By Leaders Romans Group identifies and responds to demand as the unprecedented opportunity becomes more widely understood
In the Budget on 30 October it is anticipated that both Capital Gains Tax and Inheritance Tax will rise. But while this may appear unattractive to high earners, current legislation creates an ideal investment opportunity for them as individuals and companies to profit free from increased taxes.
The returns on managed residential property portfolios have increased exponentially in the last five years and profits will continue to rise if, as expected, the new government continues to support the professionally managed rental market, specifically Build to Rent (BTR).
It is the structure and benefits of private pension funds, combined with recently relaxed change of use legislation, which offer the specific opportunity.
Andy Jones, Group Director of Corporate & BTR at LRG explains: “The advantages brought about by Small Self-Administered Schemes (SSASs) or Self Invested Personal Pensions (SIPPs) could present extremely rewarding investment opportunities for both individuals and companies, and even more so in the face of tax hikes.
“Some fantastic profits can be achieved by buying a commercial property such as an office building or retail unit, changing its use to residential through permitted development rights (PDR) and then selling or managing it, benefitting from the substantial value uplift that residential now offers over commercial.
“But the real opportunity comes in when the property is purchased through a SASS or SIPP, managed as a private company and the profits then fed back into the fund. Because pensions are currently exempt from both Capital Gains Tax and Inheritance Tax, increases in these taxes in the October Budget will have no impact. A SASS can even function as a bank, charging interest to the private company at normal banking rates – which can be considerable.
“It’s a little-understood but highly effective way of profiting from property with considerable fiscal advantages. The model of centralised pensions, invested in commercial property and ignoring residential has been reversed: today the value is in residential, and the power is with the individual.”
Responding to significant interest from individual high net worth investors, SMEs and institutions, LRG has made a significant investment in the people and proptech that enable this. LRG’s Portfolio Sales and Investment website https://portfolio-investments.lrg.co.uk, which includes modern cloud-based super-secure data rooms, allows clients to sell large scale assets smoothly and efficiently to a mature and active investor market.
Andy Jones continues, “The circumstances could not be better aligned. With more lettings legislation in the pipeline, the growth of the professional residential lettings sector is set to continue. Demand for larger property portfolios will increase and in a frenzied market, it’s vital that sellers and investors benefit from quality, timely advice and an understanding of the intricacies of the market conditions.
“Making the right investment choices requires expertise on planning, surveying, management and lettings advice. At LRG we’re pleased to offer the full package, all under one roof, supported by enhanced technology: an online platform which showcases property portfolios to the investment market and provides data to enable customers reach information quickly and efficiently.
“But despite the advanced technology offer, the online must be combined with offline to provide a full service and we continue to utilise our extensive network to identify sales opportunities.”
Grant Leggett is Executive Director of LRG’s planning consultancy Boyer and has advised clients on change of use and BTR. He says, “The introduction of permitted development rights (PDR) to allow change of use from commercial to residential has been a godsend to many of our clients. Previously underutilised office and retail buildings are being repurposed as homes through a relatively easy planning procedure which not only addresses the under-supply of housing but delivers fantastic returns.
“We’re seeing clients who hold high street properties, such as former department stores or office buildings, benefit significantly from change of use legislation, which was increasingly relaxed during the Conservative administration.”
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