Is it time for Bournemouth landlords to sell up?

Since the budget two weeks ago I have had a number of blog readers call and message me regarding some of the changes and how they will affect them going forward. It’s great talking to you all, and please do continue to get in touch if there is something on your mind that you wish to discuss. I did want to share one of the big questions I have had asked quite a lot however, and that is whether it is time for Bournemouth landlords to hang up their boots and sell up.

Landlords have been coming under increasing attacks over the last few years, and the latest budget didn't fail to pack another few punches. The Stamp duty tax increase of 3%, the capital gains surcharge of 8%, the reduction interest you can offset against tax coming next year. It almost seems as if landlords are on par with bankers to be the most disliked group of people. But why is that?

There is an ever increasing focus on the media around landlords. If it’s not another story about a dodgy landlord who lets his garden shed out, then it’s a story about how landlords are to blame for increasing house prices, increasing rents and so on. This mainly stems from the Bank of England’s continuous cautions around the increasing number of buy to let mortgages and the potential risks this causes. It’s almost ironic how the BoE warn about the dangers and consequences of not protecting the private landlords from over exposure and yet landlords are being weighed down by the Treasury’s vindictive taxes.

What the government fails to realise is the great service landlords provide in providing homes for people who are not able to afford, or choose not to, buy their own home – something the government is failing to address itself by the continued missed targets on new homes. The very fact is, the population is growing at a rate that far exceeds the development of new homes. The private rental sector is one of the main driving forces (and indeed investors) in the development and renovation of properties and without the PRS, there would be fewer renters, and increased homelessness.

But what options are there for people with money in the bank? The interest rate remains at the all-time low of 0.5% pensions are not as great as they used to be and in fact with the recent changes many people took their lump sum from the pension to invest. So unless you wanted to take a gamble on the stock market, the property market seems to be the safest bet, and the best all round return of money invested.

When you take a look at Bournemouth, the capital gains you will see on your properties this year alone will likely be in excess of 8% just take a look at the following link where I talked about future predictions for the area - CLICK HERE. You also have to consider the higher than average yields that are achievable in Bournemouth compared to other towns in the UK – on average in excess of 6% gross; then you would be right in saying that Bournemouth is one of the most profitable Buy To Let areas in the UK.

So what should you do?

Well every landlords situation is different so the first thing you need to do is go back to the very reason you started out investing in property in the first place. Why did you invest, and what did you want to achieve. You then need to have a look at how these changes will affect your targets and plans. If there’s no change – for example you don’t plan on buying any more properties (no stamp duty affect), you don’t have a mortgage (no interest rate offset affect) and you don’t plan to sell (no capital gain affect) then you only need to carry on doing what you are doing as you are unaffected.

If however the government changes has a negative impact on your plans then you need to carefully consider your options. Selling is an option, but you have to consider the capital gains tax you will face, along with the fact you haven’t achieved your initial target when starting in BTL. There is however an alternative, and its something I have suggested to everyone who has contacted me for advice around this subject – review your targets and strategy. For the most affected landlords, this could be restructuring your portfolio and changing some of your targets so that they are achievable. For this you would really need a conversation with a good financial advisor. 

For the majority of affected landlords there are many options to think about. Rent increases is one of the options, and despite the increase in rent across Bournemouth, a number of landlords haven’t increased their rent in years – maybe now it might be worth considering if you are receiving below market value. You also need to see if your properties could be made more profitable whether that is through some minor decorations and changes to your property to demand a higher rent, or simply market your property better to get higher paying tenants.

The rental sector in Bournemouth is one of the best placed to deal with the changes coming our way from the government. Yes the changes will have a negative effect on many landlords in Bournemouth, however we are best placed to mitigate these affects and continue to make better returns than by investing anywhere else. Just look at my recent report where housing gives the best return out of all investment classes- CLICK HERE.

Is it time to sell up in Bournemouth? - Not until you give me a call.

If you are affected by any of the changes then please get in touch to have a detailed review of your portfolio and what can be done to maximise the returns you get to offset against the changes to deliver your targets and aspirations. Send me an email to luke.marchbanks@belvoir.co.uk or give me a call on 07979123970.