Try our useful free Excel tool to calculate how much you might make from investing in property.

Is Buy-To-Let the ideal investment for you? Is it as good as it used to be?

For the past few years, the BTL sector has been booming, propelled by an annual 5.6% rise in property values, with yields at 5% to 6% and base rates at a record low of 0.5%. It’s been good business for banks, too, with the market now accounting for 15% of all UK mortgages.

But fuelled by concerns that the resultant property boom might spiral and flip over into a bust cycle, the Chancellor and the Bank of England have headed off prospective landlords in a pincer movement that sees stamp duty on investment properties increase by 3% and new stress tests for BTL mortgages that raise the bar significantly for borrowing landlords.

In addition, the recent reduction in Capital Gains Tax pointedly excluded landlords – meaning that they’ll now pay 8% more tax than other investors on any increase in the value of their assets.

 

Landlords say “It won’t affect us”.

Still, it has to be said that most BTL investors remain unmoved by this perceived persecution. A recent YouGov poll of 1,000 landlords (commissioned by Aldermore Bank) suggested that more than half expected it to have no effect on them whatsoever.

And of course, for the majority, it won’t. 87% profess no intention of buying any more properties, and among those who are actively building a property portfolio (assuming they’re sensibly viewing them as long-term investments), even the pain of the extra stamp duty will be assuaged when spread over a decade or two.

Nevertheless, while 70% expected the number of tenants to rise over the next 5 years, a third felt the value of the BTL market would fall in the next 12 months.

 

So how much can you realistically expect to make?

All of which suggests that, while BTL will remain a valued part of the investment portfolio for years to come, newcomers to the market should take a very prudent long term view of their own prospects.

To this end, we felt it might be helpful to create this useful free Excel BTL Calculator to help you project what a BTL investment could earn you in a variety of circumstances. It allows you to project best and worst case scenarios, play with the variables and paint yourself a very clear picture of how things will likely pan out.

 

A simple example

Let’s say you have £100,000 to invest into a modest flat costing you perhaps £275,000, and generating a gross yield of, say, 6%.  Immediately you will be out of pocket by almost £15,700 having shelled out for stamp duty, legal fees and mortgage costs.

After mortgage interest (let’s assume you secure a mortgage at 2.99%) and other costs (don’t forget to budget for void periods), your net income would be £4,598 – giving you a net yield of 4.6%, all of which is clawing back your upfront costs over the first three and a half years.  Taking into account selling costs and assuming no capital growth, you would lose money if you sold before four and a half years were up.

Of course, this is only an example. Feel free to put in your own numbers and test different scenarios.

For instance, you could extrapolate scenarios like the property lying vacant for a couple of months, increasing or reducing the capital growth rate – or you could see how it would look if you decided to bypass an agent and do a lot of the management work yourself, if you have the time.  You might also like to see what impact the Bank of England’s new stress tests might have.  The example shows that a hike in rates to 5.5% would only leave you slightly underwater but any other additional costs, such as a longer void, would require you to put your hand deeper into your pocket.

The calculator allows you to plot out all these eventualities and draw your own conclusions – so play around with it and see how BTL works for you.

 

What are the alternatives?

If you decide BTL isn’t right for you at the moment, but you still want the comfort of property backed investment, it’s worth considering Peer to Peer property lending.

Since the banks tightened up, property developers typically find themselves with a piece of land, perhaps 20% equity of their own and a promise from a bank to lend 50-60% of their project cost.

In between those two figures, there’s a golden gap that needs filling – and it’s being increasingly filled by peer-to-peer investors.

www.capitalstackers.com, for instance, works with banks and developers to fill this funding gap, giving investors the option to choose different developments – from office blocks to housing developments – and different risk and reward profiles.

Instead of sinking your £100,000 into a single property and taking on the headache of managing it yourself (or at least managing the agent), you could spread your cash across several different ones.  You can even lend against residential property through your pension fund and get the returns tax free.

 

How much could you make from P2P property lending?

The returns you get can vary from 5% for a let investment property to figures in the high teens if you lend on a development and where you have an appetite for a higher return against a higher risk (up to around 75% of the property value).

If this seems a strikingly large return for an investment, consider the experience of CapitalStackers investors who are currently lending against a residential development in York.  Those with the lowest risk (less than 60% of the property value) are earning 8.5% which compares favourably with the example in the BTL Calculator irrespective of the differing risk profiles.  Investors taking the most risk, sitting at 76% of value, are earning in excess of 20%. Since the developers have already sunk cash equity into the project which will make a profit, the investors benefit from a fairly deep cushion against possible downturns. Their returns take into account the fact that the property securing their lending is a development which at the time they committed had yet to be built out and sold (which, at the time of writing, it is and has).  The developers take care of the whole process and will be making quite a tidy sum from it themselves, so they’re more than happy to reward those plugging the gap that the banks used to fill.

Okay, so you might forego any capital uplift from owning the property outright but you are also well shielded from capital depreciation by the borrower’s equity and profit margin.  Essentially, it’s possible to make better returns for a lower and better spread of risk with someone else looking after your interests.  What’s more, you don’t have to tie up your cash for so long and nor do you need to take on a mortgage.

 

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CapitalStackers is authorised and regulated by the FCA. Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other peer to peer lending platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

CapitalStackers – the P2P property development lending platform – has raised a £2.25m loan to fund the purchase and development of a 24-unit residential block in York.

The entire funding was completed in just 14 days from engagement to the full loan being raised, and the development by Norstar Limited is projected to have a Gross Development Value of £3.2m.  Investor returns are pegged at between 8.5% and 23% p.a.

Steve Robson of CapitalStackers commented:

“This is a huge milestone in our development and singles us out from the competition as being able to perform swiftly and professionally when circumstances dictate.  Working closely with our investors and professional advisers to deliver the whole package within an incredibly tight timescale is a fantastic achievement.”

CapitalStackers allows a wide range of investors to get involved with large commercial building projects, from housing to offices– schemes that would otherwise be out of their reach except through REITs or unit trusts. The idea is to plug the funding gap between typical bank debt and the developer’s equity. CapitalStackers invites P2P investors to take a stake at a risk and reward level they choose, with typical returns of between 5% and 20% p.a. on completion of the project, around 12-24 months later. With the minimum investment being just £5,000 fully secured on the property being funded and on the back of high quality due diligence, this is proving to be a very popular investment vehicle.

This is the latest in a string of new projects funded by CapitalStackers, who are currently inviting investment in an exciting new residential development in Birmingham. The loan sought is £1.9m and returns will be between 7.7% and 17.2% p.a. over a 15 month term.

The development address is: Foss Place, Foss Islands Road, York, YO31 7UJ.

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CapitalStackers is authorised and regulated by the FCA. Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other peer to peer lending platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

CapitalStackers, the exciting new peer-to-peer property lending platform, has lured senior industry figure Sylvia Bowden to join its ranks.

Originally an investment fund manager, then a chartered surveyor running York’s second largest practice, Sylvia rose to prominence after switching to the banking industry and spending more than a decade structuring bank debt for property investments and developments. Her robust, cashflow-led approach to risk assessment and risk management have been the hallmark of her deals and make her a perfect company fit.

CapitalStackers’ Managing Director, Steve Robson, said, “I’m delighted Sylvia is joining us. The appointment affirms CapitalStackers’ growing presence in property finance”.

Sylvia said her decision to join CapitalStackers was driven by “a desire to make a difference”.

“Real estate finance has been in the doldrums for too long and initiatives like CapitalStackers will be the catalyst to get the country building again.  I’m really looking forward to writing new deals” she said.

Nigel Bennett, Chairman, said, “This is another step forward for the company and its plans to improve the funding options for property borrowers and provide attractive secured returns for investors who lend to them. ”

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CapitalStackers is authorised and regulated by the FCA. Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other peer to peer lending platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

There are a raft of tax provisions that are going to make individuals who lend money pay less tax, including:

From 6th April 2015 a £5,000 zero % band for basic rate taxpayers.

From 6th April 2016   £1,000 interest tax free for basic rate taxpayers (£500 for higher rate tax payers).

It is anticipated Peer to Peer lending will be allowed to be held in ISAs in the Government’s second 2015 budget next week.

Therefore, there is potential for an extra £6,000 per annum tax free income per individual.

Philip Eagle, Tax Director, Hallidays Limited

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CapitalStackers is authorised and regulated by the FCA. Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other peer to peer lending platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

Hundreds of UK property developers with attractive products are crying out for investors to plug the gap left by the banking crisis.

Big deal, you say. But possibly too big.

The hefty sums needed to fund a new factory or office block are simply out of the reach of most investors unless you go through REITs or collectives. But then you lose control and the thrill of involvement.

So for most of us, the grim reality of investing in property is slogging away at small residential stuff, shops and industrial units – with the attendant headaches of borrowing from banks, PGs and management headaches – not to mention the equity risk.

But a new service launches this week that might give you a considerable leg up into the headier heights of property Nirvana.

It’s the brainchild of two experienced former North-West bank managers who specialised for decades in the property industry. It’s called CapitalStackers, and it’s a brilliant solution to the small investor’s dilemma.

Very often, banks will lend 55-65% towards the cost of a viable project, but no more. The developer will obviously have some equity of his own, so it just needs someone to plug the gap between the two.

Obviously, that in itself is too big a leap for most investors. But here’s the clever bit.

Simply put, CapitalStackers “stacks” private funding on top of bank lending in order to reach the level required to finance a property scheme – in other words, it actually works with active banks rather than pushing them out.

Investors can then choose where in the “stack” of finance they’d like to invest – picking their own level of risk and return, which management team they prefer, which projects they’d like to get involved with – and they can even spread their risk at different levels within the same project.

It typically brings in returns of between 5% and 20% – and one of its most attractive features is that the investment is secured against the underlying property assets being financed.

It’s certain to be of interest to people looking to invest through their pension funds at a sensible risk/reward ratio. In addition to the bank’s due diligence process to get the project off the ground in the first place, the CapitalStackers team perform comprehensive risk analysis and ongoing monitoring of your investment.

Which means investors benefit in the following ways: (a) the lending risk analysis process is doubled up; (b) phased funding of ongoing construction is more suited to a bank than individual investors whose cash goes in first and gets an immediate return; (c) senior debt gearing means you can use your cash to access more or larger deals; and, (d) cheaper senior debt enhances the return on your investment.

So for the investor seeking more attractive risk-weighted rewards, this could be the future of property investing.

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CapitalStackers is authorised and regulated by the FCA. Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other peer to peer lending platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

CapitalStackers – the hottest new concept in peer-to-peer lending – has added considerable weight to its board with the recruitment of new director Tony Goldrick.

The online platform specialises in property investment and development deals secured by commercial and residential real estate, so Tony’s considerable experience in both the banking and property sectors enhances the company’s powerful presence in this market.

After 30 years working for Royal Bank of Scotland, Tony spent the second half of his career in real estate finance – having established the bank’s first dedicated regional property lending team in Manchester in 1999. The success of the team led to expansion across the north of England, and at its height Tony and his team were managing more than £5.5bn of lending.

Tony is a well-known face in the real estate sector, with a wide range of contacts with developers, investors, property agents, banks, and other professionals.

Since leaving RBS in 2012, he has been advising a number of large regional property development and investment companies, and will continue in this role, complementing his involvement with CapitalStackers.

“This is an exciting addition to the board” said Steve Robson, CapitalStackers’ Managing Director.

“His experience and knowledge of real estate really complement our existing team and I look forward to working closely with Tony to push the business forward”.

As part of the pre-launch activities Steve Robson, Managing Director of CapitalStackers presented his new model at the highly successful Great British Private Investor Summit in London in March – unveiling an inventive template which augments traditional bank lending, allowing private and corporate investors to tailor their risk and return profile.

It’s likely to be a particularly attractive vehicle for investors, given that all loans are secured by commercial and residential real estate. The North West based firm has gained a lot of attention in this embryonic, but fast growing and dynamic sector.

CapitalStackers aims to be the first-choice destination for investors looking to finance property investments and development schemes. It’s the ideal platform for high net worth individuals or sophisticated investors with a minimum of £5,000 to invest, looking to achieve a better deal than the more traditional investment routes offer.

It is supported financially and professionally by Hallidays Ltd – a firm of accountants with an admirable reputation. CapitalStackers and Hallidays already have a successful track record in changing the world of property finance and information technology. In 1999 they set up pi-FRAME Ltd, a specialist software house which sells real estate lending risk analysis software to banks and property lending boutiques.

The CapitalStackers team have huge property lending experience and can introduce investors to well-structured and secured real estate lending deals, setting up relationships with experienced property entrepreneurs and giving attractive risk-weighted rewards.

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CapitalStackers is authorised and regulated by the FCA. Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other peer to peer lending platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

Steve Robson, Managing Director of CapitalStackers presented to a packed audience at the highly successful Great British Private Investor Summit in London yesterday, organised by Angel News. Some 250 high net worth and angel investors were in the audience listening to pitches from a range of crowdfunding and peer to peer lending platforms.

Following the event, Steve said:

“We are delighted with the response from investors to the business model and really encouraged by their level of interest in the platform.  The completion of two deals marks an important step for us and we now look forward to the formal launch to enable us to engage with the wider investment community.”

At a recent pre-launch event hosted by Hallidays LLP, CapitalStackers generated enough interest to complete its first two deals. The CapitalStackers business model seeks to engage with banks and allow investors to choose their preferred risk and return profile.  That, and the fact that all deals are secured by commercial and residential real estate, made the Stockport based firm stand out in this embryonic but fast growing and dynamic sector.

CapitalStackers and its website aim to be the destination of choice for investors looking to finance property investments and development schemes. These will be high net worth individuals or sophisticated investors with a minimum of £5,000 to invest and looking to achieve a better deal than through some of the more traditional investment routes.

It is supported financially and professionally by Hallidays LLP, a firm of accountants with an excellent reputation. This is not the first time these people have come together in the world of property finance and information technology. In 1999 they set up pi-FRAME Ltd, a small and specialised software house which sells real estate lending risk analysis software to banks and property lending boutiques.

At the recent pre-launch event, Steve Robson commented:

“Real estate lending has spent long enough in the doldrums. This initiative and others like it will go a long way to repairing the property finance market. Not only will real estate borrowers benefit from improved liquidity, so also will investors through achieving better returns. We are genuinely excited about the future.”

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CapitalStackers is authorised and regulated by the FCA. Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other peer to peer lending platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.