How Landlords Can Increase Their Income Without Putting Up the Rent
Buy-to-let investors can tighten their belts and improve their bottom line in many ways.
Landlords searching for inspiration need look no further than Apple founder Steve Jobs, who famously said, “Details matter.”
That’s because the key to success as a landlord is keeping a firm eye on all the details.
That means making the big decisions—such as setting rent—right, but also paying attention to other ways you can minimise your expenses and protect yourself from one-off cost blowouts.
So, here are some simple ways you can save on costs. When added altogether, these measures can make a healthy difference to your profit margin.
Inventories
A thorough inventory (also known as a check-in report) helps to prevent costly disputes over damage, cleaning or redecoration at the end of a tenancy.
It can also serve as a useful reference if you need to discuss an issue with your tenants during a periodic inspection.
While most landlords compile inventories, some rush the process to get the tenants into their rental as quickly as possible.
But take it from us – don’t cut corners.
A good inventory outlines the condition of a property and its fixtures and fittings before a tenant moves in.
It should go beyond the bare essentials, include photos, and encompass the property's indoor and outdoor areas.
Both the landlord and tenant should sign and date the inventory. Each party should keep a copy.
Mortgage
Whether you’re taking out a mortgage or re-mortgaging, it pays to shop around.
If you’re one of the 15% of landlords currently on a standard variable rate*, it’s worth checking to see if a fixed-rate deal would offer better value following the recent cut in the base rate.
The good news is that there are plenty of products to choose from as buy-to-let availability is at an all-time high, with 3,560 deals currently on offer**.
However, you must do your calculations carefully, as some products with appealingly low rates come with hefty fees.
If you’re on a fixed-rate mortgage, ensure you know when your deal is ending so you give yourself plenty of time to prepare. (You’d be surprised how many landlords leave it to the last minute.)
Also, consider the change in value of your property over time. Your loan-to-value ratio may have dropped if your property’s value has increased significantly since your last deal (if, for example, you’ve given your BTL a serious makeover). This would mean that you’re eligible for a more favourable rate.
It’s best to talk to a mortgage adviser to get an indication of the best deal for you.
Landlord insurance
Insurance is another area where savings can be made if you put in some legwork.
When your insurance policy is up for renewal, always check to see if you can get a better deal elsewhere. You may be surprised how much you can save by switching. But don’t forget to factor in the excess rate; some policies with cheaper premiums sting you with an eye-wateringly high excess should you claim.
You could save considerably by going for a multi-property policy if you have several rentals.
Always ensure that you provide your insurer with the correct information (an honest oversight can cost you dearly, with the insurer refusing to pay a claim). For example, if your tenant’s circumstances change during a tenancy, you may need to notify your insurer.
It’s also worth noting that some policies become void if the property is empty for a specified period (typically 60 days). Contact your insurer if you’re doing a major renovation and the property will be empty for longer.
Tax
Even if your accountant handles your tax affairs, it’s important to understand the latest tax rules and regulations.
Yes, the system is frustrating and complicated, but the more you know, the better your record-keeping will be.
The list of allowable expenses for landlords is extensive and includes everything from travel costs to viewings to advertising and insurance premiums.
So, be meticulous with your paperwork and keep all receipts and invoices. If you’re disorganised and your records are all over the place, you’re much more likely to overlook claim items.
Also, speak to a financial adviser to see if you’re operating tax-efficiently. Setting up a company structure for your rental portfolio may be beneficial depending on your circumstances.
If you’d like to know more about any of the points raised in this article, contact us today. We’re here to help.
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*Source: The Money Lender
**Source: Moneyfacts
