgoings by managing your property yourself. If you are unable to manage your property, ensure

that the price you are paying your agent is competitive.

Now is a good time to seek professional advice about HMRC tax relief on buy-to-

let mortgage interest. Landlords and investors may wish to adjust their property portfolio to ensure that

it remains as profitable as possible in 2017.


for landlords worried about buy-to-let tax relief changes:


History of UK Buy-to-Let

The 80s…Although we see a private rental market at present

that is strong and prominent, it hasn’t always

been that way. Even as recently as the 1980s, the

government’s focus was firmly on making sure that

people had the ability to own their own home, a

project that would prove altogether more successful

than a similar one over 30 years later.

Coming out of the 1970s, the majority of people in

the UK lived in council-owned rental properties,

which made up most of the homes across towns and

cities throughout the country, and particularly in

working class areas. However, Margaret Thatcher’s

Conservative government wanted to see a change

in this, and in October 1980, the Iron Lady would

launch the Right to Buy scheme.

This new scheme allowed those who had lived in a

council house for more than three years to buy the

property at a discount of between 33 per cent and 50

per cent, with a guaranteed 100 per cent mortgage.

In the years between 1952 and 1980, some 370,000

former public sector homes were sold to former

tenants, but the rise of Right to Buy would massively

outstrip this period. At its peak in 1982, as many

as 248,000 homes were sold in the space of just 12

months, giving a substantial boost to the number of

homeowners across the UK.

For the buy-to-let property sector, the Housing

Act also saw deregulation of private rentals in

the 1980s, with freedom for buyers and shorter

tenancies making investment a better prospect. And

although it was initially slow – only nine per cent

of people rented privately in the 1980s – it was the

starting point for a market that was set to grow in

prominence in the decades ahead.

The 90s peak… In the public sector to private ownership side of the

market, by 1995, as many as 2.1 million homes had

been transferred through the Right to Buy scheme,

meaning that there had been a massive boost in

ownership when compared to just 15 years

before.

On top of this, there

was also more

confidence in the

banking sector, and

although it was a time

that would later prove to

be controversial, what with

PPI scandals and mortgage

shortfalls in their millions, 100

per cent mortgages became the

norm, allowing many people who

would previously not have had

the ability access to the market.

It created an upward trajectory in ownership that

was prevalent throughout the 1990s, and by the turn

of the century, the number of homeowners across

the country had hit its all-time peak. In 1979, only 55

per cent of Brits owned the home they lived in, but

by the turn of the millennium, this had hit over 70

per cent.

At the same time, however, the private rented sector

was starting to stir. Deregulation in the 1980s had

sown the seeds of interest for investors, but it was

the introduction in 1996 of dedicated buy-to-let

mortgages, according to the University of Sheffield,

Buy-to-let has come a long, long way over the past few decades. From a place where the homeowner was king, and buying property

was seen as one of life’s big milestones, the market has had to find its feet and grow into a

functional, convenient option that enhances residents’ lives and provides investors with

excellent returns on their spend.

But how did BTL manage to position itself so strongly in the marketplace?


Continued on page 10 >


1980 2000

9% of the country

in private rental accommoation

1996 Buy-to-Let mortgages introduced

2007 House prices

reach record highs

2008 House prices crashed by

16.2%

Increase in private renters between 2007 and 2012Right to Buy

scheme introduced in the 80s saw

home ownership increase 1 m

homes purchased with buy-to-let mortgages

in 2000

1400%Increase in property

investment since 1996

1990 2010

22% of the country

in private rental accommoation

3 m 5 m1990s became one of the

strongest decades for home ownership

£20 bn Lent to landlords

throughout 2013


UK Buy-to-Let Timeline


that saw investment levels rise. Between 1996

and 2007, rising house prices would mean that

early adopters of the sector at this time have seen

rising demand ever since, and it’s estimated that

investments in 1996 have risen by 1,400 per cent

since.

The 2000s…Home ownership was starting to slow, and early

in the new millennium, the tide started to edge

towards an emerging market.

According to the Resolution Foundation, high house

prices, weak income rises and a lack of available

homes meant that in 2002, the number of people

who own their own home started a decline that has

surprisingly not reversed since. Although there have

been peaks and troughs since, 2002 can be seen as

the time when there was a clear shift in the market,

and ownership levels have been on the decline ever

since.

It was still a period where home ownership was

strong, and the market was performing well. But

many people being priced out of the market meant

that there was a change afoot. By 2007, continual

year on year rises and demand for homes meant

that in November, house prices reached their

highest ever total, hitting over £181,000 on average.

This, of course, meant that many people could not

afford to own their own home, and the government

estimates that at the time, it was between 24 and 40

per cent cheaper to rent than it was to buy, which

meant many people decided this was the way to go.

It was the true start of something big.

Today’s marketComing off the back of 2007, when house prices

peaked, the financial downturn and recession of

2008 proved disastrous for the property market.

The bubble burst, and house prices plummeted by

an average of 16.2 per cent according to Halifax

figures, in just 12 months. The effect on sentiment

was huge, and people across the UK started to lose

confidence in the future of a housing market that

had creaked, and eventually broken on the back of

poor lending practices and failure of mortgages

from the 1990s to mature.

It meant that for the first time, there was a huge

swing towards the private rented sector, and people

who were flying the nest were starting to look at

becoming tenants, unsure of what the future would

hold for those who did own a home.

In 2008 alone, there were more than one million

homes purchased with buy-to-let mortgages, as

the sudden change in the marketplace

meant that investors were starting to see

the value in investing in rental homes to

cater for a rising demographic.

Between 2007 and 2012, the peak years

for change in the private rented sector,

investments rocketed, and in the space

of just five years, the number of rented

homes peaked time and again, growing

from a little over three million to more

than just under five million.

By 2013, Paragon reports that more than

£20 billion was loaned to landlords in just

12 months, with this expected to rise at a

rate of over 20 per cent for years after.

Such strong investment is something

that has continued ever since, with the

rising prominence of the rental sector

meaning that we now see 22 per cent of

all homes in the UK being occupied by

private sector tenants. This is now, for

the first time ever, higher than public

sector housing, and means that less than

two-thirds of people now own their own

property, the lowest seen in the UK since

the early-1980s.

The post-recession period not only

saw tenant and landlord numbers

rise, however. The demand for homes

around this time also allowed for all new

demographics to be carved out. This

meant that the student property market,

once a tiny niche, saw investment of £6

billion in just three years, while Build

to Rent’s multibillion-pound injection

was fuelled by the arrival of an all-new

generation with an all-new attitude.

The future of the marketMuch as in 1980s, one of the biggest challenges faced by the housing market in recent post-recession years has centred around government. Policies from the latest Conservative government have often looked at ways to get more people onto the housing ladder, unfairly punishing rental market investors along the way.

Policy changes in recent years have included:

• An additional three per cent levy on Stamp Duty for those who are investing in rental properties over and above the standard rate

• The retraction of a promise that Build to Rent, a growing sector designed to help increase market supply, would be exempt from new Stamp Duty charges

• A change to taxation that means owners no longer being able to deduct mortgage interest from their taxable income.

• Banning of all letting agent fees, making the market a costly place to operate, and causing agents to have to reassess their business plans

However, in spite of the rising tide of changes that threatened to overwhelm the marketplace, not to mention the pressures of Brexit and related political uncertainty, the British buy-to-let market remains strong.

Between 2016 and 2017, the Association of Residential Letting Agents said there has been a rise in demand of some three per cent, while supply has risen 12 per cent in the same period. This shows that even at a time when the government has perhaps lost sight of the value of the rental market, the public and investors have not.

And with more than five million people now living in private sector homes owned by more than two million investors across the globe, it’s clear that the UK buy-to-let sector has room to grow and the strength and support behind it to do so for many years to come.



Residential buy-to-let properties are the backbone of many property portfolios however, the UK government’s shake up of taxes could leave some investors out

of pocket.

From April 2017, landlords will no longer be able to deduct their mortgage interest payments from their NET income before calculating their taxable income.

These financial restrictions will mean that landlords will only be able to claim tax relief at the basic rate of 20%. The change will be phased in over the next four years and has been brought in to prevent wealthier landlords from receiving favourable tax treatment.

The restriction will have little effect on landlords on the basic tax rate however, those on a higher rate may wish to hold properties in a limited company structure, as mortgage interest will

remain deductible. Basic rate tax payers however, should be aware of that the new way of calculating gross income could push them into a higher tax bracket.

A survey by Mortgages for Business has shown that around 60% of respondents believe that income tax rule changes will have a negative effect on their returns. Just 29% believe that the changes will not make a difference to them.

Investors who believe these changes will affect them should seek professional advice from a mortgage or financial advisor.

Alongside the changes to tax relief, UK residential property investors must pay an additional 3% on top of the normal Stamp Duty rate.

Source: HMRC

Should you invest in buy-to-let property in

In light of buy-to-let tax changes, are investment properties still a good option for buyers?

2017? Buy-to-let and second home Stamp Duty tax bands

Brackets Standard rate Buy-to-let/second home rate (1st April 2016)

Up to £125,000 0% 3%

£125,001 - £250,000 2% 5%

£250,001 - £925,000 5% 8%

£925,001 - £1.5m 10% 13%

over £1.5m 12% 15%


VISIT GOVERNMENT WEBSITE FOR MORE INFO...

https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies


As costs continue to rise, property investors may begin to question whether buy-to-let can still be profitable in 2017?

How can landlords reduce their outgoings?

Since the introduction of higher Stamp Duty rates on buy-to-let purchases, many investors have looked for ways to reduce their outgoings on their initial purchase.

There has been new wave of investors buying properties in hotspots in the north of England, and in London commuter belt towns, where they have found housing at a more reasonable price, which ultimately reduces their Stamp Duty bill.

Manchester, Liverpool, Leeds, and Birmingham have all emerged as popular choices for investors. Supported by strong rental demand, reasonable house prices with scope to rise higher and flourishing local economies, buy-to-let properties have been snapped up in these high performing cities.

However, it is not just the north of England that has benefitted from an influx of investment.

In 2016, the Halifax named Luton – a popular London commuter town – the UK’s number one property hotspot. Data revealed that, on average, house prices in the town increased by £41,700 in 2016. Investors can also generate an average 5.8% return on buy-to-let properties according to property118.com.

In 2017, buy-to-let landlords will benefit from researching profitable rental hotspots and by reducing the initial cost of the property they are buying.

Off plan Build-to-Rent properties may also provide investors with a lower entry level option and a rental assurance is usually in place.



ASSET CLASS

LEAGUE:Comparing the best asset

classes for investors in the UKAs landlords have started to

re-evaluate their investment in the rental sector as the laws

change around taxation, we compare some of the best asset

classes around.

What are the best asset classes for those looking to invest their money in the UK markets?

Over the last couple of years, the government has seemingly gone a long way to make investment in the residential rental sector more challenging to say the least. More than any time in recent years, the government has been throwing barriers in front of investors in the shape of taxation alterations.

It all started last year, when the government decided to bring in a new level of Stamp Duty tax for those spending money on rental sector homes. It said that anyone who bought a second home would have to spend three per cent on top of the cost of the home in order to secure another property.

And in April this year, the government is going to go one step further again, bringing in new laws that will see landlords not being able to deduct mortgage interest from their taxable income, increasing the cost of buying rental homes nationwide.

As a result, many rental sector investors have been reassessing their choices, and looking at the options available when it comes to spending their money. Here, we take a look at various UK assets, and ask, is the rental market still the best place to invest your money?


Off plan buy-to-let

Off plan residential buy-to-let offers benefits but can also present risks to investors. These properties

are sold before they are actually built, which can lead to developers

offering huge discounts. While the development is being built, property prices will rise in the

surrounding area, allowing investors to capitalise.

However, it can be difficult for buyers to obtain mortgages for these properties, with lenders

uncertain of the outcome of the development. They are therefore

particularly attractive to cash buyers.

Commercial property

Commercial property can include retail units, offices and restaurants, giving prospective

buyers a wide choice. In January, the Telegraph reported that the number of buy-to-let investors

who chose to focus on commercial property instead has tripled in the

past three years.

A number of analysts think that Brexit will cause continued

uncertainty in the commercial property market, which means that buyers should think carefully about

whether this is the right time to invest.

Student property

Student property is generally considered a safe investment option as it will always be in

demand. Despite the threat of financial recession, there will always be students attending

universities across the UK.

Knight Frank recently revealed that investors in purpose-built student accommodation are seeing better

yields than they ever have, with the number of students living in these properties having doubled in the last decade. There are also more students than ever at university,

with UCAS revealing on last year’s A-level results that 424,000

had been accepted into higher education.

Hotel/Apart Hotel investments

The idea of investing in hotel or apart hotel rooms is a relatively new one. It can be an attractive

option, with the owner often benefitting from a certain number of free nights in the hotel. It can also appeal to investors looking for something different to the

residential buy-to-let investment in city centres that attract a great

deal of tourism.

Hotels in London saw more than 80 per cent occupancy during 2016,

which positions it as a relatively secure asset class.

Residential buy-to-let

Residential buy-to-let is one of the most common asset classes,

offering buyers a tangible investment. It has also been

preferred for its often high yields, compared to low savings rates and

stock market instability.

However, the new tax changes are likely to see potential investors think twice about investing in

residential properties.

Care home investments

Investors wanting to diversify their portfolios are increasingly looking towards care home units as they

offer real opportunities for capital growth and high returns. With an

ageing population that will require more care homes, now might be a good time to consider investing.

These investments are offered on long-term leases so they do offer security, but if you’re looking for

something permanent, you might prefer a buy-to-let property.

Average price of investment: The average price of an off plan residential buy-to-let property

varies depending on property type and region.

Average annual return: Investors who purchase an off plan

through Experience Invest can secure an assured rental return between 6% to 8% depending on the location and property type/

size.

Stamp Duty cost: As with residential buy-to-let

investments, investors will pay varying amounts of Stamp Duty on off plan property. However, some developers do include the cost in

their fees.

Average price of investment: The price of a commercial

property depends entirely on the region you’re looking to invest in, with London seeing the highest

costs.

Average annual return: Commercial property in London

can cost an average of £52.50 per square foot per month, which

can offer huge yields. It varies according to location, though,

and Brighton will cost £3.38 per square foot per month in rent.

Stamp Duty cost: Zero per cent on anything up to £150,000, two per cent on the

next £100,000 (between £150,001 to £250,000) and five per cent

on the remaining amount (above £250,000).

Average price of investment: The price of purpose-built student accommodation does vary based

on location. Investors should look for high quality developments

which are close to an established university. Good transport links

and city/town centre locations also provide good returns. Investors

can pay from £68,000 per student room.

Average annual return: Depending on the location,

students pay an average of £143 per week in rent and stay in their accommodation for an average

of 44 weeks, leading to an annual income of £6,292.

Stamp Duty cost: A zero per cent Stamp Duty tax is applicable to purpose-built

student rooms however, HMO are the same as other residential buy-

to-let properties.

Average price of investment: How much you’ll be expected to

pay for a hotel or apart hotel unit will vary on the region you’re

purchasing it in. With it being such a niche market, there are few

average price statistics around so it’s important to do your research.

Average annual return: Developers promise returns of up to ten per cent so it’s, again, vital to do your research and find the

best yield prices.

Stamp Duty cost: As they are classified commercial

properties, hotel rooms up to £150,000 are exempt of Stamp

Duty.

Average price of investment: As of January 2017, the average house price in the UK stood at

£218,255.Average annual return:

According to Countrywide, the average monthly rental price in the UK is £921, resulting in an

average annual return of £11,052.

Stamp Duty cost: Most buy-to-let investments come

with a Stamp Duty cost of three per cent on anything between

£40,000 and £125,000. On those between £125,000 and £250,000, you will have to pay five per cent.

You’ll be paying eight per cent on a property between £250,000 and £925,000 and 13 per cent on anything between £925,000 and

£1.5 million. Anything above £1.5 million will cost 15 per cent in

Stamp Duty.

Average price of investment: Prices of these units differ but

many will cost between £70,000 and £85,000 so investors should

survey their options before buying.

Average annual return: Some developers promise

investors yields of up to 12 per cent so explore what returns

are really being offered before going ahead with a care home

investment.

Stamp Duty cost: As with hotel rooms, care home

investments are considered commercial property so are

exempt from higher rate Stamp Duty.



2030Build to Rent could deliver nearly a quarter of a million homes by

The UK government has released its new Housing White Paper that sought to address how it could, among other things, bring more homes to market for renting and buying at a quicker pace. At the heart of this is set to be the Build to Rent market, which is perfectly positioned to deliver required numbers.

The Build to Rent market is becoming more and more popular with investors thanks to the fact it plays off demand. The sector is one of the few that meets the needs and demands of the modern tenant perfectly by being built with them in mind, and as more tenants come to market year after year, so investors are prepared to spend more to expand the sector.

According to a new report from the British Property Federation (BPF) and the London School of Economics, should Build to Rent become a focus, with building centred around urban areas where business growth creates rental property demand, it could increase construction activity three-fold and see the sector deliver on nearly a quarter of a million homes between now and 2030.

The report said that if this can be achieved on as many as a fifth of the large sites that are currently being built across the country, then it could mean a rise of 10,000 in terms of the number of new homes being built in the UK each year.

Overall, this sector therefore has the potential to deliver as many as 15,000 new homes every year between now and the end of the next decade, with demand pushing investment across the sector each year.

By 2030, this would mean there would be an additional 240,000 homes in place across the UK, meaning the Build to Rent market would be worth £60 billion in total, putting it at a similar level as the more mature US equivalent.

Ian Fletcher, director of policy at the BPF, said: “Build to Rent is a relatively new phenomenon in the UK, but already has a significant development pipeline, which will see it deliver thousands of homes over this Parliament.

“By measuring Build to Rent’s growth and the other benefits it delivers, and what gets in its way, we want to show to government the sector can be an important partner to its ambitions to build more homes, on this most important of days for housing policy,” he added.

The Build to Rent sector is set to be a major player in the plans to boost the number of homes being built in the UK



LondonIn recent months, investors have moved away from London-centric property investments.

Towards the tail end of 2016, estate agent, Portico, reported that transaction volumes in London were 50% lower than before the 2008 economic downturn.

This could indicate the draw of the capital has soften in light of high property prices and relatively low rental yields.

However, with property prices in London climbing at a slower rate since the Brexit vote and the decrease in the value of sterling, opportunistic overseas buyers are making the most of the favourable exchange rates currently available.

Despite the on-going debate of the UK leaving the EU, London’s property safe haven status doesn’t look like it is under threat any time soon with investors backing the capital based on its resilience after the global economic downturn.

Commuter belt townsAccording to Savills, buyers can save an

average of £3,000 per minute the further they travel outside of London. Perhaps that is why increasingly volumes of city workers are opting to commute into the Big Smoke

for work.

The average house within a 30-minute commute can be purchased for around

£485,000 - a much cheaper price tag when compared to the £606,000 London average.

And it is not just prospective buyers who are saving by commuting. Renters are swapping

longer commutes in favour of larger rental properties. With houses and flats available

for the same amount as one shared room in a house in London, many commuters are

reaping the rewards of living outside of the capital.

Commuter belt towns also offer capital growth prospects.

Figures from Land Registry have shown the prices have

increased at a faster pace in Slough (19%), Luton (17%) and

Reading (14.6%) than in London (13.5%) in 2016.

Northern PowerhouseThe Northern Powerhouse is a government-back scheme which will

see millions of pounds’ worth of investment pumped in to specific areas of the region. Improvements to infrastructure, in the shape of the new high-speed HS2 rail link, will boost the economy by billions

when it opens, with cities including Leeds, Manchester, and Sheffield all set to benefit from reduced travel times across the country.

Property investors see the benefits of buying rental property in key cities including Manchester, Liverpool, and Leeds as they often

provide better value for money when compared to property in the south.

According to JLL, investors buying property in Northern Powerhouse cities may also be set to unlock stronger capital growth potential than in the

south, with the experts suggesting that property prices in the North West will increase by 18.1%

over the next five years, outpacing the rest of the UK.

What’s more, buyers can save money on Stamp Duty Land

Tax as lower priced properties fall into a lower tax bracket.

This coupled with strong market fundamentals

means that many investors can secure higher rental

returns than their southern counterparts.

United Kingdom

LondonCommuter Belt

Shefiled

Leeds

LiverpoolManchester

Where to invest?

London

Commuter belt


Experience Invest’s top picks for buy-to-let investment in 2017

GUIDEBUY-TO-LET

2017

Experience Invest, 43 Palace Street, London, SW1E 5HL, UK

Tel: +44 (0) 207 834 1113

Email: [email protected]

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BUY-TO-LET GUIDE · on a daily basis, this guide has been created to provide landlords and investors with an overview of what is happening now. From hot topics including Brexit, buy-to-let