The most pressing questions on LandlordZONE readers' minds were revealed during a recent webinar hosted by Chief Commercial Officer of the HFIS group, Paul Shamplina (main pic).
He joined forces with industry figure David Coughlin (main pic, inset) to help landlords identify the key steps to achieve the highest profits from their portfolios this year, but the pair were also inundated with questions from those watching.
Coughlin is the co-founder of the National Association of Property Buyers and director/founder of both National Residential and the Landlord Sales Agency.
This included the tricks of the trade when looking for the best mortgage particularly for first-time landlords; the practicalities of incorporating an existing property portfolio; the best heating systems for rented homes during the current energy price hike crisis; how to manage tenants who are struggling to pay their rent and what constitutes a '�fair' rent increase.
Shamplina and Coughlin were asked nearly 40 questions on these subjects both during and after the webinar, which was watched by hundreds of landlords.
One of the most frequent issues vexing landlords, the webinar revealed, is whether to operate existing or newly-purchased properties via a limited company umbrella. It's a strategy that, although more time-consuming than personal ownership, is becoming more popular as a way to reduce a landlord's tax bill and overall improve profitability. Learn more on limited company ownership of property and find out the pros and cons.
Q: How would a first time buyer go about getting a buy to let mortgage? Are their any specialist mortgage providers?
A: Usually you would need a residential property mortgage before applying for a buy to let mortgage as lenders would like to see experience. Or you can buy your first property as residential and convert it to buy to let which is a good strategy for beginners
Q: What is your advice on increasing rent in the current climate? What would a fair increase percentage be?
A: You need to consider the market rent versus what they are paying. Advise your tenants what this is and that you need to agree on a rent increase closer to market rent for long term financial stability for yourself and their tenancy. Communicate and make it clear that with interest rates rising and future repair costs you cannot afford to run at a loss. Work with your tenants to come to an agreement and even offer to stagger the increase
Q: When incorporating properties how much stamp and capital gains tax needs to be paid?
A: This depends on whether you have commercial property in your portfolio and if you are running your rental portfolio as a partnership. You can pay 0% CGT if incorporating a partnership or pay 1% if it is a mixed residential-commercial portfolio. Alternatively, you may have to pay the full prevailing stamp that would apply
Q: Is it worth transferring a buy to let property into a company (that I own as a sole trader) for tax purposes?
A: For one property maybe not as the tax-costs benefits may be negligible. Incorporating is an expensive and complex business and the cheapest and simplest way for you would be purchasing from yourself in an SPV. If you are intending to purchase more properties then it is advisable to set up an SPV for future purposes and maybe in time you can transfer this property
Q: As a basic rate tax payer with one HMO property in my name is it worth moving to limited company ownership? What might be the costs involved?
A: Firstly, add the rental income to your salary and if you stay in the basic rate bracket then there is nothing further to do. If you are pushed into a higher rate then consider purchasing the property from yourself in the limited company and benefit from the tax efficiency. It is worth considering you might also be able to increase your pension contributions to reduce salary and keep in line with the basic rate