A growing number of buy-to-let landlords are diversifying their portfolios by investing in semi-commercial property in order to protect their investments from higher levels of taxation, according to Roma Finance, the specialist bridging finance lender.
Mixed-use property is exempt from some of the tax increases coming into force from next month, and those landlords who are looking to diversify their portfolios are snapping up such units to offset stamp duty tax hikes.
For example, a £500,000 residential buy-to-let property would incur stamp duty of £30,000, whereas stamp duty on a commercial or semi-commercial property of the same value would be less than half at just £14,000.
Investing in mixed-use property also provides buy-to-let investors with two types of property, and therefore potentially multiple sources of rental income.
Popular mixed-use property Roma have recently lent on includes a retail or workshop unit with flats above, and pubs with a residential house attached.
Scott Marshall, managing director at Roma Finance, commented: “We’re seeing many landlords looking to diversify their portfolios and some are investing in semi-commercial units for the first time. They are keen to take advantage of tax efficient property types and also have another string to their bow when it comes spreading tax risk.
“With a retail unit and a residential flat above, they are getting longer tenancies for the shop and good rental prices for the flat. We’ve funded conversions where separate entrances have been created for the different parts of the property and occasionally the exit route for the bridging loan has been to sell one of the units and retain the other.
“Landlords and property investors are putting in place a variety of strategies to protect their portfolios from increasing taxation and semi-commercial property has a definite role to play in this as they look for new opportunities.”