As an alternative to buy-to-let
With the changes to Stamp Duty on second homes on the horizon, there has been a surge in interest of investors trying to beat the deadline with a new buy-to-let investment. Also though, there has been a surge in commercial and semi-commercial property investments, which have some excellent perks and low commercial loan rates too. It seems property investors may be going commercial.
The SDLT deal from April 2016
As Stamp Duty Land Tax (SDLT) will be applied at 3% to all residential buy-to-let properties and second homes from April 2016, it has got investors thinking.
Some have brought forward investment plans and are busy now with estate agents trying to “seal the deal” on a property purchase before the tax hike.
Of course, no-one can predict the future, and how drastically the effect of the SDLT increase will have on the buy-to-let market as a whole, will be uncovered in the coming months and years.
Will investors be deterred completely from buy-to-let, or will they suck up the extra tax as part of their portfolio?
Others investors though, it appears, are already looking at alternatives in commercial property and semi-commercial property, which are not affected by the new tax rules.
The PRO’s of commercial property investment?
The activity in commercial property markets was already hotting up with many businesses looking to buy their own business premises, refinance or raise capital.
With commercial loan rates starting at just 1.99% above the base rate and the “loan to value” (LTV) as high as 85%, who wouldn’t be at least considering this as an option?
In addition, many property investors are purchasing commercial property for the first time – which could be an early sign of a way to diversify portfolios whilst avoiding the extra SDLT.
Naturally, it pays to get expert advice when investing in a new area of the market, or a new financial product. Speak to your accountant, financial adviser and solicitor to make sure you have all the information.
The CON’s of commercial property investment
There are a number of things to watch out for when it comes to commercial property investment.
Break clauses in a lease contract will be counted by the lender, for example, a twenty year lease with a ten-year break-clause will be viewed as a ten-year lease.
And, on the whole, buying and managing commercial property is more complex than residential buy-to-let and a solicitor will be essential.
The complexity shouldn’t put you off though, as the pro’s typically outweigh the con’s.
This is the reason many investors, it seems, are turning to commercial property as a lucrative investment that isn’t subject to the new SDLT rules.