Landlord money saving tips

Not only does the government change the rules of the game with additions to the growing raft of legislation but being a landlord can also be stressful, time-consuming and expensive.

Quite simply, therefore, if you are a landlord, you will want to run your buy to let business without spending money unnecessarily. To help you avoid doing just that, let’s instead look at how to save money as a landlord. You might also want to review our companion article Money saving tips for landlords.

Saving money

There are probably two main areas on which to focus attention:

• the purchase of your buy to let property and making it fit for occupation by the types of tenant you wish to attract; and
• the management of the let property in a way that maximises your rental income and so helps to ensure the health and success of your buy to let business.

Taking these as your starting point, a number of important lessons might be drawn.

Location, location, location

It has become a cliché by now, of course, but that does not make it any less critical a decision when it comes to buying a property of any type. Choose the right location for your buy to let investment and you might have tenants queuing up for the privilege of living there – but buy a property even just a few hundred metres away and you might find yourself scraping the bottom of the barrel.

Investing time in the thorough research of suitable locations is likely to pay off in the longer term. Scour those online property sites to help build up in your mind an impression of particular areas, though there is probably nothing to match seeing with your own eyes at street level the immediate neighbourhood of a potential investment property.

Empty property

If you choose to buy a property that has previously been empty for more than two years, you may be able to make immediate money savings thanks to the government’s drive to bring such homes back into useful life.

In some instances, local authority grants may be available for the renovation of such properties – whether the new owner intends to live there or whether the property is bought by a landlord with the intention of letting the home to tenants.

Different local authorities may have different policies governing the consideration of applications for improvement or renovation grants – so a lot might depend on the specific location of your property.

In addition to improvement grants, a further option for local authority help may be extended to landlords whose let property has been empty for longer than a year – by letting it to council-nominated tenants over a long-term lease, you secure tenants and may also be eligible for further improvement grants for the property.

Mortgages

Wherever and whatever type of property you wish to buy, the chances are that you are looking for a buy to let mortgage. It may come as no surprise that the overwhelming advice about this aspect of owning your buy to let property is to shop around for the best mortgage deal.

This lies at the heart of the recommendations on the government-sponsored website MoneyHelper, which also cautions a serious look at the fees typically charged for arranging such mortgages just as much as the current borrowing rate.

The size of any mortgage advance is typically governed by the anticipated rental income (rather than the market value of the property, as you might expect with a home that is to be owner-occupied). For that reason, it is important to keep in mind that your monthly mortgage repayments need to be met from the rental income you anticipate.

What are tenants likely to pay?

In any market situation, there is a conflict – the provider wishes to maximise the return whilst the customer hopes to minimise the price. The relationship between landlord and tenant is no different. As the landlord, you may want to maximise your rental income, whilst tenants may hope to pay less.

Resolution of this conflict, of course, depends on the specific market conditions in the area in which your let property is situated.

Once again, therefore, it may be important for you to conduct a detailed local analysis of the private rental sector in the area in which you have chosen to invest.

There is little point, for example, in your attempt to maximise rental income by seeking a rent that is out of all proportion to those being paid by other tenants in your area.

Savings through the management of your let property

In addition to the broader economic determinants, there are also opportunities for saving money on the management of your let property and the ongoing overhead expenditure involved.

So, let’s take a closer look at some of those management issues:

Managing your buy to let property

• letting the accommodation – this involves everything from advertising and finding suitable tenants, taking up references and making credit checks, accepting deposits (and keeping them in accordance with the rules of the Tenancy Deposit Protection scheme), conducting inventories, collecting rent from tenants, maintaining communication, and arranging the return of any deposit at the end of the tenancy; and
• maintaining and repairing the accommodation as and when necessary – the amount of work and the costs involved in this work naturally depend on the age and condition of the property in which you have invested;
• the fact remains, that your involvement in both aspects of letting the property may well amount to a full-time job – especially given the amount of time, effort, and expense involved in simply minimising voids, or periods when the accommodation is not occupied by tenants and therefore costing you lost rental income;
• therefore, while this is not a money-saving tip but a time-saving tip, you may wish to employ a property management or letting agent to relieve you of the burden of running your buy to let business;
• if you decide to instruct such an agency, it is important that you shop around to secure the most price-competitive arrangements on offer – and you can review our Guide to choosing a letting agent;

Landlord insurance

• probably the single most important consideration when it comes to landlord’s insurance is ensuring that the cover you choose adequately safeguards your investment in your let property and the risks your buy to let business may face;
• whilst the protection of a sizeable investment is likely to be at stake, it may not always be as straightforward as it seems in arranging the appropriate form of cover;
• although it occupies just one niche in the wider property insurance market, for instance, landlord insurance still takes several different forms and levels of cover;
• some policies may include certain elements of cover, for example, whilst with others, you may need to pay extra for that added protection;
• defining your exact needs and requirements may prove difficult enough, but finding those products which are likely to meet those needs for competitively priced premiums may be little short of overwhelming;
• that is where specialist providers such as us here at Cover4LetProperty may help – by allowing you to draw on our expertise and experience in matching and tailoring the various needs of landlords with the particular products we have access to – at a competitively quoted rate;

Landlords insurance versus home insurance

• it is essential to distinguish the cover on your let property from the insurance that may be protecting the home you live in – let property is subject to a host of different risks to one that is owner-occupied and landlord insurance, therefore, is quite different to standard home insurance;
• what this means is that if you are relying only on home insurance but, in fact, let the property, any subsequent claim may well be rejected;

Building insurance

• landlord insurance has at its heart the protection of the structure and fabric of the property against such potentially disastrous risks as fire, flooding, impacts, storm damage, and vandalism;
• this, at least, is an element of protection shared both by home insurance and landlords’ insurance;
• the total building sum insured needs to anticipate a worst-case scenario in which the property is destroyed, the land cleared, and the premises rebuilt;
• rebuilding costs are quite different to the price you may have paid for the property or to its current market value and you may want to ensure that your insurance valuation is kept up to date – possibly with the reference to the house rebuilding cost index published by the Chartered Institute of Chartered Surveyors (RICS);

Subsidence

• particular consideration may need to be given to the risk of building subsidence;
• clearly, subsidence of the property’s foundations is a potentially serious problem and some of the causes and remedies are considered on a website dedicated to the phenomenon, the Subsidence Forum;
• one of the issues to emerge through such forums and discussions is the difficulty frequently encountered when trying to insure a property in an area vulnerable to subsidence;
• you may be particularly interested, therefore, in arranging your landlord’s insurance through us here at Cover4LetProperty, where our policies typically include such cover as a standard feature;

Landlords’ liabilities

• some of the risks faced by a landlord, however, may present equally threatening financial disaster as the loss of the property itself;
• issues relating to a landlord’s various liabilities may prove critical in the event of a claim of negligence;
• such claims may be made in the event of a tenant, a visitor to the let property, a neighbour, or a member of the public sustaining a personal injury or having their property damaged as a result of an alleged failure of the landlord’s duty of care to any such third party;
• public liability – also described as landlords’ or property owner’s liability – may result in claims of such significance that cover against such risks is typically for an amount of £2 million up to £5 million;
• there is a further area of potentially even greater liability if the landlord employs anyone else in the running of the buy to let business;
• your duty of care as an employer extends to the safety of the individual against personal injury or ill health in the course of their employment or of damage to their property – and, with very few exceptions, any landlord acting as such an employer is required by law to hold a minimum of £5 million employer’s liability indemnity;

Loss of rental income

• as the landlord of buy to let property, the success of your business clearly relies on the continuity of rental income;
• in the event of a serious insured event – such as fire or flooding, for example – your property may be rendered temporarily untenantable, and you suffer the consequent loss of their income;
• as a safeguard against such losses, some landlords’ insurance policies offer compensation in that event – up to a predetermined maximum sum or for a specified period during which rental income is so disrupted;

Playing your part

• whenever arranging any type of insurance, it is important to remember the contractual obligation you typically have towards the insurer to mitigate the risks of loss or damage to the property insured;
• even though you have been careful to arrange the appropriate type and level of insurance for your buy to let business, therefore, you are still responsible for mitigating the risks – such as maintaining the property in a good state of repair or taking all due precautions to ensure the safety of tenants, visitors, and members of the public from any injury or loss.

Saving money as a landlord

In running a successful buy to let business, you face a number of financial challenges.

Fortunately, however, we have shown that there remain many approaches and measures you may take to ensure you maximise your profits as a landlord.