Putting A Buy To Let Investment To Good Use

For many of us, financial uncertainty seems to be a key feature of life; saving and investing for the future in a time of low interest rates has become immensely challenging.

Many people who have accumulated savings, inherited money or wound up with a significant sum to invest, look to the buy to let property market in order provide for their futures.

In this blog post we will explore the best ways of ensuring that buy to let properties can provide for you and your family in retirement.

The golden years

In the decade between 1997 and 2007, property seemed to be all anyone was talking about. The TV stations were bursting at the seams with programmes about property ladders, property fortunes and property presenters.

It was clear, in hindsight, that the property bubble was about to burst.

The moment that a critical mass of people enter the market in one go, assuming that property is a licence to print money, the count down to a crash begins. 

In 2008, an era of cheap borrowing, available credit and rising property prices came to an abrupt end and so did the dreams of many who hoped to become property millionaires overnight. 

All is not lost, however

Get rich quick schemes aside, property can still be a sensible way of investing for the future; the rental sector is growing rapidly and predicted to continue expanding over the next decade.

Unless housing is built at a pace to meet demand, it is likely that rents and therefore rental income will continue to rise.

Most private landlords who own a buy to let property are small time property investors with one or two properties.

These days, the more risk averse banks are reluctant to lend to landlords with dozens of properties, recognising that they represent unacceptable default risk levels. 

Banks have to lend money to someone, however, or they cease being banks, so you might find you can get a buy to let mortgage by presenting yourself as a low risk borrower with few liabilities.

Bank, building society or broker

Bank lending rules have become far more stringent since April 2014 and few are now happy to consider a buy to let mortgage without an existing property to put up as collateral.

Helping the next generation

Housing costs in London and other major cities have sky rocketed in recent years and even affluent young professionals find themselves priced out of the housing market.

If you have grown up children and dependents who are unable to buy, you might be able to provide for them and find an investment opportunity at the same time.

You will need landlords’ home insurance if you choose to become a buy to let landlord, as regular insurance policies will not be considered valid and the first concern of any new landlord is ‘insuring my property against possible damage or loss.’

The government’s pension reforms in the past year have left many retirees with a lump sum of cash that they can invest as they see fit, no longer having to purchase an annuity.

By investing in buy to let properties, retirees may be able to use rental incomes to supplement their pensions, and have a property to leave to the next generation in their will.

For more information please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.

Nil Rate Band Discretionary Trusts - Review

If you have set up a ‘Nil Rate Band Discretionary Trust’ in your Will, new Inheritance Tax regulations that are due to come into force in April 2017 may mean that your children miss out.

Families who set up these Trusts in order to leave property tax efficiently are unlikely to benefit from the new ‘family home allowance’ worth up to £350,000 per couple from 2020 because the asset has not passed directly to the children.

Why Review?

The new family home allowance will be available to home owners from April 2017.  It will eventually be worth an additional £175,000 per person in 2020.  When this is added to the current Nil Rate band of £325,000, this will mean an allowance for property owners of £500,000 - £1,000,000 per couple.

Crucially, to qualify for the allowance, the property must be ‘directly inherited’ by direct descendants.  This includes children, stepchildren, adopted and foster children and grandchildren.

If you are unsure, Ward Williams Financial Services Ltd are able to assist.  Please contact us on 01932 830664 or wwfs@wardwilliams.co.uk.

Help to Buy ISA

The Help to Buy ISA launched on 1 December 2015 and is designed to reward those first time buyer clients who are working hard to save up for their first home.
First time buyers that choose to save through a Help to Buy ISA will receive a Government bonus to help them make the critical first step onto the housing ladder. The bonus will represent 25% of the amount saved with a minimum of £400 and a maximum of £3,000. The bonus will be calculated and paid only when the client buys their first home. Clients can open their ISA with a maximum amount of £1,000 and can save a maximum of £200 per month.

Some key points on using the Help to Buy ISA are:

Ø  Applicants must be a first time buyer and never had an interest in any property in the UK or aboard;

Ø  Maximum purchase price of £250,000 outside of Greater London (or £450,000 in Greater London);

Ø  The Help to Buy: ISA is limited to one per person rather than one per home.

For more information please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.