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Why landlords need your help

Our recent research amongst landlords showed that only 21% said they were a full-time landlord. The rest had another job. So it is fully understandable why it is difficult for landlords to keep abreast of the constant flow of regulatory changes. Even those full-time landlords that I know struggle, so just imagine what it is like for the rest.

This is why having a financial adviser is so important for landlords, which is great news. Over the years we have read about perceived threats to the adviser community, from when the internet first begun through to robo advice and a new era of AI. But nothing can be further from the truth and landlords are now wanting a relationship that goes beyond pure advice on their mortgage.

This was reinforced in our research. Of those landlords using a financial adviser, 23% wanted help in understanding how new regulation affects them. There are changes to the licencing rules for houses in multiple occupation (HMOs) in October, for example. This has been discussed a few times within the media, but I suspect many of your landlord clients will be in the dark about this. For some, they may need to raise capital if they need to make any refurbishments and changes to comply with the new HMO licencing rules.

A further 35% of landlords, who use a financial adviser, said they need help understanding the implications of taxation, given the raft of rule changes that have been implemented. It is a complex area and I know some advisers are building reciprocal arrangements with tax advisers to determine if owning a buy-to-let property via a limited company is the right thing to do for the client. Nonetheless, the market is seeing a rise in limited company buy-to-lets. At Foundation Home Loans, over 40% of our buy-to-let applications are under this structure.

The buy-to-let market continues to change and because of this change, your landlord clients need your help more than ever – and there are lots of landlords out there who don’t have a financial adviser and are probably on the lookout for one. So take advantage before someone else does.

Source: Mortgage Introducer

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Spike in BTL landlords looking to invest in HMOs

New research from OneSavings Bank has found that, in the last six months, around 51% of UK based brokers have been approached by landlords looking to diversify their portfolios.

According to the data, of those brokers who had been approached by landlords about diversifying, 56% of enquiries were about diversifying into Houses with Multiple Occupants (HMOs). HMOs can generate a higher yield for landlords which will help to mitigate against the additional costs that they now face. Indeed, research by Mortgages for Business found that the average yield of a HMO could be 3.3% higher than a property with one tenancy agreement. However, changes to HMO regulations following a government consultation, due to be implemented from October, could introduce additional regulation in this area.

Landlords are also increasingly diversifying into commercial and semi-commercial properties in the wake of the recent PRA regulations and the changes to tax treatments for buy-to-let properties. The research found 14% of brokers said they had been approached by landlords wanting to increase the level of commercial property within their portfolio. In addition, 9% reported that landlords wanted to diversify into mixed-use properties. Unlike residential buy-to-let property, landlords holding only commercial property will not be affected by the reforms to mortgage tax relief. In addition, commercial or mixed-use properties will not incur the same amount of stamp duty as purely residential buy-to-let properties would.

In addition, 6% of brokers said landlords were looking to diversify into student accommodation. Brokers also pointed to other options, such as holiday lets and serviced accommodation, being brought up by clients.

Recent regulatory and tax changes are thought to be the driving force behind a growing number of landlords moving into new property markets. In particular, reforms by the Prudential Regulation Authority (PRA) introduced stricter underwriting standards for portfolio landlords with four or more properties, whilst reforms to mortgage tax relief have reduced the amount of mortgage interest landlords could offset against rental income. These are in addition to the 3% stamp duty surcharge for second homes that was introduced in 2016.

Adrian Moloney, Sales Director at OneSavings Bank, said: “Landlords are on the hunt for greater yields, and, in the face of regulatory and tax changes, diversifying into commercial property or more complex residential options such as HMOs can offer this. With the buy-to-let market becoming increasingly complex, there is an opportunity for informed brokers to support landlords seeking new niches. However, these brokers must in turn be supported by specialist lenders who can offer the flexible lending needed to finance the growth of these segments of the market.”

Source: Property Reporter