In light of the economic, social and health crises we’ve faced this year as a country, you’ be forgiven for questioning what the best next steps would be in your life. For those looking for the next big opportunity as we ease out of complete lockdown, could “becoming a landlord” be exactly that? With the reduction in stamp duty costs, falling house prices and the opportunity to get a steady second income when things are still so uncertain, the perks of becoming a landlord could mean that now is a perfect time – here’s what you need to know.
In the uncertainty of the COVID-19 pandemic, having a secure and regular second income is a good way to provide yourself with the financial stability and backup you may need if the country was to go into lockdown a second time. Becoming a buy-to-let landlord in particular offers you access to the property market and a second income in a time where house prices are falling and the government have introduced a number of schemes to ensure that said homes are of livable quality.
Of course, you’ll also have your own responsibilities as a landlord, but for making a regular profit, buying to let out a home in a good location with access to schools, transport links and more, could provide a steadier income than you might under the employment of a company at such a volatile time.
The UK’s Stamp Duty Land Tax has undergone changes this year, with homeowners paying reduced rates until 31st March 2021. This was introduced as a move to help the property market during the economic struggle as a result of the pandemic and could be the perfect opportunity for those who were already on the fence about becoming a landlord. Any homes below £500,000 won’t need to pay any tax at all, and homes above this threshold will pay different amounts depending on the cost of the property. The rates are as follows:
- Property between £500,001 and £925,000 – 5% Stamp Duty
- Property between £925,001 and £1.5 million – 10% Stamp Duty
- Property over £1.5 million – 12% Stamp Duty
Those purchasing second homes, however, need to be aware that a 3% extra will be placed on top of the above rates, as well as a standard 3% rate on homes under £500,000. This is still reduced compared to previous rates, however, and while buy-to-let landlords may be put off by the additional 3%, it’s worth noting that this is still the lowest rate we’ve had in some time, meaning it’s still likely to be worth the investment.
House Prices Are Falling
Alongside the reduction in Stamp Duty, the pandemic has also led to house prices falling, meaning it is actually one of the most affordable times to buy a home in most of the UK. Fewer people are likely to be able to afford mortgages due to financial struggles during this period, and so investing in a home is usually at the bottom of their list, however buying to let could be a great longer-term investment. Property prices are likely to rise again in the coming years, meaning that you can generate capital growth and make money as you go.
This isn’t foolproof, however – sellers may not be willing to give up their homes for too low of a price, so it’s important to be prepared and to shop around for the best homes, locations and prices as a whole.
Tenant Demand Is Up
People finding it difficult to buy not only offers lower house prices for those who can invest but also means that the demand for rentable properties is up too. For this reason, letting out a property can not only be easy but is profitable too. Compared to May 2019, tenant demand is up around 33%, meaning that this is a perfect opportunity for new and existing landlords. Provided the home is in good condition and you are able to meet all landlord responsibilities, there should be no reason as to why your property won’t receive any enquiries from interested renters and so in theory, now is the perfect time to make that leap.
The government have recently introduced an insulation scheme which provides financial incentives to homeowners and Landlords to introduce energy-saving measures in their properties. This is set to come in the form of vouchers of up to £5,000 depending on the household, with some of the poorest even receiving up to £10,000. These vouchers are intended to encourage property owners to embark on ‘green’ home improvement, whether that’s energy-efficient insulation, solar panels, or other green initiatives.
This was introduced in a bid to get the UK’s homes to net zero emissions by 2050, but for today’s property owners and in particular, landlords, these schemes offer a financial incentive to improve their homes and may mean you can rent your property out for a higher value as a result.
Make Sure To Protect Your Investment
While it may be a good time to invest in property, you also need to make sure that you have proper protection for you, your property and your tenants. This can come in the form of Landlord insurance.
We offer a range of products as part of our Landlord cover, including:
- Buildings Cover – This covers the financial cost of repairing structural damage caused by the environment, malicious incidents or unforeseen events/accidents.
- Contents Cover – This covers the costs of replacing or repairing furnishings inside the home that have been stolen or accidentally damaged by tenants.
- Public Liability – This protects you in the case an incident or accident were to occur that resulted in injury on your property.
- Loss Of Rent – This will cover any missing rent payments should the tenant not be able to pay, or is in arrears, protecting your own income (for a maximum of 6 months).
- Malicious Damage – This covers any damage caused by tenants or other persons that were carried out purposefully and led to damage to the property.
- Legal Expenses – This offers cover for the expenses associated with any legal costs, including defence of any disputes.
We also offer cover for Landlords that own more than one property, with our Landlord Portfolio Insurance. For more information on this, feel free to take a look at our provided information, or get in touch with us for help.