Investment

Landlords - How much rent should you charge?
Stamp Duty Rates for second home owners and buy to let investors
Pinpoint Investment Advice

Landlords - How much rent should you charge?
When it comes to property investment in Northern Ireland, the number one question on many buy to let investors and landlords minds is how much you should charge for rent. Do some research first as the result of your decision is going to decide if your rental endeavour or purchase is profitable or not.

The first thing you need to think about are your costs, because you want to make sure that over time the rent is going to offset your costs. Obviously, you do not want to lose money while renting a house or apartment so the minimum rent that you can consider is going to have to be aligned with the associated costs of being a landlord.

Establish the minimum rent required
Add together your costs to establish the minimum rent, including;

  • the mortgage amount you pay
  • rates
  • the costs of maintenance
  • the cost of landlords insurance.

Also consider

  • the area property is located in since every area has its own set average rent and ceiling level. 
  • the average cost of living for the area
  • What is the competition and how much are they charging?  If there are a lot of competing properties available to rent in the immediate surrounding area you may need to be willing to undercut the competition a bit.

Research
Research competitors to get a good idea of what to charge, and what people will be willing to pay.  You will need to be objective and look at properties that roughly offer the same space and amenities that you do in the same area.  As leading letting agents Belfast area, you can use the Pinpoint Property Search for apartments and houses to rent Belfast and surrounds, as well as student accommodation Belfast areas.

Setting the price
After weighing up all the above, set a rental price that you believe is fair but one that allows a little room for negotiation if needed e.g. with student rentals you may have to negotiate or offer special deals during certain times of the year, so make sure that your rental price can allow for this and that prospective tenants see it as a good deal, whilst you know that you have achieved about what you expected from the rent.

 

Pinpoint Investment Advice
If you are thinking of purchasing a property to let and want a little advice on area and rental demand why not contact Lisa Privilege, our Lettings Development Manager 07841970740 and see how she can help. Lisa has been with Pinpoint Property for over 12 years and has a wealth of experience in both residential sales and lettings as well as property management Belfast area. 

 

Stamp Duty Rates for second home owners and buy to let investors

Stamp Duty Rates changed in April 2016 for second home owners and buy to let investors.  Since this time anyone who buys additional residential property, including second homes and buy-to-lets, will have to pay an additional 3% in stamp duty. 

  • You pay nothing if the purchase price is below £40,000
  • If the property price is between £40,000 and £125,000 you pay 3% of the entire property price.
  • If the property price is between £125,000 and £250,000 you pay 3% on the first £125,000 and then 5% on the remaining balance
  • If the property price is between £250,000 and £925,000 you pay 3% on the first £125,000 and then 5% on the next £125,000 and 8% on the remaining balance
  • If the property price is between £925,000 and £1.5 million you pay 3% on the first £125,000 and then 5% on the next £125,000, 8% on the next £675000 and 13% on the remaining balance
  • If the property price exceeds £1.5 million it will follow as above plus 15% on the remaining balance.

 

What does this mean for purchasers?

  • Many parents want to help their children buy their first property. As a condition of lending, most banks and building societies require parents to also put their name on the title deeds. It is likely, if the parent already owns a residential property that the higher stamp duty charge will apply.
  • Commercial property investors, with more than 15 properties, are expected to be exempt from the new charges, though this is subject to consultation. 

 

Are there any other upcoming changes that may affect buy to let purchasers?

  • Buy To Let investors can claim tax relief on their mortgage interest payments at their marginal rate of tax – so 40% relief for higher rate taxpayers and 45% for additional rate. From April 2017 this will gradually be reduced to a flat rate of 20%, phased in over four years which will result in a higher tax bill on the rental income.
  • Wear and tear allowance.  Landlords will no longer automatically be able to deduct 10% of their rental profits as notional wear and tear, starting from April 2016. From April 2017 they will still be able to get tax relief, but only on costs they have actually incurred.


What to do next?

  • If you have concerns about how the stamp duty increase and reductions in tax reliefs will affect you as a small landlord speak to your accountant.
  • Whilst taxation is out of your control, mortgage interest rates are not and now is a good time to review your current mortgage deal. 
  • Contact your local Pinpoint office to get a free appointment with an experienced independent financial advisor at a time that suits you. 
  • Parents helping their children to purchase should consider all the options available to do so, as using a different means could avoid the additional cost these changes in stamp duty will bring.