As we have been reporting for the past few months, the removal of a major tax relief for landlords is now less than a month away.
In a nutshell, current interest payments made on buy to let mortgages are a deductible expense, which means only landlord’s profits are taxable. So this means landlords who sit in the highest tax bracket can claim tax relief at the same level, which is currently 45%. But this is changing, and over the next four years, landlords will eventually (by 2020) only be able to claim tax relief at the basic rate – currently 20%.
The phased removal of this tax relief has raised two main concerns for landlords: one, that many may have to increase rents in order to compensate for their own rising costs; and two, that some may be forced into a higher tax bracket (because the income from their rental properties will be viewed differently, as we explained previously).
What Can Be Done?
While only 25% of financial costs will be subject to the new tax relief criteria in 2017/18, this increases to 50% in 2018-19, 75% in 2019-20 and then 100% in 2020-21. Therefore, landlords who want to avoid hiking up rents have to look at other ways to compensate for their increased costs.
For one, ensuring the areas you buy in offer decent returns / yields will go some way to protecting your investment from the removal of the tax relief – and other potential tax changes that may occur in future.
What Areas Offer Strong Yields?
There are various locations across Scotland offering impressive yields on buy-to-let properties and below are a couple of properties currently on our books that offer potential landlords yields higher than the UK average.
Priced at offers over £115,000 with a Home Report value of £120,000, this one bedroom flat in Edinburgh could easily achieve £695pm on the rental market; offering a yield of 7%.
In Glasgow’s West End, this immaculately presented two bedroom corner flat is on the market at offers over £190,000, with a Home Report value of £225,000. Therefore, this flat could fetch up to £1,150pm, resulting in a strong 6% yield. (Such is the demand that this buy-to-let is currently under offer!)
This property proves it’s not just the cities where decent yields can be achieved. This three bedroom end of terrace home is on the market for offers over £169,999, with a Home Report value of £190,000. We estimate it could achieve £950pm on the rental market, offering a prospective landlord a 6% yield.
What else can be done?
To ensure you invest in the right property – that will offer similarly strong yields to the areas/ properties mentioned above – we here at Clyde Property have a couple of tips that all landlords should strive to follow when purchasing properties.
Get an accurate valuation – An agent with local market knowledge can put an accurate value on your property, ensuring you get the best possible price, calculate accurate rental returns and position yourself for the quickest let. With our extensive knowledge and local experts on hand seven days a week, we have insights on a number of surprising locations in central Scotland that offer outstanding rental returns.
Decide on property management – Both landlords and tenants often prefer the ease and security of professional property management and agencies can offer a reliable service. This should include handling of council tax, utilities and rent, 24 hour emergency repairs, inspections and legally required safety checks.
The benefits to working with the right letting agency
With the various tax changes taking place, there has arguably never been a more vital time to have a reliable, honest, and professional letting agent on side advising and aiding you to achieve the best rental return on your investment.
At Clyde Property, we believe that we have the most transparent management platform for managing a property portfolio.
Our portal MyClyde, allows landlords to keep up to date with all of the latest activity to do with their properties including things like inspection reports, photographs, rental and VAT statements, tenants correspondence, etc – from anywhere at any time.
Online and on the Highstreet
With 96% of property rentals enquiries now taking place online, landlords can be rest assured that at Clyde Property, their portfolio is well represented on our professional, recently launched website as well as major property portals, while also being present in privileged highstreet branches with high footfall and available, friendly staff.
Available more than any other agent
Lastly, and we think most importantly, we’re available more than you’d think. Each of our 11 branches across Scotland is open seven days a week from 8.30am to 8pm. With 70% of property viewing scheduled for after 5pm or at the weekend, landlords can rest assured that our team of letting experts are on hand when they’re needed most.
So if you’re looking to make a move in the buy to let market and want to ensure you get the most out of your investment, especially in light of the removal of a tax relief, why not contact your local Clyde Property branch and talk to one of our local agents today.
Clyde Property is a leading independent, multiple award winning estate and letting agent with 30 years’ experience in selling and letting property in Scotland. Just call your local Clyde Property branch today, for friendly, impartial advice on finding your next dream home.