Advice for Accidental Landlords
You might be thinking, how can you become a landlord by accident? Well not everyone buys a property with the intent to rent it out but due to a change in personal circumstances i.e a relationship, these things happen! So if you've become a landlord by accident here are some useful tips to help you out...
A huge percentage of rental properties are owned by what in the industry is known as ‘accidental landlords’. UK rental properties are not the reserve of the rich multi buy-to-let investor as many would have you think. So you’re an amateur letting someone move into your property, in a heavily regulated world, here’s 5 things to make sure you know….
1. This year is the final phase in of electrical regulation to rental properties. So all rentals must have what is known as an EICR certificate produced every 5 years. This along with Gas certificates, Tightened EPC regulation, IOC regulation on you holding your tenant data, Deposit rules, enough anagrams to give you a headache, and a few scrabble points. Become a member of a landlord body, or let under a qualified letting agent to ensure you are kept on the right side of the law.
2. Tax, yikes, where do I start?! Well the basics. As a landlord you now have an income from property, this MUST be reported on a Self Assessment Tax Return, and If/ when you go on to sell the property you may be liable for Capital Gains Tax if the property has increased in value. Tax on landlords has been a hot topic in the last 5 years as relief on mortgage interest has been tapered off. My advice, before you let the property take some independent advice on how to structure the ownership and taxable income on your property with a medium to long term view. In many situations, tax liabilities can be split or reduced particularly for married couples.
3. Stamp duty. Probably the only thing talked about more than COVID in the last 12 months in property circles! Be aware, if you are looking to Let your home to buy another, be aware you will be liable for a 3% additional charge of stamp duty. However if this is a relatively short term plan in order to either buy with no chain, or a play on the market as you believe there is due to be an increase, this additional stamp duty can be clawed back if you sell the original home within 3 years.
4. Why pay a property manager and not self manage? Well firstly, can you say you understood every term in tip number 1? Ok some will, but secondly, do you have a team of local, qualified trades on standby, or the time to take to visit the property to inspect it? Remember rents are high, and tenants are not just paying to live in the property, they are paying for a service. If that service isn’t provided it WILL lead to them moving on prematurely, and it’s rental voids, the empty periods that are costly for landlords.
5. How to turn your property from a Let to Buy into a profitable investment. Well there are hints above. From the first minute look at the tax situation. One landlord may pay double the tax of another on exactly the same property. We’re fortunate to live in a period of incredibly low interest rates. Ensure you consistently review the mortgage payments. Many landlords will re-finance to an interest only mortgage with the ability to over pay for flexibility. And look at what you can do in the property to improve the rental, and quality of tenant you will attract. Many improvements are tax deductible but will fire your property into a new bracket of searching tenant and improve the value of the property long term.
Ian and I have both been landlords for over a decade, we’re experienced, qualified property managers, we’ve made and learnt from our own mistakes and always happy to share our opinion. We work with our landlord and tenant clients to make sure renting is a positive experience.
If you want to chat, drop us a line.
01344 249500