Despite the gloomy economic picture being painted due to the outbreak of coronavirus, there’s some good news for landlords, especially if you’re considering buying another rental property.
Due to the current economic uncertainty, some investors have concentrated on moving the bulk of their cash into secure government-backed savings products.
But property may still be a good home for landlords’ money, not least because there may be some bargains to be snapped up at the moment.
Here, we take a look at some of the reasons you may want to consider adding to your buy-to-let portfolio during the coronavirus outbreak.
These include the prospect of buying a property at a discount, and achieving a strong rental income.
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If you're wondering about whether to stay invested in your property – or even whether you should add to your portfolio – here are some reasons now could be a good time.
Perhaps the most recent incentive for investing in bricks and mortar is the government’s cut in stamp duty, designed to help support the UK housing market.
The Chancellor announced an immediate rise in the initial stamp duty threshold in his so-called mini-Budget on Wednesday.
It sees the initial threshold increase from £125,000 to £500,000 on main homes. This means that landlords will only pay the surcharge, payable on all buy-to-let properties and second homes.
The stamp duty cut means landlords will see their tax bills start at a rate of three per cent on properties costing up to £500,000.
With the previous stamp duty rates, landlords paid three per cent on top of the old residential rates of zero up to £125,000, two per cent between £125,001 and £250,000 and five per cent between £250,001 and £925,000.
It makes the cost of buying a property investment of £500,000 or less significantly cheaper temporarily, with some landlords being able to potentially save thousands of pounds.
The stamp duty ‘holiday’ will be in place for more than eight months – until 31 March next year to help boost the economy and housing market amid the coronavirus pandemic.
As people are less likely to be able to afford a mortgage due to the coronavirus outbreak, house prices are widely predicted to fall significantly.
Nationwide Building Society has already announced that house prices suffered their first annual fall in almost eight months, dipping 0.1 per cent to an average of £216,403 in June.
It’s worth noting that a long-term view of investing in property can help to iron out the peaks and troughs in prices. However, the current predicted fall in values in the shorter term means you may be able to pick up a bargain where prices are lower than expected.
US investor, Warren Buffett, believes in being “greedy when others are fearful”.
Achieving a strong income is the main reason for investing in property for many landlords – and this hasn’t changed during the pandemic.
Rents usually do the opposite to what house prices are doing. This means that when house prices fall, people tend to rely more heavily on rented accommodation.
And when demand for rental properties increases, it usually follows that rents will increase. This is, of course, good news for landlords and their profit margins.
The latest ONS figures show that monthly rents have reached a record level.
It would be careless to ignore concerns that rents could fall in the months ahead if some tenants continue to struggle to meet their monthly payments due to employment uncertainty.
However, the government has put in place measures to ensure that rents continue to be paid during the pandemic.
While there has been an extended ban on evictions, this will soon end, and tenants will need to start repaying any outstanding rent they weren’t able to pay during the pandemic.
These measures taken by the government have helped to ensure that the rental market continues to operate efficiently.
Are you considering adding another property to your buy-to-let portfolio? Let us know in the comments section.
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27 August 2020 • 5-minute read
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