Buy to let landlords get creative

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Faced with increasing costs and red tape, buy to let landlords are being creative in adapting their business models to maintain profitability.

Changes in regulations have increased the costs of running a buy to let business. Some pundits said that this would result in the death of the but to let sector. The latest figures show that this is far from the case. There are now 2.5 million landlords, an increase of 5% on 2017, and 27% more than five years ago.

The reason people are still attracted to buy to let investment is because returns can be greater in the long term than equity markets and other investments.

To achieve good returns, landlords are adapting their business strategies. Landlords that have a few properties are forming limited companies because of their tax advantages over individual investors.

Landlords are diversifying their portfolios. Semi-commercial properties such as flats above shops that have both residential and commercial tenants are not subject to the higher 3% stamp duty on residential only property.

Large house converted to houses of multiple occupation (HMO) can achieve better rents than houses leased to a single tenant. HMO’s are especially popular amongst students. Large houses suitable for conversion to HMOs are often found in locations where house prices are relatively low.

Many landlords are finding it difficult to obtain loans from large mainstream lenders. A mortgage broker can find commercial mortgage deals from alternative lenders who have more flexible lending criteria.

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