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New Crowdfunding Product To Revolutionise Buy-to-let Investment
Following the government's recent tax changes to curb the BTL market, recent research* shows that more than two thirds (69%) of landlords have been deterred from investing further in rental property. (* Source: RLA research, based on a survey of almost 3,300 landlords, February 2018).
The 3% extra stamp duty introduced on homes bought to let and the reduction in mortgage interest relief is clearly deterring landlords, at a time when demand for rental property is on the rise. Research from the Association of Residential Letting Agents (ARLA), demand from tenants rose in the UK, while the supply of rental properties dropped by 8% between December 2017 and January 2018. The findings also indicate that the gulf between supply and demand widened in January, with more tenants coming onto the market.
Further research from the National Landlord's Association reveals that 20% of landlords plan to reduce the number of properties in their portfolio in 2018. This represents the highest level of intended property sales in 10 years.
According to Jatin Ondhia, CEO of Shojin Property Partners (https://www.shojin.co.uk/
Jatin Ondhia comments: "The rental market in the UK is growing and still presents a fantastic investment if done correctly. The Brits have always loved buy-to-let investing. It's an investment in bricks and mortar - you can see it, touch it, feel it and even live in it. How many other investments can boast that? What's more, every budding property tycoon has read that property values increase, on average, at 10% per year over the long term, so it's a sure winner.
"So how can landlords and property investors further buy into BTL property, without the tax and legislative burdens? This is where property crowdfunding comes in.
"Our new crowdfunding product for the BTL market, enables landlords and investors to come together and buy into a small portfolio of residential property for rental purposes, sharing the income and capital growth.
"Our crowdfunding model is unique, as it enables landlords and investors to invest in accordance with their own preferences, requirements and tax position. Rather than the traditional structure with a bank and an equity investor, we have placed a mezzanine tranche in the middle. However, if landlords and investors prefer to take a traditional BTL position, they can buy an equal amount of both mezzanine and equity.
"The beauty of this type of investment is that it is familiar to investors, but at the same time completely hands-off. However, the tax position of landlords and investors often has a big part to play in whether BTL is a sensible investment. A higher rate taxpayer, for example, may not care for the income due to the higher taxation, hoping instead to make a decent capital gain. While a lower rate taxpayer may prefer the income, being able to fully utilise the interest deduction and also live off the income. Why not, therefore, break this investment up into two pieces – one for those that want regular income and another for those that prefer capital gains.
"Most people in the UK do not utilise their capital gains tax allowance, so our structure enables higher rate tax payers to take a leveraged position in equity, while giving up the income. The mezzanine investor meanwhile benefits from a fixed return, regular income and higher security.
"The cherry on the cake is that, because building this type of portfolio involves purchasing several units at a time, there will be an upfront discount, which the equity investor instantly benefits from. This discount is usually 5%-10% off the market value of the properties, based on a third party valuation."
For further information, please call Gareth Bain on 0203 871 5959 or visit www.shojin.co.uk. Shojin Property Partners is authorised and regulated by the Financial Conduct Authority (No. 716765). Shojin Property Partners is a trading name of Shojin Financial Services Limited (company number 09697161) and the registered office is at Golden Cross House, 8 Duncannon Street, London, WC2N 4JF.
Shojin Property Partners