Top Ten Buy to Let Tips

Coffee spillage on paperworkTaking your first steps on the property investment ladder can be daunting; so we decided to ask some seasoned buy to let landlords how to get things right first time:

Get the right strategy

Property investment is just like any other business and that means you need a well mapped-out strategy. Start by defining your goals (rental income Vs capital gain) the scope of your plans (size of property portfolio) the timeline and finally don’t forget your exit strategy.

Get the right property

It’s said that knowledge is power and any time spent researching your property is time well spent. Get a good feel for the area taking note of everything from location and transport links to local amenities. Talk to lettings agents about demand and rental rates and see what else you can find out online. Remember that you are looking for a property to let and don’t make the mistake of buying one that you would like to live in.

Get the deposit right

Since 2007 landlords have been legally obliged to place rental deposits into a government backed Tenancy Deposit Scheme (TDS) within 30 days of receipt. The legislation is designed to protect deposits in the event of dispute between landlord and tenants. Failure to use a TDS could lead to unlimited fines, although they are usually calculated at three times the deposit or an average of £3,600.

Get the right tenants

Just because you are a first time landlord it doesn’t mean you should be taken in by first impressions. No matter how genial your prospective tenants it’s essential you carry out a thorough background check. Ask for personal and professional references (including previous landlords and current employer) and consider carrying out an online credit check.

Get costs and cash flow right

When purchasing a buy to let property don’t forget to budget for additional costs, such as: stamp duty, mortgage arrangement fees and solicitor’s fees. When calculating ongoing costs include: letting agent’s fees, maintenance costs, insurance and possible empty periods. Don’t let unpaid rent add-up (you’ll be surprised at how many landlords do) but talk to your tenants and get to the root of the problem quickly.

Get the right insurance

Landlords insurance is a specialist product and requires a specialist provider. Standard home insurance doesn’t cover buy to let properties and because every landlord’s needs are different it’s a good idea to get a bespoke policy. Cover varies but typically includes Buildings, Contents and Public Liability and a range of additional benefits such as Rent Guarantee and Legal Expenses. To find out more, and to save at least 10% on like for like renewals, visit our Landlords Insurance pages.

Get the right paperwork

The web is a valuable resource for landlords and it’s tempting to simply download a Tenancy Agreement and forget about it. However, when it comes to legal documents it’s better to think ‘bespoke’ rather than ‘off the shelf’ and it’s likely that you’ll need to review the paperwork amending clauses and conditions. The government guidelines and model tenancy agreement are an excellent starting point.

Get health and safety right

As a landlord you owe a duty of care to your tenants and are legally obliged to make sure your property is safe and free of health hazards. On a practical level that means adhering to strict government guidelines covering Gas, Electrical and Fire Safety.  At best the penalty for failure to comply with gas regulations is a £6,000 fine (and or six months behind bars) at worst charges can be brought for manslaughter.

Get the right agent

If you are new to the buy to let market you may want a helping hand. Lettings agents don’t come cheap, but they can prove invaluable to first time landlords and you’ll learn a lot along the way. Make sure you choose an agent who is a member of the National Approved Letting Scheme (NALS) and carefully check clauses and charges before signing on the dotted line.

Get tax right

As a landlord you won’t be surprised to hear that you have to pay tax on your rental income. At present landlords must declare earnings over £10,000 (before expenses) or above £2,500 (after expenses) although tax thresholds regularly change; so it’s best to double check. To make matters more confusing the amount landlords can claim in mortgage interest tax relief is scheduled to be stepped down in coming years and there are changes being made to how landlords can offset property maintenance costs.

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