Sunday, July 21, 2024

Why now is a good time to expand your buy-to-let portfolio

We discover why
buy-to-let landlords should increase their portfolio following the pandemic.

The past few months have undeniably been difficult for a majority of the UK and other areas of the world. The pandemic has likely changed any plans you may originally have had at the beginning of the year. No one could expect or envision the pandemic or its impact, not only on our health but also our economy.

To help revive the
economy, the government released several updates including reduced stamp duty
rates to help keep the housing market going, this is a massive bonus for those
looking to move and for buy-to-let landlords who want to increase their

Before the pandemic

If you were considering purchasing an additional property before the pandemic, you would have been faced with extra charges such as an increase in stamp duty tax with a surcharge of 3%, reduced tax relief for buy-to-let landlords and capital tax gains when you eventually go to sell the property.

Previously, the
government’s aim was to prioritise those who wanted to enter the housing market
by making it easier for them to purchase their first property and make it
harder for landlords to expand their portfolio.

If you are in the
position of being able to invest in more properties, now may be the perfect

Let us explain why.

Why now is a good time to expand your buy-to-let portfolio?

Here are some of
the reasons why now is the time to consider adding to your property portfolio.

Stamp duty tax reduced

You may have heard
recently the governments new package to kick start the economy after lockdown
includes a reduction in stamp duty tax. The housing market was particularly hard
hit during the lockdown as no one was allowed to physically view another house,
nor were they allowed to move.

As restrictions
have eased, the stamp duty reduction is hugely welcomed by not only home movers
but also buy-to-let landlords.

You are currently
no longer required to pay the standard 2-5% stamp duty on main home properties
of the value between £125,000 – £500,000. If the property you are purchasing is
an additional property, landlords will only need to pay the 3% surcharge which
is payable on all buy-to-let properties or second homes.

The cut in stamp
duty means that landlords will see their tax bills start at a rate of 3% on
properties costing up to £500,000. This means you won’t have to pay the
original stamp duty of 2% of properties between £125,000 – £250,000 and 5% on
properties worth between £250,001 – £925,000.

The reduction in
stamp duty is to last for eight months, ending on 31st March 2021.

Property prices dropping

As people lose confidence in the economy and with people losing jobs, the property market has taken a small hit with a decline of 0.1% in property houses, bringing the average house value to £216,403 in June.

House prices have
been on the incline for the past 8 years, and with the rise expected to
continue in the following years to come, now may be the chance to benefit from
a bargain. Depending on how the markets go, if it continues to grow in a couple
of years, this could potentially be a good investment opportunity.

Increase demand for rental properties

Buying a buy-to-let
property, you need to consider what the rental market is like and whether you
can find someone to live in your property to pay rent.

According to recent
surveys and research, the UK rental market has been booming during the
lockdown. There is currently a tenant demand for rental properties with an
increase of 33% in May compared to this time last year.

This may be a sign
of the rental market starting to recover. When the demand for rental property
increases, it usually follows that rents will increase too.

Buy-to-let products have increased

Buy-to-let product
numbers have increased between May-June 2020 by 280, bringing the total of
mortgage options available to 1,735.

This means that Buy-to-let
landlords can now benefit from the biggest variety in mortgage options. Some
five-year fixed rate buy-to-let mortgages have seen product numbers rise the

According to recent
research, borrowers with a fix for five years with 80% loan to value will see
the biggest rate reduction with the average being -0.67%.

Things to consider

Before committing
to expanding your property portfolio, there are other extra costs and things
you need to consider.

Rent break

As coronavirus has
shut down a large majority of the economy, a lot of people have or will face
losing their jobs.

With this in mind,
there may be some tenants who will struggle to pay their monthly rent. You will
need to make sure you have enough funds to cover any costs if you lose any
tenants for a period of time, or if they are struggling financially.

Landlords Insurance

Landlords insurance is vital to keep commercial or
residential investments safe during and after the pandemic. It can protect you
for buildings and contents cover, loss of rent, damages and forced closure.
This will help to protect you from most unexpected costs.

Use a financial advisor

Please be advised,
all information provided in this article is based on research and market
information, if you are considering purchasing additional properties, you
should visit a financial or mortgage advisor.

As the lockdown
continues to ease and the economy starts to open again, this may affect
property prices and interest rates. But as it stands at the moment it looks as though
the buy-to-let market is growing. 

Claire James
Claire James
Claire is an accounts manager at Fire Digital UK, an online publishing and content marketing company based in the North West.

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