Additional complications for Landlords
One of the usual dinner party conversations, once people know you are an IFA, (independent financial adviser), is should they invest in “Buy To Let”? For a number of reasons, I hate giving an opinion on this, as there is not a simple yes or no answer.
On the plus side, it is a way of getting ‘passive’ income, an income without going to work for it, but on the down side, landlords are being dragged into more and more work than before. Not too many years ago, all the landlord needed to worry about was finding a tenant that would pay the rent and not killing them by accident with an unsafe house. These days, things are rather more complicated and it is getting more onerous as time goes on – just because you live in a house, does not make you an expert on Buy to Let.
The next big change was signalled by the recent Queen’s speech, which flagged the national roll-out of a scheme run in the West Midlands, where landlords and letting agents had to check the immigration status of potential tenants or face a potential £3,000 fine. (http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11683858/Right-to-rent-all-landlords-must-check-immigration-status-or-face-3000-fine.html). Unlike some responsibilities, the landlord can delegate this to a letting agent, but it still represents a burdensome demand on landlords and their wallets, likely to be nationwide by the end of September this year.
A further blot on the horizon for landlords, is a requirement for minimum energy standards for let properties. As you should be aware, houses bought or let need a valid Energy Performance Certificate, (EPC), which will give a rating between ‘A’, the best, to “G”, the worst. From the 1st April 2018, any new lets must have a minimum energy rating of “E”, with properties rated F and G excluded from even existing lets by 1st April 2020. There are some exemptions, but these appear to be in specific circumstances and rather hard to find. (http://www.rla.org.uk/landlord/guides/minimum-energy-efficiency-standards.shtml). Theoretically, the Green Deal should enable landlords to bring most properties up to standard at minimal net cost, but Green Deal building works, (and payments), need the co-operation of the current tenant.
Any new landlord has a steep learning curve to face and will probably need to be become best friends with a good local lettings agent. I would suggest that any prospective landlord registers with and regularly reads the Property118 website, www.property118.com, as this will give a better idea of the benefits and trials of being a landlord than I can.
Buy to Let, (BTL), is one way of generating passive income, but there are a number of others, which have virtues of their own. For one thing, BTL does not scale down very well, the minimum investment is high, liquidating it can take months and will not release comparatively small amounts of capital; it tends to be all or nothing. A conventional pension or ISA portfolio may not be fashionable, but it is readily scalable, has straightforward tax breaks and can be liquidated in small amounts to generate a regular income.
Being conventional may be ‘dull’, but the potential risk is more easily managed.
Contact me with queries
If anyone is looking for general advice, then please write in to the blog and I would be happy to help with anonymous advice posted here. Alternatively, please call us on 0116 253 5600 and ask to speak to an IFA, (Independent Financial Adviser), for a no-obligation discussion.
If you know you need formal advice, have a look at http://bankfield.net/personal/mortgages/buy-to-let-mortgages/, or ask around for a recommendation, it might even be me.