Landlords are beginning to diversify towards mixed-use property investment in a bid to counter the buy to let tax increases due to come into force on 1st April.
Roma Finance, the specialist bridging finance lender, have seen a 50% increase in enquiries in the last six months with many going to completion or in the pipeline, indicating a move by landlords to diversify their portfolios.
Mixed-use property is exempt from some of the tax increases coming into force from 1st April, and those landlords and property developers who are looking to diversify their portfolios are snapping up such units to offset stamp duty tax hikes.
To give an idea of the tax savings that can be made with mixed-use property, a £500,000 residential buy to let property would incur stamp duty of £30,000, whereas for a commercial or semi-commercial property of the same value the stamp duty would be just £14,000.
In addition to the tax savings, there are other benefits to mixed-use property for the investor too, including having two types of property in one, so being able to let them to different types of tenant and having the opportunity to sell either to a different set of buyers.
Rental yields are often also higher on mixed-use property and have been seen to deliver as much as double the yield possible on purely residential property.
To maximise the income and offset tax on mixed-use property, there is often renovation works required, mainly to make the separate units fit for purpose and to put in separate entrances to each part of the building. Bridging loans can be provided in stages as the work progresses and the exit for the bridge is often the sale of one of the units, while the other is retained for ongoing rental income.
Managing director at Roma Finance, Scott Marshall, commented: ‘We’re seeing many landlords looking to diversify their portfolios and some are investing in semi-commercial units for the first time. They are keen to take advantage of tax efficient property types, and also have another string to their bow when it comes spreading tax risk.’
He continued: ‘Landlords and property investors are putting in place a variety of strategies to protect their portfolios from increasing taxation and semi-commercial property has a definite role to play in this as they look for new opportunities.’