The 3rd Seminar from today’s Live National Property Showcase is entitled ‘Technical Aspects of Buy to Let’ – Nik Madan, Associate Director, John D Wood & Co, ARLA Central London Regional Representative.
Start up Costs
When preparing a property for rent there are several start up cost to consider to ensure it is presented in the best possible condition. This could include painting, refurbishment, new kitchens and bathrooms. Once your property is ready to come on to the market, you also must ensure you have an EPC(Energy Performance Certificate) ready and in place before you begin to market your property to perspective tenants. Other requirements could include a HMO licence, if your investment is a house of multiple occupancy, and consent to sublet if appropriate. If you are unsure speak to your local authority. Before letting a property you must also ensure you have commissioned a gas safety inspection and an electrical inspection, and ensure furniture and electrical goods are up to standard. It is also advisable to get specialist landlord insurance to protect your property and your interests as a landlord. You should also check with your lender that your mortgage covers a buy to let scenario – especially if you are an ‘accidental landlord’ who is letting out a property you have previously lived in.
Additionaly costs could include cleaning and setting up an inventory.
As part of your lettings strategy you should consider whether you wish to let the property furnished or unfurnished. It doesn’t make a huge difference in terms of how much rent you will recieve, the key is to remain flexible. If you do decide to let the property furnished, do not fill it with used shabby 2nd hand furniture, or over-personalised pieces. Ultimately your decision on furniture will be dependent on your letting strategy and which type of tenant you wish to target.
Letting Agent Fees
Letting agents offer a range of packages in term of fees. From introduction only or basic rent collection, to full property management, the type of package you opt for will dependent on how much involvement you wish to have in the day to day running of the investment. Most agents take their fee on a periodic basis which is useful in terms of allowing you to keep up to date with your regular out-goings. Some agents also offer a discount on fees but these should be investigated thoroughly.
Other fees to consider include the administration fee, the agreement fee, and the tenant deposit holding fee.
The most popular type of tenancy agreement is an Assured Shorthold Tenancy (AST). Beware of cheap alternatives and ensure you minimise risk. Company lets are sometimes a good option, and shorter term lets for special events such as the Olympics can pay well.
To re-cap you will need to ensure you have the following to remain compliant – EPC, Gas Safety Record,Electrical – wiring / appliances,Furniture safety and Consent to let: mortgage /freeholder/ insurer.
Professional Property Management
If you opt for professional property management, you will essentially take a back seat and leave the hard work to someone else. This can be advantageous to those who do not live close to their investment properties or who have a busy career or family life, however there are costs involved. The most important thing is to always use a regulated agent, do not be tempted by the cheaper alternative as it will cost more in the long run. If you have a complaint against your agent you are better protected if that agent is regulated you rental income is
There has been a recent shift in the buy to let sectors – tenants should be viewed as customers and landlords should aim to deliver the best service possible. Agents are geared up to provide efficient, cost effective property management.
Tax on Rental Income
Income generated from a buy to let property is taxable. however, there are numerous legitimate costs that can be offset against your tax liability. It is always advisable to seek professional advice when calculating your buy to let tax returns. Items that can be deducted include: pre-letting expenditure, legal fees, letting / managing agent’s fees, ground rent and services charges, maintenance and repairs and buildings and contents insurance.