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Why would I choose to use a property sourcer instead of finding property myself?

There are several reasons why you may choose to use a property sourcer instead of finding property yourself:

Time-saving: Property sourcing can be a time-consuming process that requires a lot of research and analysis. A property sourcer can help you save time by doing the legwork for you, identifying potential properties that meet your investment criteria, and presenting you with options that fit your goals and budget.
Expertise: A property sourcer has extensive knowledge and expertise in the industry, including the local market and trends. They can use this expertise to help you identify properties with high potential for return on investment (ROI) and negotiate better deals.
Access to off-market properties: A property sourcer often has access to off-market properties that are not available to the general public. These properties can be a great investment opportunity because there is less competition, and you may be able to negotiate a better price.
Reduced risk: Property sourcing involves a significant amount of due diligence, including researching the property’s history, analyzing the local market, and conducting financial analysis. A property sourcer can help you mitigate risks by identifying potential issues and providing recommendations on how to address them.
Customized service: A property sourcer can provide a customized service that is tailored to your specific needs and goals. They can help you identify properties that meet your investment criteria, provide advice on financing options, and guide you through the buying process.

Overall, using a property sourcer can be an excellent option for real estate investors who want to save time, reduce risks, and access a wider range of investment opportunities.

Is Buy to Let dead?

Investments, Macroeconomics, Tax

Investing in single let residential properties has long been considered a reliable way to make money in the UK property market. However, with interest rates rising substantially in the past year, this traditional method of investing is no longer the only option available. Instead, there are much more effective ways to make money from property, such as investing in or repurposing existing rental stock into HMOs or Serviced Accommodation. These alternative methods can generate much higher returns than simple Buy to Let, and they have several advantages over traditional property investments.

Firstly, let’s take a closer look at what HMOs and Serviced Accommodation are, and how they differ from traditional Buy to Let properties. HMOs, or Houses in Multiple Occupation, are properties that are rented out to multiple tenants who share communal areas such as kitchens and bathrooms. They are popular with students and young professionals, who often cannot afford to rent a whole property by themselves. Serviced Accommodation, on the other hand, is a type of short-term rental property that is fully furnished and equipped with amenities such as cleaning services and Wi-Fi. They are popular with tourists and business travellers who prefer the flexibility and convenience of a home away from home.

Both HMOs and Serviced Accommodation have several advantages over traditional Buy to Let properties. For one, they can generate much higher rental yields. According to a recent report by Knight Frank, the average rental yield for HMOs in the UK is around 7%, compared to just 3-4% for traditional Buy to Let properties. Similarly, Serviced Accommodation can generate much higher yields than traditional holiday lets, thanks to their shorter rental periods and higher nightly rates.

Another advantage of HMOs and Serviced Accommodation is that they are more resistant to changes in the property market. This is because they cater to specific niches in the rental market, and so are less affected by fluctuations in demand. For example, students will always need somewhere to live, regardless of the state of the wider property market. Similarly, business travellers will always need somewhere to stay when they are away from home, regardless of whether the wider economy is doing well or not.

One potential downside to investing in HMOs or Serviced Accommodation is that they may require more management and maintenance than traditional Buy to Let properties. This is because they involve managing multiple tenants or short-term guests, and ensuring that communal areas are kept clean and well-maintained. However, this extra effort can be offset by the higher rental yields and greater resilience of these types of properties.

Now let’s take a closer look at how Section 24 legislation, which restricts tax relief on mortgage interest for Buy to Let properties, affects different types of property investments. Under Section 24, which was introduced in April 2017, landlords can no longer deduct mortgage interest payments from their rental income when calculating their taxable profit. Instead, they receive a basic rate reduction from their income tax liability for their finance costs.

This has had a significant impact on Buy to Let landlords, who are now faced with much higher tax bills. However, HMOs and Serviced Accommodation are exempt from the legislation. This means that landlords who invest in these types of properties can still deduct their mortgage interest payments from their rental income, and so can benefit from higher post-tax profits.

Another advantage of Serviced Accommodation is that it qualifies for favourable capital allowances. Capital allowances are tax deductions that can be claimed against the cost of assets such as furniture and fittings, and can significantly reduce a landlord’s tax bill. Serviced Accommodation properties qualify for these allowances because they are considered to be a business, rather than a residential property.

In conclusion, investing in single let residential properties in the UK is no longer the only way to make money from property

5 things to look for in your property sourcer

Investments, Savings

A property sourcer is an expert in finding investment opportunities for investors that meet their goals. When looking for a property sourcer, here are five things to consider:

Experience: Look for a property sourcer who has extensive experience in the industry. They should have a deep understanding of the local market and be able to identify opportunities that meet your investment criteria.
Transparency: A good property sourcer should be able to articulate clearly how the procure deals. Sending links directly from Rightmove is not deal sourcing. A good sourcer builds relationships with agents, does direct to vendor marketing and many other ways of securing property at a discount or on preferable terms. They should act ethically and secure deals for investor while also treating vendors with respect and making the deal a Win/Win for all parties concerned.
Due Diligence: A property sourcer should conduct thorough due diligence on every property they recommend. This includes researching the property’s history, analysing the comparables, factoring in any costs such as refurbishment or finance fees to ensure it’s a viable investment.
Communication: It’s essential to work with a property sourcer who communicates effectively and keeps you updated throughout the process. They should be responsive to your questions and concerns and provide regular progress reports.
Fees: It’s important to understand the property sourcer’s fee structure upfront. Look for a transparent fee structure that aligns with your investment goals. A good property sourcer should be able to demonstrate the value they bring to the table and justify their fees.

Why the Government’s tax changes are biting harder than ever for landlords

Investments, Tax

In April 2017, the UK government introduced a tax change that would gradually phase out the ability for landlords to deduct their mortgage interest payments from their rental income before calculating their tax liability. This change, known as Section 24 or the ‘Tenant Tax,’ was designed to make the buy-to-let market less attractive to landlords and help first-time buyers get on the property ladder. However, the implementation of Section 24 has caused significant financial strain for many landlords, especially those owning property in their own name.

Under the previous tax system, landlords were able to deduct their mortgage interest payments from their rental income, which reduced their taxable income and, in turn, their tax liability. However, under Section 24, landlords are no longer able to deduct all of their mortgage interest payments from their rental income. Instead, they receive a tax credit worth 20% of their mortgage interest payments. This means that many landlords are now paying significantly more tax on their rental income.

The impact of Section 24 has been felt most acutely by landlords who own property in their own name. This is because landlords who own property through a limited company are not subject to the same restrictions on mortgage interest relief. Instead, they are able to deduct their mortgage interest payments from their rental income as a business expense, which reduces their corporation tax liability.

The effect of Section 24 has been compounded by a number of other changes to the tax system, including the introduction of a 3% stamp duty surcharge on second homes and buy-to-let properties. These changes have made it increasingly difficult for landlords to make a profit from their rental properties, especially in areas where rental yields are low.

As a result, many landlords have been forced to increase their rents to cover the additional costs associated with Section 24 and other tax changes. This has led to a significant increase in rental prices in some areas, which has put further strain on tenants who are already struggling to afford their housing costs.

Landlords who are feeling the impact of Section 24 are left with few options. They can try to increase their rental income to cover the additional tax costs, but this may not be possible in areas where rental prices are already high. They can also try to sell their properties, but this may be difficult in areas where the property market is stagnant. Those deciding to sell their properties may decide to do so sooner rather than later in order to take advantage of the current Capital Gains Tax allowances before they are reduced in the next tax year.

Some landlords have opted to transfer their properties to a limited company to take advantage of the more favourable tax treatment. However, this option is not suitable for all landlords, as it brings additional responsibility in managing a limited company, and there may be additional tax costs associated with transferring ownership of the property.

Others have chosen to incorporate their property portfolios into a limited liability partnership (LLP), which allows them to retain ownership of the property but still take advantage of the more favourable tax treatment. However, this option is also complex and may not be suitable for all landlords.

Overall, Section 24 has had a significant impact on the buy-to-let market and the landlords who operate within it. Landlords owning property in their own name have been hit particularly hard, and many have been forced to make difficult decisions about the future of their investments. The changes to the tax system have made it more difficult for landlords to make a profit from their rental properties, which has led to an increase in rental prices and a strain on tenants who are already struggling to afford their housing costs. Those people who need to rent are looking at increased rental prices due to the diminishing supply of privately owned rental stock pushing up prices as demand outstrips supply.

One thing is for sure – whatever the outcome – it is clear that whenever the Government interfere in the private housing market, however well meaning always cause a raft of unintended consequences.

What is the modern method of auction?

Investments

The modern method of auction is a relatively new way of buying and selling property that involves an online auction platform. This method combines the best aspects of traditional auctions with the convenience of online property sales.

Under this method, the seller sets a reserve price, which is the minimum price they are willing to accept for the property. Potential buyers can then place bids, and the auction runs for a set period of time, typically around 30 days. If the reserve price is met or exceeded during the auction, the property is sold to the highest bidder.

One of the benefits of the modern method of auction is that it can be a quicker and more transparent way of buying and selling property than traditional methods. A benefit for the seller is it can also attract a wider pool of potential buyers because the auction process is open to everyone with an internet connection.

However, there are some potential downsides to the modern method of auction. One of the main drawbacks is the high fees that are typically charged by auctioneers. The fees can commonly be as high as 10% of the sale price, which can be significantly higher than the fees charged by estate agents in traditional property sales.

When buying a property through the modern method of auction, it is important to carefully review the legal pack provided by the auctioneer. The legal pack contains important information about the property and the terms of the sale, including any special conditions that may apply. In addition to the fees charged by the auctioneer, the legal pack may also contain information about other costs and obligations that the buyer will be responsible for, such as maintenance charges, service charges, or ground rent. These costs can significantly add to the overall cost of owning the property and should be carefully considered before placing a bid.

Finally, the modern method of auction can also create a sense of urgency that may lead buyers to make impulsive decisions without conducting proper due diligence on the property. It is critically important for buyers to do their research and seek professional advice before placing a bid on a property as exchange of contracts often takes place on the fall of the hammer.

What are 5 things to check when asking a property sourcer to project-manage a refurbishment project?

Investments, Savings

If you’re considering hiring a property sourcer to project-manage a refurbishment project, here are five things to check:

Experience: Check the property sourcer’s experience in managing refurbishment projects similar to yours. Look at their track record, references, and online reviews to assess their expertise in managing similar projects. You want to work with someone who has a proven track record of success and can handle any challenges that may arise during the project.
Project management process: Ask the property sourcer to outline their project management process. This should include a detailed timeline, budget, and scope of work, as well as how they plan to handle any changes or unexpected issues that may arise during the project.
Communication: Effective communication is crucial during any project, especially when it comes to managing a refurbishment project. Ask the property sourcer how they plan to keep you informed of progress and any issues that may arise. They should be able to provide regular updates, answer your questions promptly, and provide recommendations on any decisions that need to be made.
Budget management: Refurbishment projects can be costly, so it’s essential to work with a property sourcer who can manage the budget effectively. Ask the property sourcer how they plan to manage the budget, what contingencies they have in place, and how they will handle any unexpected costs that may arise.
Quality control: The quality of the workmanship is essential to the success of any refurbishment project. Ask the property sourcer how they plan to ensure that the work meets your expectations and is completed to a high standard. This should include regular site visits, quality checks, and sign-offs at each stage of the project.

By checking these five things, you can ensure that you’re working with a property sourcer who has the experience, expertise, and processes in place to manage your refurbishment project successfully.

What to look for when viewing a potential Investment property

Investments, Savings

When it comes to buying property for investment purposes, it’s important to take a thorough and critical approach to property viewings. While a property may seem perfect on the surface, there may be underlying issues that could prove costly in the long run. Here are some key things to look for when viewing a property for investment purposes:

Checking the floors – Taking a marble with you can help to determine whether the floors are level. Simply place the marble on the floor and see if it rolls. If the marble does roll, it could indicate an uneven floor, which could be costly to repair.
Measuring room size – If the intention is to buy a property for use as an HMO (house in multiple occupation), it’s important to ensure that the rooms meet the minimum legislated size requirements. A laser measure can be used to accurately measure the size of each room.
Checking for subsidence – Taking a coin with you can help to check for signs of subsidence. Simply look for cracks that are larger than the coin. This could indicate a structural problem that may need to be addressed.
Checking windows and doors – If there is subsidence, windows and doors may not open and close properly. It’s important to check that all windows and doors open and close freely.
Checking the electrical consumer unit – The electrical consumer unit is an important component of a property’s electrical system. It’s important to check that the unit is in good condition and meets current safety standards.
Checking the boiler – The boiler is another important component of a property, and it’s important to check its condition. Look for any stickers indicating when the boiler was last serviced, and check the pipes for any staining that could indicate leaks. Also, check that the pressure gauge is showing a reasonable pressure.
Checking for blown windows – Blown windows can be costly to replace and will need to factored into the purchase price.
Checking for damp chimney breasts – If a chimney breast has been blocked up, it’s important to check for any signs of damp. A damp meter can be a useful tool to detect any damp or moisture issues.
Checking the roof – A drone can be used to get a good view of the roof, but if that’s not possible, look at the roof from across the street. Check for any missing tiles or signs of damage, and ensure that the guttering is in good condition.
Checking the brickwork – Cracks or staining on the brickwork could indicate underlying problems, such as subsidence or damp. It’s important to inspect the brickwork carefully during a property viewing.

Overall, taking a critical approach to property viewings can help to identify any potential issues that could impact the value of the property or prove costly to repair. By being thorough and methodical in your approach, you can ensure that you make an informed investment decision.

What can I do to mitigate Capital Gains tax as a UK property investor?

Macroeconomics, Tax

Capital Gains Tax is the tax due on the profit you make when you sell an asset. There are several ways to mitigate Capital Gains Tax when it comes to property investments:

Utilise your annual allowance: Every individual has an annual Capital Gains Tax allowance, which was £12,300 for the tax year 2022/2023. This means that you can make gains up to this amount before being subject to CGT. However this has been reduced to £6000 for the tax year 2023/2024 and is due to be reduced further in the coming years ,so if you are thinking of disposing of an asset it might be prudent to do it sooner rather than later.
Hold onto your property for the long term: Capital Gains Tax is charged on the gains made when you sell your property. If you hold onto your property for a long period, you can benefit from price appreciation by refinancing periodically and withdrawing capital tax free.
Use a spouse or partner’s allowance: If you jointly own the property with your spouse or civil partner, you can use both of your annual CGT allowances to reduce your overall tax liability.
Invest in tax-efficient property structures: You can consider investing in tax-efficient property structures such as Real Estate Investment Trusts (REITs) or if you own the asset use a Special Purpose Vehicle (SPV) like a Limited Company (Ltd) or Limited Liability Partnership. (LLP)
Offset capital losses: If you have made losses from the sale of other investments, you can offset these against your gains from property sales to reduce your overall CGT liability.

It’s important to note that CGT rules and regulations can be complex, and it’s always advisable to seek the advice of a tax professional before making any decisions that could have tax implications.

Landlords, is your investment property now losing you money?

Investments, Savings

The world of buy-to-let investment has been turned on its head in recent years, with new legislation making it much harder for landlords to turn a profit. In particular, changes to the tax rules mean that many landlords are now paying substantially more tax on their personally owned properties.

For years it was preferable to own property personally, mortgages were easy to come by at the best rates. George Osbourne changed things with his amendment to tax law called Section 24 which means landlords can no longer claim mortgage interest as a legitimate business expense. This has a significant impact on profits, especially for those landlords in the higher rate income tax band, with many now finding that their investment properties are no longer profitable as they are no longer charged tax on their profits but tax on their revenue. This can leave landlords in the situation where they are taxed even though they may not have made any profit.

The result of this is that many tenants are suffering, as landlords are forced to raise rents in order to compensate for the increased tax burden. For those landlords with large mortgages, it may simply no longer be viable to continue owning rental properties.

If you’re a landlord who is struggling to make a profit on your investment property, it may be time to consider selling up. At EvoStar Property, we can help you to explore your options and find the best solution for your circumstances.

Whatever your situation, it’s important to take action sooner rather than later. With the impact of Section 24 already being felt across the industry, it’s likely that the situation will only get worse in the short term as interest rates climb higher and landlords come off of their attractive cheap fixed rate mortgages onto higher priced products.

Don’t let your buy-to-let investment become a financial burden. Contact us today to find out how we can help you to sell your property quickly.

What is Capital Gains Tax? A guide for investors

Investments, Tax

As many existing investors already know, investing in property is a lucrative business. In 2022, UK lenders authorized more than 211,000 buy-to-let mortgages with the value of consumer buy-to-let mortgages in the UK estimated to be around £955 billion! These figures are set to increase from 2023 with a peak of nearly 250,000 buy-to-mortgages expected to be reached by 2032.

With many new investors joining the market, there’s one important subject that needs discussion: Capital Gains Tax. In this guide, we’ll provide a clear and concise explanation of what CGT is, how it works, and how it affects property investors.

What is Capital Gains Tax?
Capital Gains Tax is a tax paid on any profits made from selling an asset, such as an investment property. For property investors, it’s the tax paid when an investment property is sold. As its name implies, the tax is payable only on the gains made (your profit) and not on the whole amount received from the sale.

How is CGT calculated?
CGT is calculated by subtracting the cost of the asset when it was acquired from the proceeds of its sale. This means that you’ll only pay tax on the profit you’ve made from selling the property. For example, let’s say you bought a property for £200,000 and sold it for £250,000. Your profit is £50,000, and you’ll pay CGT on this amount, not on the whole £250,000.

What are the tax rates and allowances?
The amount of tax payable depends on other factors, such as your income tax rate. Basic rate taxpayers currently pay 18% on their CGT, while higher rate taxpayers pay 28%. Nonetheless, everyone is entitled to a CGT tax-free allowance each year.

It’s important to note that the UK government has recently reduced this allowance significantly, from £12,300 to £6,000 per annum as of April 2023, with a further reduction to £3,000 per annum from April 2024. For couples, the allowance will be halved to £12,000 from the previous £24,600.

What deductions are allowed?
You can also deduct certain expenses from the taxable amount, such as solicitor fees, estate agent fees, and costs incurred for property improvements. This can reduce the amount of CGT you’ll need to pay.

Why is CGT important for property investors?
If you’re investing in property, you need to be aware of CGT as it affects how much tax you’ll pay when you sell your investment property. As the property investment market is very active, with many new investors joining the market, it’s essential to know how to manage your tax obligations properly.

Is there any way to reduce my exposure to Capital Gains Tax?
Invest in tax-efficient property structures: You can consider investing in tax-efficient property structures such as Real Estate Investment Trusts (REITs) or purchasing property within a Special Purpose Vehicle like a Limited Company or Limited Liability Partnership. Capital Gains Tax is not charged on property purchased in this manner, but other taxes such as Corporation Tax apply instead.

Conclusion
In summary, CGT is a tax paid on the profit made from selling an asset, such as an investment property. It’s essential for property investors to be aware of their tax obligations, including CGT. By understanding how CGT is calculated, what tax rates and allowances apply, and what deductions are allowed, property investors can manage their tax obligations and maximise their returns.

More information can be found on www.gov.uk/capital-gains-tax
Statistics from – www.uswitch.com/mortgages/buy-to-let-statistics