How to Protect Your Property Portfolio in 2017
A successful property portfolio requires ongoing investment and long-term maintenance to sustain performance. Without protective measures in place, its market value and rental returns will be threatened.
Be it for just one or a string of properties, there are certain ways to ensure your portfolio sustains long-term capital growth and provides healthy yields along the way. Here are some ways to protect your investment through 2017.
Landlord insurance is specifically manufactured to suit the buy-to-let market. However, specialised cover is needed depending on the type of property and tenants in question.
Basic landlord insurance typically includes the same type of protection as your usual house insurance, covering against fire and flooding, for example. However, additional extras will be required to safeguard against such actions as unpaid rent, malicious damage, loss of income and legal disputes.
For furnished properties, contents insurance should be taken out to cover such items as kitchen appliances, furniture, utilities and carpets, etc.
Income Protection Insurance
Many investors rely on personal income to maintain mortgage payments, especially if they’re self-employed. However, should you lose work through no fault of your own – due to illness, for example – then income protection provides a regular monthly salary for a specified period in replacement of the expected wage.
Know your Interest Rates
For buy-to-let mortgages, you have the option to lock in your interest rate or use a variable rate over a set period of time. Whilst the fixed rate won’t budge over the repayment period, the variable rate tends to follow the Bank of England’s base rate and so can be changed at any time. Knowing which option to choose depends on the current market conditions.
For 2017, it appears there is pressure from Governor of the Bank of England Mark Carney to raise interest rates, although many lenders haven’t succumbed as yet. At time of writing, there are still ultra-low rates available and many people are taking long-term, 10 year fixed deals due to current uncertainty post-Brexit.
Being phased in from April 2017, tax relief on residential properties will be restricted to the basic rate of income tax. This will push higher rate payers into the 20% relief bracket. To cope with the additional pressures, some buy-to-let landlords have moved their portfolio into limited companies or transferred properties to family members in a lower tax bracket.
Tax repercussions are a complex matter so it’s recommended to use the know-how of a professional accountants or letting agents to protect your property portfolio from tax inefficiency.
Before settling on a purchase, research the expected 2017 property hotspot areas such as Manchester, Edinburgh and Liverpool, which are backed up with vast student numbers and young professionals who move into the rental market.
Other measures are to acquire high-quality home security equipment, such as CCTV cameras and intruder alarms, to deter crime and satisfy insurance requirements. For additional protection, consider how your Will deals with your portfolio.
If you’re looking to expand your property portfolio, you may be interested in the UK’s Top 10 Best and Worst Areas to Invest in 2017.