Many landlords are selling up and leaving the buy-to-let sector as higher mortgage rates, on top of tax and further regulatory changes, make it harder to turn a profit. Online property specialist My Auction says that more than a third (38 per cent) of its current lots are from buy-to-let landlords looking to exit the market quickly.
However, fewer rental properties mean rents, which are already rising – the Office for National Statistics said they rose by 4 per cent last year – are set to climb higher still. This presents an opportunity for landlords keen to stay invested in the sector, with returns looking encouraging. What’s more, because some landlords want a quick sale in response to higher interest rates, there is more rental property coming to market, providing further opportunities for those wanting to pick up a property bargain.
There are also growing opportunities for landlords prepared to take on a commercial to residential conversion. The price of disused commercial premises continues to fall as the shift to working from home means less office space is required and high-street footfall continues to dwindle as shoppers prefer the convenience of purchasing online.
Banks remain keen to lend to landlords and are constantly looking at solutions whereby they can assist investors who want to add value to a project. Hence the growth in demand for refurbishment loans, enabling landlords to purchase a property, complete the required works to get it up to a standard to rent out before refinancing onto a standard fixed-rate buy-to-let mortgage in a few months’ time, when hopefully rates will be lower.
There are various refurbishment loans available with lenders prepared to lend up to 75 per cent of the acquisition cost on loans from £250,000 to £5m, demonstrating their faith in the market; otherwise, they would be reducing this to a maximum of 60 per cent, as they did in 2009 when the market was extremely volatile. Rates start from as little as 0.65 per cent per month on a fixed basis, enabling the landlord to put down a 25 per cent deposit and then complete the works, increasing the value and improving the rental yield.
It is possible to get up to 75 per cent gross development value (GDV), after which time you can refinance onto a buy-to-let mortgage. The advantage in delaying taking out a fixed-rate mortgage is that rates are relatively high now but could well reduce in six to 12 months’ time when you are ready to move onto a deal.
Those landlords who have equity in other properties may also be able to borrow up to 100 per cent on their new purchase by cross charging another property. This is agreed on a case-by-case basis so get in touch for more information.