How are Landlords raising funds?

By Matthew Okeefe

In recent years the UK housing market has experienced a dramatic shift, with government introductions constantly altering the parameters in which Landlords have to work within. Prior to the 1980’s the number of UK landlords was rather small, with such investments solely associated with the professional and the incredibly wealthy.

This all changed with the Housing Act of 1988 when the Assured Shorthold Tenancy came into play. Giving potential landlords and lenders the confidence that tenants would only reside in the property for a fixed period the act encouraged an influx of new landlords, seeing becoming a homeowner as a flourishing business option.

Fast-forward to the mid-1990’s and we see a rather extravagant change, with lenders advancing ‘more than 1.7 million Buy-to-Let loans between 1999 and 2015’ (Clarke, 2015)¹. According to Clarke of the Council of Mortgage Lenders this invited new blood into what was a traditionally monopolised market

Unfavourable changes from parliament

Where the UK was once a utopic land for the property investor things have certainly changed, with George Osbourne’s buy-to-let tax increase plans rather disheartening the country’s community of landlords.

‘The tax increase, on which there was no consultation, will be phased in from 2017 and fully implemented by 2020′(Dyson, 2015)² confirms Richard Dyson of The Telegraph. Accelerated by a 3% increase (Gov.uk)3 in Stamp Land Tax Rate (SDLT) landlords will be losing a considerable amount of profit from their investments, encouraging many to hike up their rent prices, thus having a detrimental effect on the industry as a whole.

As illustrated in a survey carried out by SpareRoom.co.uk 45% of BTL landlords are planning to raise their rents in 2016, and almost one in five (18%) are enforcing inflation-busting increases of more than 3% (http://www.property118.com/spareroom-survey-says-landlords-will-raise-rents-in-2016-to-cover-cost-or-the-new-legislation/83260/).

Reimagining the sector through technology

With banks and parliament implementing these changes from April 1st 2016 landlords have quickly become interested in alternative lending channels, exploring investment options that soften the sting of tax and stamp duty increases. As well as attracting lenders to such platforms this movement has seen organisations such as the FCA (Financial Conduct Authority) under immense pressure, with so many peer-to-peer businesses seeking approval to join the flourishing market:

According to finance news source Finextra:

‘The UK’s peer-to-peer lending goldrush is causing a headache for the Financial Conduct Authority, which has put out a statement revealing it has a backlog of 86 firms awaiting authorisation to operate.’ (Finextra, 2016)4.

Illustrating an expansion in the market this avenue is giving new buyers a way to gain capital whilst avoiding the banks, utilising sophisticated tech to invest and sell with confidence.

Crowdfunding through ShareProperty

ShareProperty is an alternative way for landlords to invest in property, injecting as little as £100 into a project. Joined by a whole string of investors (the crowd) the risks, taxes and returns are shared, giving landlords a way of gaining a monthly income without being tied into a mortgage.

Viewing each deal online landlords can access detailed information about each property including:

  • Images
  • Floorplans
  • Funding target
  • Dividend yield
  • Financials
  • Surveyor’s report
  • Solicitor’s report

And much more!

Sign up today

If you are a landlord looking to raise funds then sign up with ShareProperty today and be the first to learn of properties seeking investment. Only sharing deals that fit into to your needs we assist with the growth of a diverse property portfolio, relaying all of the risks and benefits in a clear fashion.

**Please note that investing in early stage businesses involves risks, including loss of capital, illiquidity (the inability to sell assets quickly or without substantial loss in value) and lack of dividends and should only be done as part of a diversified portfolio. Your capital is at risk if you invest.

References:

  1. Clarke, B. (2015) ‘Buy-to-let: the past is no guide to the future’. Available at: https://www.cml.org.uk/news/news-and-views/buy-to-let-the-past-is-no-guide-to-the-future/
  2. Dyson, R. (2015) ‘Death of buy-to-let: Landlords wake to to Osbourne’s 150pc tax’. Available at: http://www.telegraph.co.uk/investing/buy-to-let/death-of-buy-to-let-landlords-wake-up-to-osbornes-150pc-tax/
  3. uk (2016) ‘Higher rates of Stamp Duty Land Tax (SDLT) on purchases of additional residential properties’. Available at: https://www.gov.uk/government/consultations/consultation-on-higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties/higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties
  4. com (2016) [web copy] Available at: https://www.finextra.com/newsarticle/28683/fca-reveals-p2p-lending-platform-application-backlog

 

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Investing in early stage businesses involves risks, including loss of capital, illiquidity (the inability to sell assets quickly or without substantial loss in value) and lack of dividends and should only be done as part of a diversified portfolio. Your capital is at risk if you invest. Please note that past performance and forecasts are not relaible indicators of future results.

These pages do not include and are in no way intended to be a promotion of any individual investment opportunity. The summary information is intended solely to display a snapshot of what Shareproperty Limited is aiming to deliver and to determine whether you would like to be provided with more in-depth information.

Any investment decision must be made solely on the basis of the full details provided particular to that development or investment opportunity as it fits your criteria. Full details of any investment opportunity, Shareproperty Limited terms and conditions and data protection policies will be circulated to you.

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