In Part 1, landlord money saving tips focused on some of the economic imperatives determining the choice and purchase of your buy to let property. Here in Part 2, we examine some of the ways you might reduce your on-going overhead expenditure as a landlord and so contribute to the overall profitability of your buy to let business.
Managing your buy to let property
Once you have purchased a suitable property, running your buy to let premises is likely to focus on two principal areas:
- letting the accommodation – this is 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 depends on the age and condition of the property in which you have invested.
The fact remains, however, 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, you may wish to employ the services of 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.
By making your let property more energy efficient may lead to your saving money in the longer term.
Since it is typically the tenants who are footing the cost of energy bills for cooking, heating and lighting, anything you do on behalf of your tenants to help reduce these energy bills is likely to make the let more attractive, potentially allow you to charge more in rent, and keep satisfied tenants for the longer term.
Helping you to save money in this way are a number of government-funded schemes to encourage property owners – including landlords – to make their homes more energy efficient and environmentally friendly.
Perhaps the best known of these is the so-called Green Deal, designed to help spread the cost of a wide range of energy saving features, including:
- installation of new, high efficiency boilers for hot water and heating;
- improved heating controls, such as thermostats in principal rooms;
- solid and cavity wall insulation;
- draught proofing;
- double glazing; and
- even grants towards the installation of renewable heating systems.
Shopping around may also be the key to securing the landlord insurance you need – providing cover for those risks you identify and excluding any elements of cover which may be superfluous. Although adequate insurance cover is likely to provide a valuable safeguard for your investment, in other words, there is little point paying more for it than you might need to.
Although the principle of landlord insurance is relatively straight forward, making the right match between your own particular requirements and circumstances to the products available in this niche of the insurance market may benefit from more than a little insider knowledge.
For that reason, you might want to take advantage of the specialist knowledge and expertise offered by insurance providers such as those of us here at Cover4LetProperty.
Your buy to let enterprise is run as a business, with the intention of generating profits from rental income. The income is subject to tax and there are two seemingly contradictory reasons for your considering especially carefully the declarations you make to HM Revenue & Customs (HMRC):
- HMRC is currently running a Let Property Campaign designed to identify those landlords who are not paying the tax that is due on their business – whether wilfully or simply through a lack of understanding of the rules; and
- you may in fact be missing out on a variety of tax relief allowances unless you take a keen interest in what is and what is not tax deductible.
On the first count, HMRC is taking a typically carrot and stick approach by encouraging landlords to make a clean breast of things by taking advantage of an online course in what is owed and by making a full declaration now and by warning that failure to pay or to evade payment may incur severe penalties.
In March 2014, the Guardian newspaper reported estimates by the HMRC that at least £550 million is lost to the public purse each year as result of landlords underpaying the tax they are due.
On the second count, matters may not be at all straight forward, since tax allowances are subject to quite complicated rules – about which you might need the help of an accountant.
Some of the allowances you might be overlooking, for example, include:
- tax relief on any interest you pay on a mortgage on your let property (but not capital repayments) – and since buy to let mortgages are typically interest-only mortgages, this tax concession is likely to be especially valuable;
- you may also claim relief on fees you pay to any property management or lettings agent;
- expenses you incur during the routine repair and maintenance of your let property is tax deductible – unless the works amount to an improvement, extension or remodelling of the premises; and
- if you are an occasional landlord, simply letting out a room in your own home under the Rent a Room scheme, tax relief is available on any rental income which does not exceed £4,250 per annum.
In sum, therefore, although you may want to keep the taxman off your back by declaring all income on which tax is due, it is equally important to claim whatever tax allowances to which you may also be entitled.