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Landlords feeling the strain of buy to let

Landlords feeling the strain of buy to let

Landlords feeling the strain of buy to let - Buy to let landlords are beginning to feel the strain of mortgage rate increases and in order to compensate for their increased monthly costs, are increasing rents at an almost unprecedented rate. Many are worried that without rent increases, monthly payments will not meet mortgage costs and their investments will slip in to the red. Signs are that the market is suffering strain as rents are increasing at the fastest rate for nine years. It is feared that many buy to let investors will simply loose their nerve and start selling property. Property prices have remained buoyant because of buy to let interest and the limited amount of housing stock coming on to the market. If interest rates continue to rise and a glut of property becomes available to purchase, property prices will drop as buyers will have more options to choose from.

Information released by the Chartered Institute of surveyors shows that tenants are experiencing the biggest increase in rent increases since they started taking records in 1998. In the last quarter, rents have increased by an average 8%. Rental yields are dropping as interest rate increases bite and many fear the bubble may be about to burst. In the early years, buy to let represented an easy money bet, property prices were affordable and mortgage money was readily available. Anyone entering this market now may be disappointed, often the cost of the mortgage will more than the monthly income and this may deter many landlords.

This will be a great shame as despite current market conditions, property remains a good long term bet. If property prices do slip back a little, this perhaps should be viewed as a temporary blip. As statistics show that the average buy to let investor intends to hold property for a period of 17 years, hopefully most landlords will not pay too much attention to falling prices. As with stocks and shares, it is never really possible to enter a market at the bottom and exit at the top, most investments experience peaks and troughs and the signs are that UK house prices will in the long term continue upwards but perhaps at not such a pace. One option for any landlord intending to stay with property investment is to search for a better mortgage deal and sometimes money may be saved by switching to a more competitive interest rate

If this news was not bad enough, officials from the customs and excise department also appear ready to put the boot in by stating that as many as 80,000 landlords had not paid enough tax on their investments, Many landlords owe additional taxation as they incorrectly assumed that can offset the full cost of a repayment mortgage against their profits for tax purposes. Representatives from the Inland revenue have recently met with people from the accountants profession to discuss a method of bringing this matter to the attention of landlords. Currently, the inland revenue can go back six years, this may mean that some landlords will be faced with huge bills. There are approximately 400,000 buy to let landlords in Britain which could add up to an awful amount of unpaid tax. The grey area relates to what exactly can be offset, at the present moment, only the interest payable on a mortgage loan can be offset so any landlord with a repayment mortgage, is liable for taxation every time they pay some of the capital off. However, it is believed that most buy to let landlords have opted for interest only mortgages thus taxation should not be an issue.

  • If you are a landlord of a buy to let property, you are liable to pay taxation on any income you receive from rent.
  • You can offset certain landlord expenses against tax
  • You may only offset the interest portion of your mortgage against tax
  • Other offset fees include, landlords insurance, legal fees & agents fees
  • Certain refurbishments can be offset against tax.

If you are uncertain as to your tax position relating to you buy to let property, please seek the advise of a qualified accountant.

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