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landlords’ retirement dreams in tatters

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Max Armstrong, of North East Property Investment, a buy-to-let specialist, said the measures followed years of policy changes that had made buy-to-let less profitable and came alongside forthcoming minimum Energy Performance Certificate targets that could cost landlords up to £10,000 per property. “There is a worry that there will be a cumulative effect that, when you throw in the upcoming EPC requirements and the reduction in tax relief on mortgage interest, will push small landlords out of the market,” he said.

For Jess Dene*, 51, and her partner, the burden is already painful. The couple are self-employed and have built a portfolio of seven properties in the South West as their retirement fund.

“We didn’t have any money until we were in our 40s and by then it was too late to start a pension,” she said. “Our only option was property.”

But the Government’s buy-to-let crackdown and soaring house prices have already pushed back their plans. “Our aim was to have a pre-tax monthly rental profit of £5,000. We were at £3,500, but that has dropped to £3,200 following the interest rate rises. For two people, that is no longer sustainable.”

A raft of previous measures, such as new requirements for electrical checks, have already squeezed profit margins, said Ms Dene. “It used to cost £75 to renew a tenancy agreement. We just renewed one and it cost £900. The red tape costs so much money.” She is worried that a requirement for all properties to meet new minimum standards will bring additional costs in the form of paying for checks and certification.

Sarah Coles, of the investment company Hargreaves Lansdown, said: “Landlords have been cashing in and moving on as rising costs and a tougher regime persuade them there are easier and more profitable ways to make money.”

Those who sell up will get hit by inflation if they keep their savings in the bank, so former landlords could instead turn to the stock market. A stocks and shares Isa will allow them to invest £20,000 each year free of tax. Self-invested personal pensions generally have an annual contribution limit of £40,000 but allowances can be carried over for three years. Funds offer greater diversification of risk than investing in individual shares, said Ms Coles.

A Government spokesman said: “Good landlords have nothing to fear from our rental reforms, which will give tenants greater security to challenge unreasonable rent rises and poor practice. We are strengthening the grounds that landlords can use to repossess their homes where there is legitimate reason.

“We have consulted with landlords and will continue to work with them as we prepare legislation.”

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