This guest post for first-time landlords was provided by Gorvins, a conveyancing solicitors based in Stockport, Manchester.
Purchasing a Buy to Let property can be a lucrative venture for those looking to boost their monthly income and benefit from a long-term investment. However, becoming a landlord is by no means an easy process. In order to make the most of your investment, you’ll need to do extensive research into the rental market, abide by ever-changing legislation, keep on top of paperwork and carry out regular maintenance.
Here are just a few of the key considerations to take into account before becoming a landlord for the first time:
Location, location, location
The location of your investment property is crucial to minimise the risk of void periods and ensure a strong rental yield.
Before investing, think about the type of tenant you wish to attract. If you’d like to let a property to students, buy a home in an area close to a university. If, however, you’d like to attract families, a property near a school may be preferable, particularly if it has a garden.
It’s widely recommended that you select the cheapest house in the best area you can afford, but make sure you arrange for thorough surveys to be carried out just as you would if you were going to live in the property yourself. If tenants were to move into the property and substantial maintenance work was to be required, you could see yourself losing a lot of money.
Insurance
When placing such a large amount of money in your rental property, it makes sense to protect your assets. From fires to floods, there are a number of problems that could damage your property. By purchasing landlord’s insurance, you can rest assured that your investment is protected in the event of an emergency.
When looking for an insurer, consider whether you need contents insurance as well as buildings insurance. Buildings insurance doesn’t always cover soft furnishings such as carpets and furniture. Be sure to pay close attention to any clauses that address the issue of unoccupancy. You may be expected to carry out frequent maintenance checks even if your property is empty.
Also check whether or not your policy has restrictions on the type of tenant you can let to.
Tax
When letting out a property, you must notify Inland Revenue and pay income tax on rental income. However, there are a number of costs you can deduct on your tax return such as advertising, repair costs, and accountancy checks.
Filing a tax return can be a stressful process if you haven’t kept all your documents up-to-date throughout the tax year. So be sure to keep accurate records of all your maintenance work, expenses, rent collections and payments to others.
Legislation
Landlords have a number of responsibilities to ensure their properties are safe and free from health hazards. All gas and electrical equipment must be up-to-date and safety-checked, an Energy Performance Certificate must be provided, and tenants’ deposits must be protected in a government-approved tenancy deposit scheme.
From February 2016, landlords will be expected to abide by the new Right to Rent scheme which requires checks to be conducted on potential tenants to ensure they have the right to rent in the UK. The scheme is currently only applicable to landlords within the West Midlands.
There are further rules regulations that landlords must follow, but many of the rules vary depending on the local authority in question. As a result it can be beneficial to get in touch with your local authority officer to find out which rules are applicable to you.
Management time required
Although investing in property can be a lucrative move, many first-time landlords underestimate the amount of time required to see a return on their investment.
You’ll need to set time aside to find tenants, maintain the property, abide by legislation and deal with issues as soon as possible after they arise. If you struggle to find the time to do these things, a letting agent can help to ease your workload. An agent can be particularly helpful if you already work full time or spend a lot of time travelling.