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Residential Landlords Diversify into Semi-Commercial Property

Residential Landlords

In a bid to beat the upcoming tax changes, growing numbers of residential landlords are looking to diversify their portfolio into a semi-commercial property.

That is the claim from bridging lender Roma Finance who say the sector is proving to be increasingly attractive to landlords.

They point to a semi-commercial property being exempt from the 3% stamp duty surcharge that landlords have to pay when buying a residential home.

The lender says there’s been a 50% increase over the last six months in enquiries for property that combines residential and commercial elements.

Landlords looking to diversify their portfolio

The firm’s managing director, Scott Marshall, said: “We are seeing landlords looking to diversify their portfolio with some investing for the first time in semi-commercial units.
“They are keen to take advantage for tax efficient property types and having another string to their bow for spreading tax risk.”

He added: “With a retail unit that has a residential flat above, the landlord is getting a longer tenancy for a shop and a good rental price for the flat.

“We have funded conversions for separate entrances to be created in separate parts of the property and, occasionally, one exit route for the bridging loan has been for the landlord to sell one of the units but retain the other.”

Property investors and landlords putting in place various strategies

He added that property investors and landlords are now apparently putting in place various strategies that will help protect their portfolio from increasing taxation threats and recognise that semi-commercial property has a role to play.

Roma says among its most recent dealings has been a workshop and retail unit that had flats above and a pub with a residential home attached.

For landlords considering such a move to diversify their property portfolio, Roma says that a landlord spending £500,000 on a buy to let residential property would be facing a stamp duty charge of £30,000.

However, should the landlord look to buy a semi-commercial property worth the same amount, then their stamp duty bill would be just £14,000.

The lender also highlights that for landlords with mixed-use developments they can earn higher rental yields and some projects have delivered double the average yield when compared with a purely residential investment.

Mr. Marshall also highlighted that for landlords to maximise their income and offset tax then they will need to usually renovate the properties and add separate entrances to parts of the building.


About S Thompson

Simon Thompson is Chairman of the Landlord Syndicate and CEO / Co Founder of Accommodation for Students Ltd.

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