Brothers Invest in HMO Properties in Liverpool
Jim Holland, 30, and Dan Holland, 34, have taken a significant step in their investment journey by purchasing their first property in Liverpool. The brothers invested approximately £160,000 in a house in multiple occupation (HMO), which is designed for professional tenants. This move reflects their ambition to build a portfolio of 50 such properties across the north-west of England, aiming to provide high-quality accommodation for young professionals.
In addition to managing their property business, both brothers maintain full-time jobs. Dan works in the aerospace industry, while Jim is employed in the oil and gas sector. The pair, who reside in Wirral, are passionate about creating sustainable housing solutions for the growing demand in the region.
Concerns Over Labour’s Policies
Despite their success, the brothers are wary of the potential impact of Labour’s policies on landlords. Jim expressed his concerns to the Daily Mail, stating, “To sum up Labour’s direction, if you want to better yourself, they just want to take more from you.” He emphasized that the party’s approach could hinder the growth of property investors, particularly those who own properties under their personal names.
The brothers operate their property business through a limited company, a strategy that has become increasingly popular among landlords. This structure allows them to benefit from more favorable tax treatment, especially in light of recent changes announced by Rachel Reeves in the Budget.
Tax Changes and Their Implications
Starting from April 2027, landlords who own properties in their personal names will face higher tax rates on their rental income. The new tax regime will see basic rate taxpayers pay 22% on rental income, up from 20%, while higher rate taxpayers will be taxed at 42%, an increase from 40%. Additional-rate taxpayers will face a 47% tax rate, compared to the current 45%.
According to the Office for Budget Responsibility, this new tax system is expected to generate around £500 million annually from 2028-29. However, the brothers fear that these changes could lead to further restrictions on landlords, such as rent caps, which they believe would negatively affect the market.
Impact on Landlords and Tenants
Jim and Dan worry that the Budget measures might force traditional landlords to exit the market. Their accountant has already observed many landlords leaving, and they expect this trend to continue. Jim remarked, “The government clearly wants to eliminate amateur landlords. The result? More private equity firms getting involved in residential property, which is not always a good thing for tenants.”
While the exodus of “amateur” landlords could pose challenges, it also presents opportunities for the brothers. Jim noted, “As those older landlords leave the market, it creates an opportunity for us to acquire stock, which from our perspective is positive.”
Challenges Facing Landlords
The latest tax changes are likely to reduce returns for landlords, especially those who have already faced higher taxes and increased regulations since 2016. Landlords who own properties in their personal names can no longer fully offset mortgage interest costs against their tax bills. Additionally, they must navigate new legislation, such as the Renters’ Rights Act, which will come into effect on 1 May next year.
This act will make it harder to evict tenants without a valid reason and will prohibit landlords from tying tenants to fixed-term contracts. These changes are expected to drive up rents, according to the Office for Budget Responsibility, which warned that restricted supply could lead to long-term increases in rental prices.
Reactions to the Budget
Dan believes that the measures announced by Reeves will lead to higher prices for tenants. He stated, “Every Government in my lifetime seems hell-bent on making rents rise and giving tenants fewer options. They don’t understand basic economics – restrict supply, and prices go up.”
Fortunately, the Chancellor did not impose National Insurance on rental income, a move that Jim welcomed. He said, “I’m glad they didn’t introduce National Insurance on rental income. This would put more pressure on rents and make property less attractive, meaning fewer places for people to live.”
Jim added, “We need to get rid of the dirty word ‘profit’ when it comes to property. Profit is what creates supply and keeps rents stable.” He urged the government to avoid implementing rent caps, emphasizing that such measures have historically failed wherever they have been introduced.