2018 has been a year of change for the buy-to-let market. From legal obligations to increased cuts in buy-to-let mortgage interest tax relief, it’s been a period of shifting sands as landlords reevaluate their investment properties.

With further changes ahead, including a potential ban on residential letting fees and possible interest rate rises, those in the property industry are adopting a ‘watch this space’ philosophy.

How to generate revenue from a buy-to-let property

However, where there is challenge, there is opportunity and proactive landlords are looking at different ways to maximise the return on their investments. One approach is short-term letting, which can range from attracting occupants for a few days or weeks via Airbnb, to providing serviced accommodation for business travellers or long-distance workers looking for Monday-Friday accommodation. Another potentially lucrative market is working with relocation agencies charged with organising short-term accommodation for corporate staff.

Short-term lets also enable a landlord to extend a contract with a tenant on a weekly or monthly basis, providing greater flexibility for both party, which will suit many contract or freelance workers. The only downside is that there may be void periods between rentals which obviously means a potential loss of income.

Although each of these scenarios brings associated costs with servicing and maintaining an investment property to a high standard to maximise its appeal to these target rental markets, the yield can outstrip standard annual letting revenue by up to 30 per cent, and overcome some of the restrictions being placed on the buy-to-let market.

How to finance a short-term buy-to-let property

Just as the options for buy-to-let landlords have grown, the approach of lenders has shifted too. Financing buy-to-let properties has traditionally been restricted by the vast majority of lenders to applicants who have an assured shorthold tenancy (AST) or a 1-3 year corporate tenancy in place.

Commercial lenders may be less restrictive but may treat a buy-to-let or portfolio of properties as a trading business and would require two years’ trading accounts to consider a mortgage.

However, a new specialist lender, Foundation Home Loans, has released a new range of buy-to-let products aimed at those looking to focus on short-term lets. Available through NM Finance, these products do not require an AST but still calculate the amount that they will lend against a single property, based on the revenue of a single family letting. While it is important to consider the realistic net revenue that could be achieved by each letting scenario, and to discuss the tax liabilities of each with your accountant, there is a definite shift in the way that landlords can generate income from their investment properties.

More lenders are likely to respond to the way the buy-to-let market is changing with further products which meet the needs of both investment landlords and their tenants. NM Finance is tracking the marketplace and can advise on property finance for buy-to-let mortgages to help maximise rental income.

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