At Bell & Company we are regularly contacted by borrowers who have property portfolios which regularly give them financial problems. The prospect of owing an investment property portfolio is very enticing and something we view with great attractiveness. We often view those who own multiple properties with great envy. However, as we have come to experience it is perhaps a picture which is incorrectly portrayed and many do not understand the associated costs and issues that go with owning a Buy-to-Let.
Some people clearly go into property investment without fully considering all the implications. Typically potential investors think along the lines of I’ll get a low rate interest only mortgage and the rent will provide a nice income on the side. Sadly, this is not the reality and there are many pitfalls landlords face along the way.
Unfortunately the mortgage is not the only costs you need to consider:
- Insurance – insuring the property can be costly and you need to ensure you have the correct insurance product to be covered.
- Rates – goes without saying and these are payable by the property owners whose name is on the deed. Land and Property Services are the one the creditor you need to be mindful of in terms of aggressive debt collection.
- Maintenance/Property Upkeep – any property requires maintenance. This includes your rental property, whether you choose to do it yourself or employ someone this another cost to consider.
- Letting Fees – when marketing the property for rental you will have to pay letting fees and likely a monthly fee to an agent to ensure sure the smooth running of the rental. If you choose to do this yourself you need to be aware of referencing prospective tenants.
- Void Periods – when the property is vacant.
When you consider these added costs on top of your mortgage this is a significant outlay and when weighing this up with the rental income many will see the opportunity to own an investment property as less attractive.
Troublesome Tenants & Legislation
It would take us an eternity to list all the relevant legislation that landlords must adhere to, nonetheless it is key prospective landlords ensure they understand all this. We would recommend membership to Landlords Association of Northern Ireland. LANI is chaired by someone we work closely with, Mr Raymond Crooks. Raymond has spoken at one of our events in regard to owning property and Bell & Company have spoken at LANI meetings on the pitfalls of Negative Equity. Have a look at http://www.lani.org.uk/ and sign up if you are a landlord.
Another issue are troublesome tenants. At Bell & Company we have heard some real horror stories regarding tenants from shocking property damage, non-payment of rent and serious criminal offences. Sadly, as a landlord you will likely encounter a troublesome tenant at some point but membership to LANI can assist you in such circumstances.
Changing Tax Implications
From the 6th July 2017 the Government to restrict finance cost relief for individual landlords. Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits. The Government cite their objective here to is to make the tax system fairer, the Government will restrict the amount of income tax relief landlords can get on residential property finance costs, such as mortgage interest, to the basic rate of tax. So landlords with higher incomes no longer receive the most generous tax treatment. This will be introduced gradually from 2017.
As mentioned in our introductory paragraph we find many borrowers approach Bell & Company who have a property portfolio of Buy-to-Let properties in negative equity. In many instances people are having to top up mortgages and costs every month as opposed to drawing a source of income. They are servicing a mortgage for an asset whose value will likely never reach peak highs when a mortgage may have been obtained. This is a troublesome factor for many landlords and some feel there is no way out.
At Bell & Company we have assisted property investors with portfolios ranging from 1 or 2 buy-to-lets to up to 20 properties. We understand how different lenders operate and accordingly we can tailor our advice to your circumstances and help in the disposal of assets which are either underperforming or in Negative Equity. We deal with lenders based in both Northern Ireland, Ireland, Spain and the United Kingdom.
Despite our negative stance on Property Investment if done correctly it can provide a lucrative income. Nonetheless if you are suffering difficulties please contact Bell & Company on 02895 217373 to arrange your free initial consultation.