3 – REDUCE COST –
This section is about reducing the amount of money that you spend:
1 – Rent to good tenants
– good tenants will look after your property, report maintenance issues quickly, pay on time, stay for longer and give you the right amount of notice to leave. The tenant referencing process is critical here.
2 – Address maintenance issues quickly
– Issues not fixed may get worse and cost more.
3 – Re-mortgage
– After your introductory mortgage rate ends, 2 years or 5 years, for example, it may revert to the bank’s standard variable rate. This is more expensive. Your bank or mortgage advisor will advise on the appropriate new mortgage for you that can save you money.
4 – Landlord Insurance
– Landlord insurance usually consists of buildings insurance and property owner’s liability insurance. You can add many other covers, such as loss of rent, tenant default, or accidental damage, depending on your needs.
Landlord insurance can be relatively cheap and should not expire. With no landlord insurance, you leave yourself exposed.
5 – Refurbishment and maintenance
– are a normal part and therefore cost of property ownership. Here are some examples of how to minimise the costs:
· Know when to use a professional – doing the work yourself will take your time, and if the job is not good enough may need to be done again.
· Consider laminate floors rather than carpet – may feel less cosy but last longer.
· Consider replacing kitchen doors, not the whole kitchen.
· Spend money on robust products – buying the cheapest versions can be a false economy.
· Use mould-proof paint in kitchens and bathrooms – This can save more significant issues in the future.
6 – Deposit
– take a deposit, and lodge it with a recognised government scheme within 30 days. You can justifiably deduct amounts for damage to your property and furniture, for cleaning, unpaid rent, and bills.
7 – Inventory
– We recommend a photographic inventory at the start of the tenancy. Without photo evidence of the property’s condition at the start of the tenancy, it is hard to demonstrate the tenant was responsible for any damage.
8 – Tenancy agreements
– Always have a tenancy agreement drawn up. We recommend starting with a 6-month tenancy. If all is well, the tenancy roles onto a periodic tenancy, or you and your tenant can sign another 6-month tenancy.
9 – Providing furniture
– Usually, we do not advise providing furniture. Usually, the extra rent you may achieve does not cover the cost of the furniture. The landlord is then responsible for replacing items when they break or wear out.
10 – Utility bills
– Most landlords do not pay utility bills on behalf of the tenants. However, landlords of HMO properties (Houses of Multiple Occupation) often do pay the utility bills. Utility bill costs can be reduced by:
· Switching providers regularly.
· Adding a fair usage clause in the tenancy agreement.
· Fitting thermostats in the house that allow landlords to control the gas heating temperature and duration.
· Installing LED bulbs
11 – Taxes
– You pay taxes on the profits from your rental property. Certain costs can reduce your taxable profit an accountant can advise which costs can reduce your taxable profits.
It may be beneficial from a tax perspective if you buy your property in a limited company. An accountant can advise you on this.
