Faced with rising costs, many landlords are looking to broaden their options relating to the type of property they invest in, including looking at commercial mortgages. They are also looking at alternative ways to finance their purchases.
The increase in stamp duty to 3% on property purchases for people owning more than one house, and the cut in tax relief on commercial mortgage payments, has threatened to severely cut the profits for many landlords who invest in buy-to-let property.
Instead of sticking with standard residential properties, many landlords are investing in multiple occupancy housing which includes student accommodation. Rental yields can often be higher in multiple occupancy housing.
Semi-commercial property that has a mix of residential and commercial use, such as flats above shops, is also attracting interest from buy-to-let landlords.
Stricter affordability rules for lenders offering commercial mortgages to buy-to-let landlords were introduced at the beginning of 2017. This can also mean that a mortgage offer takes longer to complete. Many landlords are using bridging loans to provide quick finance to secure purchases until commercial mortgage funds are available. Bridging loans can also be used for refurbishment projects.
There are tax advantages to forming limited companies to purchase commercial property, although the legal requirements to do this can be complex. Specialist organisations have been set up that, for a fee, will guide individuals through the process of restructuring their property business as a company.
Mortgage brokers have access to a wide range of financial solutions that can help landlords who want to diversify.