Your home may be repossessed if you do not keep up repayments on your mortgage’
Buy-to-let stamp duty loophole: flats above shops
- By JOANNE DUCKWORTH
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- 06 Jun, 2016
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Contact GRD for your updates on commercial mortgages today.
Buy-to-let landlords are investing in commercial and semi-commercial property in an effort to beat the stamp duty rise.
A surcharge of three percentage points was introduced on April 1 and is payable on second homes and residential buy-to-let investments.
However, commercial and semi-commercial property is exempt from the surcharge, meaning that those who invest in these property types will have a lower tax bill.
In addition, falling commercial mortgage rates and new tax rules being introduced next year mean these properties look increasingly attractive.
The Chancellor, George Osborne, reformed the stamp duty regime for commercial property for most buyers in the Budget in March. Buyers are now charged a different rate for each band of the property's value instead of paying a flat rate. According to the Treasury, this will lower stamp duty bills for 90pc of buyers.
After the introduction of the second-home surcharge in April, a buyer of a £300,000 buy-to-let would pay £14,000 in stamp duty, while a buyer of a mixed-use property would pay just £4,500 - a saving of almost £10,000.
In addition, commercial yields are often significantly higher than residential yields. Experts say buyers can get as much as a 6pc yield on commercial property in London - double the average residential yield of 3pc in the capital.
As a result, investors are starting to turn to mixed-use and commercial options.
Research published earlier this week by Mortgages for Business, a broker, showed that a fifth of investors were now considering semi-commercial property – a figure that has more than doubled since November last year.
David Whittaker, the broker's managing director, said: “With higher yields it is no surprise that there has been a sizeable shift towards the more complex property types.
“The interest in commercial and semi-commercial property may also have grown because these asset classes do not incur the stamp duty surcharge imposed on residential property.”
While straightforward commercial property might present an intimidating prospect for the casual investor, semi-commercial investments, such as a shop with a flat above, or a pub that has been converted into a shop and flats, represent a good middle ground, said Shaun Church, a director of Private Finance, another broker.
"The flat above the shop is the best approach for an amateur. Depending on the type of tenant in the shop, it’s a nice halfway house between commercial and residential investment," he said.
"You've got two different types of property, so it’s an easy way for someone to diversify and reduce their risk – and stamp duty on commercial property is now looking quite attractive."
Once bought, Mr Church suggested that buyers might even consider changing the use of their property in order to maximise the value of their investment.
"Because it's cheaper to buy commercial property, a buyer could look at getting planning permission to convert a building from commercial back to residential.
"The square foot value is more attractive if it’s residential, so you could make a profit on sale. However, you would have to get the planing permission, which would not be guaranteed," he said.
'New stamp duty rules make our flat a better investment'
Faye Grout, 40, a teacher, realised that the new stamp duty regime meant buyers of her mixed-use flat and shop building in Aylesbury, Bucks, not only would be exempt from the higher rate but would actually have a lower tax bill after the Budget announcement.
The building, which has been in her family for three generations, used to be a saddler selling leather goods, which was owned and run by her grandfather.
When the shop closed 15 years ago the family rented it out, first to a hairdresser and then to a coffee shop owner. It also has a two-bed flat, which could be rented out separately.
Now the family want to sell. They used to own a similar property next door, which has already been sold. That sale is what made Ms Grout realise that both properties were exempt from the higher rate.
She said: “The buyers for the shop next door were very keen to complete before the stamp duty changes, but then I realised that they weren’t going to lose out under the new rules - in fact they would pay £1,500 less.”
The second property, which has not yet been sold, is worth £340,000 - and Ms Grout said she thought a buyer could make £25,000 a year in rent on the shop and flat, which would be a 7pc yield.
Will it get even cheaper?
One consideration that may have put off potential investors in the past is the typically higher interest rate on commercial mortgages.
Individuals who buy a commercial property must get a commercial mortgage, and rates tend to be higher than on an ordinary buy-to-let mortgages. Mr Whittaker estimated that a typical rate would currently be around 3.5pc.
It's also harder to get an interest-only mortgage on a commercial property than on a buy-to-let property. For mixed-use properties capital repayment loans are more common.
But experts say commercial mortgage rates are coming down and predict that more mainstream providers will begin to offer commercial mortgagesas landlords consider incorporating to avoid the higher tax on buy-to-let income being introduced in April next year.
The new regime means that landlords who are higher-rate taxpayers will be unable to deduct their mortgage interest from their rental income before calculating their tax bill. This has led many experts to advise landlords to consider setting up a limited company, as businesses are exempt from the higher rate of tax and pay much lower corporation taxes instead.
Individual landlords who buy mixed-use properties can continue to claim mortgage interest relief after the new regime is introduced, making these investments an even more attractive prospect in future, said Mr Whittaker.
“You will still be able to offset your interest even in 2020 [when the new tax regime takes full effect]. At the moment you pay a little bit more on the mortgage, but banks are already indicating that their rates on mixed-use property will come down," he said.
"You're getting a much, much better yield. It’s not yet a cavalry charge towards the high street but we are starting to see a movement that way."
GRD New perspective on Money Blog.
It adds that mortgage companies should also plan for consumer needs at different point in their lives.
Finally, the FCA recommends firms should be “considering potential innovation in product features or terms and supporting services to accommodate specific life events.”
However, the FCA says these issues are hard for individual firms to tackle, and also praised the mortgage trade bodies’ own research and “significant
It suggests firms should take older borrowers into account more with their policies and proposition.
It adds that mortgage companies should also plan for consumer needs at different point in their lives.
Finally, the FCA recommends firms should be “considering potential innovation in product features or terms and supporting services to accommodate specific life events.”
However, the FCA says these issues are hard for individual firms to tackle, and also praised the mortgage trade bodies’ own research and “significant efforts” towards helping older borrowers.
The FCA says older borrowers often do not have enough choice of mortgage products and that lenders have a “limited appetite” for the loans.
It says: “This could be due to fewer local branches, fewer products offered by high street brands that meet their needs, or restrictions in lending criteria to older consumers.”
Lenders may also fear regulatory punishment when lending to older consumers.
This leads to issues with accessing suitable mortgage products, the FCA says.
The regulator also says its own rules may not help older borrowers.
There are also some regulatory barriers to innovation, such as the withdrawal of retirement interest-only mortgages, but that it is looking to bring these back.
The FCA also says brokers have problems navigating products for older borrowers.
The regulator says “opaque or nuanced” criteria and complex affordability assessments make it hard for brokers to compare options.
This can lead to brokers only recommending a small number of products they are familiar with.
The regulator also says lenders may not be clearly publishing information about upper age limits or acceptable sources of retirement income on their websites or literature.
The FCA says it is neutral about upper age limits in mortgage lending, though notes many lenders have increased this or removed it.
But it adds: “Although we have noted some progress in this area, consumer groups, firms and trade bodies report that increases to upper age limits will not be sufficient to facilitate lending to older borrowers.
“Firms may be unnecessarily limiting themselves, and older borrowers, by having rigid policies or systems and controls that are unable to consider individual circumstances, potentially resulting in unintended exclusion of credit-worthy consumers in the target market.”
The regulator also reassured mortgage firms and trade bodies who feel that lending to older borrowers is a minefield and that the regulator may punish them for making mistakes.
The occasional paper says: “Our MCOB rules do not aim to discourage firms from lending to older borrowers, as long as they are credit-worthy. Decisions about lending strategy, identification of an appropriate target market, and application of any specific restrictions in lending policies are left to the discretion of individual firms.”
The regulator adds that it knows defining what ‘income’ is can be complicated for lenders catering to older borrowers.
It says lenders should take a common sense approach to this.
The FCA also says it will review its Handbook to make sure it is easy for firms to interpret, but that it needs to wait for Brexit first. Read More.
The key to maximising the rental value of properties is understanding how to attract tenants who will pay the most or finding a way to get more rent from property.
One of the first things landlords need to understand is the type of tenants who would be attracted to their type of property and location.
If it is in the vicinity of a college or university, properties may be suitable for students. There may already be plenty of properties for undergraduates, but overseas students – who are generally wealthier – post-graduates and even lecturers may be happy to pay more for a well-maintained home.
Whichever tenant type will maximise the rent for property in a given area, the likelihood is the most rent will be achieved by making sure it is in excellent condition. For example, the rent on a new-build will tend to be at least 10pc more than on an existing home.
Here are six ways of maximising rental income:
1. A new paint job and clean-up
These days, tenants tend to stay in a property for around two years, so they are not looking for temporary accommodation as they may have been in the past, but for a home they can call their own.
According to the Government’s English Housing Survey 2014/5, 30pc of privately rented properties are not considered “decent”. As such, one of the cheapest ways to raise rental income is for landlords to make sure their properties are well maintained, easy to heat, have no damp or condensation issues, and are given a good clean and a lick of paint.
2. Upgrade kitchens and bathrooms
Replacing a tired and out-of-date kitchen and bathroom can not only have an impact on rents but can encourage the tenant to stay longer, reducing re-letting costs and potential void periods in between lets.
3. Add en-suites
Modern student halls often have en-suites, but not all rental properties do. So, if it is possible to add private facilities – especially for landlords who are renting rooms – it is worth doing so as this may attract wealthier tenants who are willing to pay extra for the facilities.
4. Can you extend?
If renting rooms is not an option, such as where the property is not large enough, it may be possible to add extra space to create more rooms to rent. Alternatively a landlord may have a two-bed property of a type that is oversupplied in an area where tenants are desperate for three-bed properties.
An easy-to-add single extension may not just boost rental income, but should also raise the overall property value, boosting overall returns. Any such changes will of course require that landlords secure any required planning permission and ensure it passes building control.
5. Target specialised rental markets
Some properties may be suited to tenants who can pay more, such as a home that incorporates a 'granny annexe' for multi-generational living. However landlords look to improve their rental income, it is important that they talk to local property experts to check the implications of renting to different tenant types and the increased rental income will cover any rise in letting costs.
6. Offer ‘added extras’
Many people consider that tenants are renting because they are on a budget, however, in some areas, renting can actually be cheaper than buying.
If as a landlord you have access to a premium tenant market, it may be possible to secure more rent by providing a higher than average spec property with state of the art appliances, décor and security systems. Do check this investment will deliver enough additional rent to cover the higher costs and that premium tenants will rent your property type in the area it’s located.
Safer buy-to-let investment
Whether you are thinking of investing or are already a landlord, the Telegraph , on behalf of Direct Line, has created useful information on the ever-changing buy-to-let market.
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All entries need to be returned by the 14th April 2017 , judged on the 15th April and the winner notified on this day, the Winner will then receive a fantastic Cadburys Chocolate Easter Egg .
Enjoy the challenge and we look forward to hearing from you, please join us via the following social media sites. - Instagram
9. In 2007, images of an 8-inch mummified creature resembling a fairy were posted on the website of the Lebanon Circle Magik Co. The site explained how the creature had been found by a man walking his dog along an old Roman road in rural Derbyshire. By April 1 the Lebanon Circle website had received tens of thousands of visitors and hundreds of emails.
But, at the end of April 1, Dan Baines, the owner of the site, confessed the fairy was a hoax. He had used his skills as a magician's prop-maker to create the creature. Baines later reported that, even after his confession, he continued to receive numerous emails from people who refused to accept the fairy wasn't real.
8. A barge towing a giant iceberg appeared in Sydney Harbor in April 1978. Dick Smith, a local adventurer and millionaire businessman, had been loudly promoting his scheme to tow an iceberg from Antarctica, saying he was going to carve the berg into small ice cubes, which he would sell to the public for ten cents each. These cubes, fresh from the pure waters of Antarctica, were promised to improve the flavour of any drink they cooled.
Local radio stations provided blow-by-blow coverage of the scene, but when it started to rain the firefighting foam and shaving cream the berg was really made of washed away, uncovering the white plastic sheets beneath.
7 . In 1860 people throughout London received the following invitation: "Tower of London: Admit Bearer and Friend to view annual ceremony of Washing the White Lions on Sunday, April 1, 1860. Admittance only at White Gate." By noon a large crowd had gathered outside the tower. They were disappointed to find that lions hadn't been kept in the tower for centuries, let alone white lions.
6 . Burger King published a full page advertisement in USA Today in 1998. The advert announced a new item on their menu: the Left-Handed Whopper. Especially designed for the 32 million left-handed Americans, the new burger included the same ingredients as the original Whopper, but all the condiments were rotated 180 degrees.Thousands of customers went into restaurants to request the new sandwich, while many others requested their own 'right handed' version.
5. On 1 April 1972, newspaper headlines around the world announced the dead body of the Loch Ness Monster had been found. A team of zoologists from Yorkshire's Flamingo Park Zoo, who were at Loch Ness searching for proof of Nessie's existence, had discovered the carcass floating in the water the day before. Initial reports claimed it weighed a ton and a half and was 15½ feet long. Upon inspection, Nessie turned out to be a bull elephant seal.
The zoo's education officer, John Shields, confessed he had been responsible for placing the body in the Loch. The seal had died the week before, and he had shaved off its whiskers, padded its cheeks with stones, and kept it frozen for a week, before dumping it in the Loch. The seal's body was displayed at the Flamingo Park Zoo for a few days before being properly disposed of.
4. In 1977 the Guardian published a seven-page "special report" about San Serriffe, a small country located in the Indian Ocean consisting of several islands that make the shape of a semi-colon. The two main islands were called Upper Caisse and Lower Caisse. They did an in-depth series of articles on the history, geography and daily life on these idyllic islands. The Guardian's phones rang all day as readers wanted more information about the perfect-sounding fictional holiday spot, and the hoax began a tradition in newspapers to try and fool their readers.
3. During an interview on BBC Radio 2, on the morning of 1 April 1976, the astronomer Patrick Moore announced that at 9:47 AM a once-in-a-lifetime astronomical event was going to take place. The planet Pluto would pass behind Jupiter, temporarily causing a gravitational alignment that would reduce the Earth's own gravity. Moore told his listeners that if they jumped in the air at the exact moment this planetary alignment occurred, they would experience a strange floating sensation.The BBC received hundreds of phone calls from listeners claiming to have felt the sensation. One woman even reported she and her 11 friends had risen from their chairs and floated around the room.
2. The best known public prank is the 1957 news show broadcast by Panorama. It was a three-minute segment about a bumper spaghetti harvest in southern Switzerland. This was apparently because of an unusually mild winter and the "virtual disappearance of the spaghetti weevil," with video footage of a Swiss family pulling pasta off spaghetti trees and placing it into baskets. The show said: "For those who love this dish, there's nothing like real, home-grown spaghetti." Hundreds of people phoned the BBC wanting to know how they could grow their own spaghetti tree. To this query the BBC simply said: "Place a sprig of spaghetti in a tin of tomato sauce and hope for the best."
1. In Sweden, in 1962, there was only one television channel, and it was shown in black and white. The station announced that their "technical expert," Kjell Stensson, was going to tell people how to view color images on their black-and-white sets. Researchers, he said, had recently discovered that covering your television screen with a pair of tights would cause the light to bend in such a way that it would appear as if the image was in color. All viewers had to do, Stensson said, was to cut open a pair of stockings and tape them over the screen of their television set. Thousands of viewers fell for the hoax. Many say today that they remember their parents (their fathers in particular) rushing through the house trying to find stockings to place over the TV set. Regular colour broadcasts began in Sweden on April 1, 1970.
It's a tradition that goes back hundreds of years, but where did it all start?
There are many theories but the one that most hold to links back to a pope - though it isn't a religious holiday.
Where did it all start then? Why do we celebrate it?...and what can we do to be crowned best prankster (you know you want to know)?
How did April Fool's Day begin?
The change to the calendar was too much.
While no one really agrees on what happened, there is strong evidence that it is all down to Pope Gregory XIII, who adopted the Gregorian calendar in 1582 - this moved our year from March to Jan 1.
The change was published far and wide, but some didn't get the memo. These people celebrated the New Year on April 1 and were ridiculed and seen as foolish - hence Fool's Day.
The French would put paper fish on the 'fool's' backs and were called Poisson d'Avril, or April Fish - it's still the term used in France for April Fool's.
This doesn't quite work out though as the Julian Calendar, established in 46BC, made January the first month of the year. Countries began to switch calendars, and it all ended up being a mess by the 1500s. Some countries started the year on different days.
While it's not clear what calendar had what impact a lot of the theories stem from the idea of the date moving to January.
Renewal festivals where everyone was a fool
Others say the April Fool's Day is left over from the idea of "renewal festivals" marking the end of winter and the beginning of spring.
The festivals apparently involved those taking part donning disguises, playing tricks on friends and strangers, and causing chaos.
Others mistake the celebrations for medieval Christianity's Feast of Fools, which took place each January.
Christians elected a Lord of Misrule who wore masks, dressed up and sung obscene songs. They generally behaved badly. While this all sounds great, it wasn't actually what happened. I know, Disney lied to us, or rather Victor Hugo the author did. The festival which was portrayed in the Hunchback of Notre-Dame didn't happen like this. Hugo - and then Disney - made it all up, so they have nothing to do with April Fool's.
The actual Feast of Fools was held in the 12th and 13th century and was seen as an alternative to the rowdy festivals. There were role reversals, and the fools represented those chosen by God because of their lowly status. Later clergy stopped the feast, and was finally forbidden by the Council of Basle in 1435. Another theory is the French Revolution played a part. April 1 is the anniversary of the event...you may ask why is this linked to comedy?
Historians say back on April 1, 1789, after the French people deposed King Louis XVI, King George III of England made a joke which has continued the tradition until today. He pretended to step down.
The peasants took to the streets to celebrate their new freedom.. and then were arrested and imprisoned. In Roman mythology Pluto, the God of the Dead, abducted Proserpina and brought her to live with him in the underworld.
Proserpina called to her mother Ceres for help, but she could only hear the echo of her daughter's voice. She searched in vain.
Some say the fruitless search was the basis for the 'fool's errands'.
The town of Gotham's trick .
There's a folk tale which links the Fool's Day to a town called Gotham, Nottinghamshire.
It traditional in the 13th century for any road that the King placed his foot upon to become public property. When the people of Gotham heard that King John planned to travel through their town, they refused to let him in as they didn't want to lose their main road.
The King upon hearing this sent his soldiers, but when they arrived they just found a town full of lunatics. The people were acting out foolish activities like drowning fish or attempting to cage birds in roofless cages.
It was all an act, but the King fell for it. The town was seen as too foolish. April Fool's Day was supposed to mark their victory.
Chaucer's riddle of a date In Chaucer's The Nun's Priest's Tale a fox tricks a rooster on ”syn March bigan thritty dayes and two.”
Chaucer probably meant 32 days after March - May 2, but may took it to mean March 32 or April 1.
It was seen as a reference to April Fool's.
The best pranks ever Click here for more info
1. Spaghetti harvest
Here's what happened, and everything we know so far, http://www.telegraph.co.uk/news/2017/03/22/westminster-terror-attack-everything-know-far/
What happened in Westminster?
An attacker, who was armed with two knives, killed two pedestrians and injured around 40 other people as he mowed down members of the public with a car on Westminster Bridge before crashing into the railings in front of Parliament.
Then, bursting through the gate to the Palace of Westminster, he stabbed unarmed Pc Keith Palmer, 48, before being shot dead by armed officers.
Paramedics fought to save his life and that of Pc Palmer on the floor of the cobbled courtyard just yards from the House of Commons. Both Pc Palmer and the attacker were later confirmed dead. Two large knives could be seen at the scene.
Foreign Office minister Tobias Ellwood was among those who rushed to help. Mr Ellwood, who lost his brother in the Bali bombing, was seen pumping the officer's chest then standing above him, his hands and face smeared with blood.
Who was the attacker?
Mrs May has told the House of Commons that the British-born attacker had been identified as someone known by police and MI5, and the working assumption was that he was inspired by Islamist terrorism.
He has not been publicly identified yet and police believe he was acting alone, although they are investigating possible associates.
Mrs May said: "What I can confirm is that the man was British-born and that some years ago he was once investigated by MI5 in relation to concerns about violent extremism. He was a peripheral figure. The case is historic. He was not part of the current intelligence picture. There was no prior intelligence of his intent or of the plot."
Eyewitnesses reported seeing an Asian man in his 40s carrying two large knives. The suspected attacker is pictured on a stretcher below.
How many arrests has there been?
Eight people have been arrested so far, and six addresses raided across London, Birmingham and elsewhere.
The Birmingham raid took place on the Hagley Road, a mile or so southwest of Birmingham city centre.
Pc Keith Palmer
Pc Palmer, 48, was a husband and father, and had worked for the Metropolitan Police for 15 years, having previously served in the armed forces.
Conservative MP James Cleverly paid tribute to the “lovely man” he had known for a quarter of a century. “I’ve known Keith for 25 years. We served together in the Royal Artillery before he became a copper,” he wrote.
“A lovely man, a friend. I’m heartbroken. My thoughts are with the family, friends and colleagues of PC Keith Palmer. A brave man.”
Aysha Frade
Spanish teacher and department head Aysha Frade, 43, worked at DLD College, London and was married with two daughters.
She was believed to have been crossing Westminster Bridge to pick up her children aged eight and 11 from school when she lost her life in the attack.
According to Spanish newspaper La Voz de Galicia, the woman had always lived in London, where her parents met. Her father was of Cypriot origin while her mother was born in Betanzos in northwestern Spain.
According to La Voz, the woman often spent her holidays with her family back in the town.
A man in his mid-50s was also killed in the incident on the bridge. His identity is not yet known.
What about those injured?
Those injured included 12 Britons, three French children, two Romanians, four South Koreans, two Greeks, and one each from Germany, Poland, Ireland, China, Italy and the United States.
Three police officers were also hurt, two of them seriously. Two of three French teenagers caught up in the carnage are believed to have been seriously injured.
Read the full story here
