The turnaround on buy to let in the 2016 Budget statement will have surprised landlords that were gearing themselves up to use limited company buy to let as a better route going forward. George Osborne has made clear that residential property inside a limited company tax wrapper will pay the 3% surcharge, which may mean that this kind of product will mainly be sold through specialist lenders, rather than across the board.
For many of our broker members, buy to let is a substantial part of their overall business mix, as over the years many clients have built up a reasonable portfolio and continue to invest in this market.
With the lack of new homes coming to market and a significant number of houses being tied up for years under the rental banner, there has been an increase in “flipping”, recent research published by Hamptons shows. Traditional buy to let is generally a long-term investment, while flipping is the complete opposite, bringing homes to market that might otherwise be unattractive for purchase.
The research shows that last year £4.8bn worth of homes were flipped across England and Wales, up from £2.8bn in 2010. Flipping is the process of buying a home to refurbish and quickly selling on to make a profit. Buying in the right area is essential and a rising market definitely helps. The attractive areas for flipping are London and South East and here the average flipped home was purchased for 20% below the local authority average price before being sold for 25% above.
In 2015 the average flipped home was sold for £251,000 which is 37% more than it was bought for, because of the added value by the investor. In addition, 95% of flipped homes sold through Countrywide were refurbished, while nine out of 10 were sold onto an owner-occupier. Last year, homes that were bought and sold again within 12 months accounted for 3% of all homes sold, and 6% of all transactions in England and Wales.
For those landlords with the means to refurbish and turnaround quickly, flipping brings more saleable property onto the market, utilising property that otherwise would be left untouched.
