The credit crunch has claimed another buy-to-let victim. This time it’s Anthea Turner’s husband, Grant Bovey, who has handed the keys to a property empire over to his bank. So how can you avoid a similar fate?
Financially, one of the best things you can check is whether you are making the most of the tax relief available to buy-to-let investors. If you complete your own tax return, then double check your tax calculations. That’s because, from April next year, HM Revenue & Customs will acquire new powers that will allow their inspectors to arrive on your doorstep and inspect your business records if they suspect you of having untaxed rental income or capital gains.
Next, review your mortgage. Buy-to-let investors can offset mortgage interest (but not capital repayments) against rental income for tax purposes. So in tough times consider minimising your monthly outgoings by switching to an interest-only mortgage. “The buy-to-let mortgage market may have shrunk but there are still deals available for those with plenty of equity,” says Susan Emmett in The Daily Telegraph.
If you can’t remortgage to a cheaper deal then there are other ways you can cut costs. Letting-agent fees, insurance, accountancy fees and travel costs between rental properties are all also eligible for tax relief. Then there’s a “wear and tear allowance” of 10% of your rental income, which is tax deductable. This can include the cost of replacing old or broken items, but not “improvements”, such as upgrading the kitchen.
From the start of this month landlords have been required to prepare EPCs – certificates which tell prospective tenants about energy efficiency. Rising energy bills are a worry for tenants, so by lowering a property’s EPC rating you may increase your occupancy rates. Better still, you can claim tax relief on up to £1,500 spent on improvements.
More than ever then in the current climate, “landlords need to approach buy-to-let as a business and seek the correct advice. Otherwise they could miss out,” says Chris Norris of the National Landlords Association in The Daily Telegraph.
A week in the property market
• Spanish property development firm Salsa Inmobiliaria has announced that it will give buyers of its £620,000 beachside houses a free one-bedroom flat in one of its golf resorts.
• The average house price is now £172,108, having dropped 12.4% in a year, according to the latest figures from Halifax. They also reported a price fall of 1.3% in September.
• The FT House Price Index indicates that prices dropped by 1.1% in September, contributing to a 4.3% fall over the year and leaving the average house price worth £219,307.
• The Council of Mortgage Lenders has reported that in August only 15,600 mortgages were approved for first-time buyers, compared to 34,800 in August 2007. Overall, mortgage lending fell 63% to £6bn, the lowest level since 2002.
• The average number of sales per estate agent hit a 30-year low of 11.5 in the three months to September, says the Royal Institution of Chartered Surveyors. In London agents sold an average of just eight properties between July and September.
• Estate agency Knight Frank reckons that house prices will fall to the same levels as 2003, meaning a drop of another £45,000 on the average house price to £140,687. This would leave over two million people in negative equity.
• The Gambling Commission has warned that people who resort to raffling their homes in order to sell them may in effect be running a lottery and thus breaking the law. A legal competition, on the other hand, must demand a level of knowledge or skill that will deter a significant number of people but be sufficiently challenging to generate clear winners. “Lotteries are the preserve of good causes and cannot be operated for private gain,” warned Tom Kavanagh, deputy chief executive of the Gambling Commission.