Q. I recently inherited a lump sum and given the bank rates are still so low with little to no interest I believe that investing the money in property still seems like the most sensible choice, even though the property market isn’t in the best shape at the moment I think once it recovers I could be set to make a decent return not only on the rental but also on the capital gain too. Do you think this is still a smart idea given all the recent government changes to the buy to let market?
A. I have always been a firm believer that there is no better place that you could put your money than investing in property. However it is no longer quite as simple as it used to be with all the government’s recent changes that have certainly given Landlord cause for concern. Not only have Landlords been penalised on what they can actually claim for when it comes to mortgage interest which is now zero their and wear and tear has also been hit. Sadly though I think one of the biggest concerns for a new investor like you is the introduction of the extra 3% stamp duty for owners of a second home or investment. So for instance if you were to buy between £250,001 and £925,000 250k stamp which is currently 5% would now be 8%, a huge chunk of your investment even at the lower end of the scale. The good news is that, as the rules currently stand, investors will be able to offset the additional stamp duty, along with other purchase costs, against their capital gains on the property in the future if they decide to sell. So even though it is an unwelcome extra upfront expense, a proportion can be clawed back eventually. However, the Treasury could change the rules at any time. As most investors tend to hold onto their properties for some years, there is large scope for further tax changes in the future. I think it is sensible to consider all your options but if you are in this for the long-haul I have no doubt that investing is still by far your best option to make money. In general property tends to double in price around every ten years or so, something you will never realise if you just leave it sitting in the bank.