As you begin or continue to build a property portfolio, there are always some simple vital facts to keep in mind.
How to own it?
It often seems more straightforward and easier to buy each property in your own name. While that suits some, always ask advice from your accountant or a tax specialist. However, with the landlord tax changes back in 2015, there has been a steady increase in the proportion of landlords making new property purchases through limited companies or other incorporated structures. Over half of landlords intend to purchase their next rental property within a limited company structure, and for those owning 11 or more investments, it is over two thirds.
Incorporation allows landlords to expense their finance costs against rent before the deduction of tax. In addition, the corporation tax rate is currently a flat 19% compared with the basic, higher and additional personal tax rates of 20%, 40% and 45% respectively.
However, everyone is different, so do get that specialist advice. Church Investments are experienced property investors ourselves but are not Tax experts; getting good advice from day 1 and set out your strategy.
Think about where you buy
Most of you are investing for the medium or long term to provide you with an income when you retire. So look for property that will give you steady growth and an excellent rental yield. Church Investments will help you identify those areas with proven track records and help spot up and coming areas. Remember not to get too hung up on areas that you might know. They are not necessarily the areas to offer the best returns and let’s face it; you are unlikely to end up living in these investments. It is better to maximise capital gains and rental yields and leave sentiment out of your investments.
Maximise what you have and watch your cash flow
It might be the case that you bought a property a while ago and that you are sitting on substantial equity. This could be released and used to build a portfolio which will offer you far higher returns than if you left it sitting there. Church Investments help their clients review their current properties and take a sensible approach to releasing funds to reinvest. For example, we recently helped a client release money to buy an HMO in Berkshire by adding a few hundred pounds to their monthly mortgage commitment on that property. However, despite the small raise along with some funding on the new property, they are £35,000 pa (gross rent) better off.
Keep in mind to always keep an eye on cash flow and do not borrow too much as, with all investments, circumstances can change, meaning mortgage rates could go up. You do not want to be overexposed. A common error that saw many ill-advised investors lose their investments and income in the last property downturn in 2007 / 2008, especially.
Finally, could your current property investment be improved to maximise its potential by extending, converting or overhauled? Church Investments can advise you as we have decades of development experience.
Now is an excellent time to start; don’t leave it too late!
There has been uncertainty in the market place over the last 18 months or so while Brexit plays out. However, all this time, demand is growing for property, and new developments are still not being built at anything like the rates they need to meet supply. Eventually, this political issue will be resolved, and activity in the market will increase as will demand, which usually follows with capital appreciation.
Now is a perfect time to buy a property before everyone else does. We are finding that this is being supported by the increase in clients approaching us to build their future. No matter what stage you are in your career, there is one certainty; it will end!
Do not leave it too late as the goalposts get moved when you retire. Simple things like refinancing or getting mortgages do get much more difficult without the constant of your monthly wages being available to satisfy mortgage lenders requirements.
So contact us now, and we would be delighted to talk you through your options and help you build your future.