Evolution of buy-to-let advice – Doug Hall

It’s now a viable option for anyone from first-time landlords to professional investors. Brokers must evolve the way they approach buy-to-let advice, rather than sticking to a ‘more of the same’ approach.

To date, most brokers will determine early on in their discussions whether a buy-to-let deal should be financed in the individual’s name or within a limited company. Once that decision has been made, advice will then be given about the most suitable product for the client’s needs.

An alternative approach is for brokers to provide all their buy-to-let clients with two quotes: one for an individual buy to let and one for a limited company buy to let. The broker can then advise their client to speak to their accountant to determine which option is best for them.

What! I can hear you cry – why prolong or even lose control of the deal by involving an accountant? The answer is because the factors involved in determining whether to go down the individual or limited company route are no longer confined to simply product related issues. The critical factors will, most likely, be to do with the borrower’s business aspirations and tax position.

The reality is that borrowers will probably consult their accountants anyway, so better to be on the front foot and recommend it as part of the advice given. You could go even further and recommend a meeting between the client, accountant and yourself so that you can work together to arrive at the most appropriate solution.

The changes made to the buy-to-let tax regime cannot be ignored and the way in which brokers advise clients should change accordingly.

The good news is that more lenders are now offering limited company buy-to-lets and pricing is becoming more competitive, with some lenders abandoning the practice of dual pricing limited company deals. For example, 3mc now works with nine lenders offering limited company buy to lets, with pricing starting in the 3% rate band. And I have no doubt that over the coming months we’ll see more lenders join in and more deals become available.