What do budget changes mean for buy-to-let investment?

People who are considering selling an existing investment property may wish to do so before new buy-to-let changes come into effect in April, according to ESPC Lettings manager Orlaith Brogan.

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The recent budget announcement from finance minister John Swinney brought more changes that directly impact the buy to let investor. Mr Swinney announced a LBTT ‘second-homes’ supplement on purchases of additional residential properties, including buy-to-let properties. The proposed Land and Building Transaction Tax (LBTT) supplement is 3% of the total price of the property for all relevant transactions above £40,000.

What will you pay?

Not only will a buyer of a second property have to pay LBTT charges, but also an additional 3% levy. For example if you were looking to purchase a property at £150,000 – under the current rates you would pay LBTT of £100 but from April, this figure would increase to £4600 (£100 LBTT plus £4500 second homes supplement). This additional cost may influence where you choose to buy and how you choose to present the property.

Budgeting is extremely important

ESPC Lettings manager Orlaith Brogan says: “Greater care must be taken when deciding to invest in property and budgeting is of the utmost importance. A buy-to-let property can be a fantastic investment but we cannot underestimate the amount of work involved in becoming a landlord and the importance of conducting your investigation in advance.

“However the Edinburgh rental market continues to grow and recent figures show that not only are average rents rising, from £833 for a two bedroom flat in quarter four of 2014, to £868 in quarter four of 2015, but the time it takes to secure tenants is falling."

The valuable role of tenants

Orlaith continues: "Due to Edinburgh’s large student population, as well as young professionals who are not quite ready to get onto the property market, the city has a large tenant market who play a valuable role in the private rented sector.

“ESPC is unique in that we represent both the buy-to-let investor as well as the first time buyer, and while the government must take measures to help first time buyers get on the property market, the private rental sector also plays a vital role.

“If you are looking to secure your rental property before the tax changes, we would recommend that you take a look at your budget, agree your mortgage in principle, and assess the property market and sign up for MY ESPC automatic alerts for available properties.”

Those wishing to find out more about the new changes along with advice on buy-to-lets, can come along to ESPC’s landlord event on 9th February, which should be booked in advance. Click here for more information.

Is buy-to-let right for you?

  • You have considered the financials in great details: this includes the purchase costs, conveyancing costs, LBTT, preparing your property for rent and full management
  • You are aware of the tax implications
  • You are committed to a medium to long term investment
  • You thoroughly research your target market and present your property accordingly. Research can take time but it will benefit you in the long run.
  • You are committed to continually investing in the property to keep it at a high standard.