Master broker Clever Lending has reported seeing more landlords move away from ‘traditional’ buy-to-let property acquisition into property types that have a more favourable tax situation such as retail units and small commercial developments.
The firm said that many of the residential investment properties recently on the market ripe for renovation and conversion have been snapped up in the pre-hike tax spending spree, making certain categories of property scarce, and it’s been reported that there has been a dip in this type of activity. With the permitted development rights becoming permanent in April, this has also put more of a focus on commercial opportunities, it said.
The tax reforms for commercial property have put a focus on small to medium sized investment opportunities. With a 0% band up to £150,000 and just 2% above this to £250,000, residential landlords are now applying to finance this type of investment as an alternative way to grow their existing residential portfolio.
Rates on business and retail units were also relaxed in the last budget making them something which landlords are now considering, Clever Lending said. It believes that becoming commercial landlords rather than ‘just’ residential property investors is now a real option and this is being seen in the type of cases Clever Lending is currently now looking at with brokers and lenders. The business rate threshold has been increased to £15,000 and the top band will go up to £51,000 from April 2017.
Sonny Gosai (pictured), sales and operations manager at Clever Lending, said: “The Chancellor’s increases on buy-to-let taxation and the relaxation of tax on other property types has resulted in a shift of focus for the entrepreneurial landlord.
“Becoming a commercial landlord has some distinct advantages over the residential sector and it may not be that big a step if the property is a mix of retail and residential. Industrial and office units can also be acquired to grow a portfolio on terms that may be more beneficial with higher income and asset value.
“We’re still seeing the post-budget market evolve but the trends are starting to appear and it’s an exciting time in commercial bridging finance.”
