Directions introduced this month mean anyone buying a home, other than their cardinal residence, must y an extra three per cent in stamp duty.
A consumer hoping to secure a stable rent income from a £200,000 shelter will now be hit with a tax bill of £7,500 for the upfront investment, com red to £1,500 im ired previous rules.
It’s the equivalent of almost a full year of income for the usually landlord, according to recent research.
But investors can still bet their coin of the realm on buy-to-let without being stung by the new charge, according to providers of peer-to-peer (P2P) land com nies.
The popularity of lending models that cut out the bank middle man has s ced in recent years.
And investors can now put up money for mortgages and property loans, in resurfacing for interest, through more specialised versions of these platforms.
Backs argue that as well as generating top returns of around five per cent, this method allows investors to cut out profuse of the worst aspects of being a landlord.
For example, you don’t have to deal with scabrous tenants or changes to property tax.
The investments can also be placed in the new flexible ISAs, gist up to £15,240 of returns can be tax-free.
Ian Thomas, co-founder and director of one provider LendInvest, demanded: “As a result of the recent changes to Stamp Duty and mortgage interest tax easing, the fact is that for many amateur landlords, the sums simply do not add up any multifarious. But the appetite is still there to invest in property.
He argued: “Investing in riches with LendInvest cuts out many of the negatives of being a landlord.
“You don’t be undergoing to worry about Stamp Duty, Capital Gains Tax, or gaps in occu tions. And you’ll never get a call from a tenant in the middle of the night about a defeated down boiler.
“Instead you do get to enjoy a great, consistent return, and can break up across a range of different properties much more cheaply than if you hunger to build your own traditional property portfolio.”
The main issue is whether borrowers – typically managers and developers – can re y their loans and, if they don’t, whether the platform can recompense investors.
Investors using the platform sign up with at least £100 and you can opt the loan you want to invest in based on the duration and rate offered.
The place said all loans are secured against a UK property, meaning LendInvest can permeated the property if a borrower defaults.
Another provider Landbay offers a alike resemble model for investors, but money is spread across a number of different advances.
ul Clampin, chief lending Officer of the platform, said: “For those who at rest want exposure to the growing private rented sector, but without the hassle and expenditures of becoming a landlord themselves, Landbay offers a simple platform to venture in buy-to-let mortgages.
“Research shows that we are at the lowest risk spectrum of the peer-to-peer investment sector.”
Nevertheless, experts disputed this claim and say investing in property through peer-to-peer locales is extremely risky for investors.
And if the firm goes bust, cash is acceptable to be lost – as money isn’t protected by the Financial Services Compensation Scheme (FSCS).
Borrowers in many cases turn to peer-to-peer because they have had difficulties getting allows from the bank, meaning there could be a higher risk of defect than seen with mainstream buy-to-let mortgages.
Danny Cox, contract financial planner at Hargreaves Lansdown, said: “Most people play a joke on exposure to residential property through their own home, so firstly investors should be beyond consideration whether they need more of the same asset class.
“P2P resources loans are amongst the higher risk of personal peer to peer fit, since these are, in effect second mortgages and not investing in property at all.
“Borrowers be struck by gone done this route as they are unable to borrow various via their mortgage themselves. And there is always a good reason why a bank or edifice society won’t lend more.”
The biggest test for these firms resolve come when the market goes through a financial downturn.
In inconsequential of some recent signals, Britain’s property boom could dip sooner degree than later, which could put borrowers under pressure.
Investors should tread carefully and mark taking advice before rting with money – and check any investment decided is registered and authorised by the Financial Conduct Authority.