Many of you, particularly our landowning clients, own older let properties which have been with you for years. With the considerable headwinds of compliance demands, taxation, and pressures on returns on investment, maybe the time has come to challenge yourselves on why you hold them.
I am in a similar position with properties I run as part of our farming businesses. Recent experience has shown me that it can take over ten years’ worth of rent to bring these premises up to scratch and in good condition for the long term.
Is it worth it? Residential returns are often only around 2 or 3% in these parts. From a pure profit and loss point of view I am not so sure – especially when one considers the time involved and / or the cost of using an agent to run them.
Rural house prices have boomed recently – is it time to take advantage of this and release some capital, time and hassle? There seems to be increasing pressures on holding such assets including Labour’s recent call for tax on landlords. And there are inheritance tax challenges talked about – reducing the percentage of non-business assets that can be eligible for 100% relief.
The downside of course is the cost of doing so – probably 30% with fees and tax for those held outside companies. Perhaps the greater challenge is what to do with the proceeds. Commercial properties – especially conversions of farm buildings – often show much greater returns. Clearing borrowings in the light of interest rate increases might be another. Or simplifying family ownership.
I guess what I am saying is to challenge yourself and your advisers as to why you are retaining these assets. Clearly some are of strategic importance but holding and managing let residential properties is only looking more challenging.
This should definitely be on the agenda for your winter strategy planning – we are here to help facilitate such meetings.