Buy to let investors have bounced back against the Brexit doom and gloom and have not been disheartened or put off, with only 9% of landlords claiming that they would postpone their next investment (Landlord Today). Will the changes announced in the Autumn Statement provoke a similar response?
With quite a few hurdles of late and potentially more to come, it’s the right time for Landlords to be looking at the most cost-effective ways of running their properties.
Know your costs
Ensure that you know all of your costs before they arrive on your doorstep!
For example, have you considered the legal fees incurred when buying? Buy to let Landlords usually need a higher deposit, around 25%, higher than advised for a regular mortgage. Consider how you will be letting out your property and what costs this will incur, such as agent fees. Look at costs that you will be covering while your property is not let out and you are still tenant searching and plan ahead for these times, your buy to let mortgage provider will assess whether you will be able to handle this financially. It would be irresponsible to assume that your tenant's rent will always be covering your mortgage payments and not have additional money available to cover it.
The autumn statement; the much-awaited announcement has confirmed that there is to be a ban on letting fees for tenants. These fees are likely to be felt in the pockets of Landlords, and although the move seems initially great news for tenants, they are sure to feel the effects of this change via eventual and gradual rent increases as “landlords [will] pass costs to tenants via rent”; forewarned by the Housing minister earlier this year (Financial Times). Finding the most cost-effective way of letting out your property just became even more vital.
Tax deductions and Interest rates
Are you making the most of your tax deductions? As a landlord, you will be charged tax on the profit you make from the rent as well as other charges to the tenant, such as cleaning services (see .Gov for full details). You can, however, gain some of this tax back via deductible expenses; landlord insurance fees, cleaners wages or advertising fees, again see .Gov for full details of what can and can not be claimed. These deductible expenses will, however, continue to change as promised by George Osborn, so do make sure you are up to date and claiming this while you can. As changes are not likely to be in the favour of landlords.
Be clear about your mortgage payments and the level of interest you will be paying over the time you will be letting the property out. Most buy to let mortgages are interest only, meaning that you will have the full mortgage amount to repay come the end of your mortgage. However, your payments work out for you, know them inside so that you don't encounter any unexpected costs.
Secure a decent interest rate. This is a key point and something to look into right away whether you are already a buy to let investor or new to the market. Buy to let mortgage rates are historically low at the moment; this is great and means that right now you could be saving money, however, these rates will inevitably rise just as we witnessed with the 3% rise in stamp duty this April, so perhaps see if you can secure yourself a good fixed rate mortgage.
Work & Improvement
Many buy to let investors plan on doing a little work to their property with the aim of improvement. If this is the case, then make sure you’re savvy and safe when it comes to sourcing your workforce. When looking for tradesmen, use trusted tradesmen that you have either vetted, have used previously or have been used by people you know. It is easy, especially for first-time, buy to let investors to pay over the odds, so just do your homework to make sure you aren't wasting your budget.
If you’re completing work yourself then ensure that you are doing so correctly and are meeting proper standards, in other words, don't cut corners. This may not sound like a 'money saver' but for example, if your property requires jobs like getting rid of mould or damp, do not merely cover these things up. By getting them fixed early the problem should be smaller and less costly; by covering a patch of mould or damp, the problem persists and grows into a much larger and much more costly issue. Not to mention potentially costing you a tenant.
In the same vein, investing in quality, slightly more initially expensive, equipment such as an efficient boiler or good double glazing could go quite a way to lowering the price of your bills while renting the property out.
Are you protected?
As a Landlord, protecting yourself is important and insurance is a sure step in the right direction. Landlord insurance will usually cover building and contents cover, it can also cover against loss of rent (rent insurance), a good idea to have! Shop around to find yourself a good deal, check what is included and if you need all of those components or can simply get a better deal somewhere else.
An inventory; now this is not a direct investment to save money however it is just a little extra protection for you and your property. By carrying out an inventory with your tenant, you may avoid any future disputes and also just make the tenant aware of the state of the property upon arrival. Avoid any little extras that you can by ensuring you won’t need to cover the costs of new furniture or broken appliances caused by the tenant.
Letproof.com offer a unique platform, aiming to make the process of letting a property as simple as possible, cutting out any middle-men and therefore any additional fees. Our landlords can pay as little as 10p a day and only pay while they are searching for a tenant; then connect with the tenant directly. A step in the right direction to a more cost effective way of letting.