Landlords face increasing costs, stamp duty on buy to let properties has increased and commercial mortgage interest rate tax relief is being phased out. All of this means landlords may need to restructure their business to make them more profitable. There are at least four ways to do this, as listed by a recent MortgageStrategy.com article:
1. Form a limited company
There are tax advantages in transferring property ownership to a limited company because company tax is less than that paid by individuals. However, there are set up and administration costs involved that means forming limited companies is not suitable for all situations. Landlords considering this strategy should seek professional financial advice before making their move.
2. High rental yield areas
Some regions of Britain have higher rental yields than others. Most of the highest yields can be achieved in the North of England. Landlords with property in lower yield areas such as London and the South East could sell their property and invest in Northern buy-to-let property.
3. Short-term lets
The daily rental rates for short-term lets such those arranged through Airbnb are generally higher than the daily rent for long-term lets. Many councils do not allow short-term lets of more than 90 days a year without planning permission, and some buy-to-let mortgages may prohibit short-term lets altogether. Some landlords have profited from this strategy.
By converting a large house into a House of Multiple Occupancy (HMO), landlords can receive larger combined rents from multiple tenants than a single tenant.
It should be noted that none of these steps are 100% certain to increase profit, and a financial expert should be sought for advice.