I recently had a call from someone who reads this blog regularly.
They work in England and they are a higher-rate tax payer. They also own two small buy-to-let properties in Belfast, both of which are in negative equity. Due to ongoing tax changes, these properties no longer ‘wash their faces’.
The reader is interested in keeping these properties long term, if they could be viable. What are their options?
First up, if you want to swot up on the landlord tax relief changes, I produced a comprehensive article on this which you can read here.
My initial thoughts are to explore the possibility of holiday lets / Air Bnb. The property would then move from a residential letting into the furnished holiday let category and would therefore be exempt from the tax relief restrictions.
As well as this, holiday lets and Air Bnbs tend to command a higher level of rental income compared with residential tenancies.
I spotted a Lisburn Road one-bed apartment in the Lisburn Road area renting on Air BnB for £40 a night - the equivalent of approx £1,200 a month. A similar one-bed apartment in this area is currently advertising a rent of £625 per month; that's about 45% less.
In 2017, I spoke to a Belfast landlord who made the switch from tenancies to holiday lets - you can read that article here. It's very interesting reading - he claims he tripled his income!
But as with everything, there are benefits and drawbacks, so here is a reminder of the potential ups and downs with this investment plan:
Also, in Northern Ireland - unlike other parts of the UK - you have to register with Tourism NI in order to legally offer short term property rentals (AKA holiday lets). There are many rules and regulations to comply with, so you need to be fairly well versed in these.
However, as with a residential rental, this is something a good letting agent could look after for you, so it doesn't need to be a hassle.
What do you think about this one? Are you in a similar position with negative equity and/or tax change headaches? Drop me a line to firstname.lastname@example.org and let's have a chat.