Are you a landlord, or looking to set up as a landlord? Here are our Top Tips for Landlords in 2023, written by one of our accountant directors, Peter Edwards.
Acquiring property in a company, personally or jointly?
Buying within a limited company allows the shelter of tax on the rental property and allows the full offset of mortgage interest for tax purposes. Compliance costs are higher.
This should be looked at on a case by case basis however if you have income or salary in excess of £50,000 and wish to hold property for the medium term, a company for your property investment is likely to be more tax efficient for you.
An exception to this rule is if you have a spouse that is a basic rate tax payer then purchasing the property jointly and then arranging a deed of trust to vary the interest in the property to utilise their allowances would be tax efficient, care must be made that associated HMRC declarations are made.
Sourcing buy to let properties
When looking to acquire a property the area is very important, factors to consider are;
- Transport links, close to a motorway? Close to a railway station or bus stop?
- Schools – what are the local Ofsted reports for local schools in the area?
- Population of the local town. I’d suggest this would need to be in excess of 100,000 to ensure rental demand
- Employment prospects, large employers in the area?
- Distance to property. I self manage and can only do this if my portfolio is within an hour drive. Further than this you need to factor in rental agents costs.
Type of property
Factors to consider here are numerous; a few considerations are;
Whilst these should be typically low maintenance landlords typically pay the service charge which can be a monthly fee of around £100. Distractions such as managing the common areas might be an unwelcome distraction.
Age – The older the property the more likely you’ll have issues with maintenance, ensuring electrical wiring meets today’s standards, EPC ratings are adequate etc.
Occupation – A three bed property would be perfect for a typical family let. In my opinion this would be suitable for a family who would be a long term tenants and avoid voids.
Cost & Yield – The price paid must stack up with your rental expectations and mortgage and overhead costs. Using Rightmove to check rents for similar properties helps.
Other factors and useful tools to the landlord
- Openrent – for the diy investors this website allows the property listing and marketing on Rightmove without the cost of using an agent. You can prospect potential tenants yourself and get a feel for genuine tenants first hand. You can also utilise Open rent to provide tenant referencing, letting agreements and setting reminders for compliance such as gas safety certificates
- Hammock – a digital accounting solution ideal for managing joint ventures, joint ownership and maintaining accounting records. Not only that this software assists with management of the properties and the platform front end shows a photo of your property and pulls the up to date value based on Zoopla.
- Mettle – a free online business account. Keeping your rental income and expenses separate from your personal banking is recommended, especially for future HMRC Making Tax Digital rules.
- Professional advisors – Surround yourselves with experts in property, from a good independent mortgage advisor who has buy to let experience, to property solicitors and accountants, not all advisors are experts in property.
- Reliable tradesmen – from a handyman to gas engineer and electrician, surround yourself with a reliable trustworthy team.
- Surplus funds, set aside an emergency fund of three months rent. This is advisable for unexpected repair bills or loss of tenants or tenants falling to pay!
Retaining tenants and upkeep of your property
Landlords normally dread their tenants advising they are leaving as this gives rise to a void period.
Here are my top five suggestions to retain tenants.
- Firstly letting your property unfurnished ensures your tenant feel at home with their own furniture and would make them less likely to leave your property. Also avoids costs associated with replacing items.
- Ensuring the property is maintained to a good standard, clean, recently decorated and has a modern bathroom and kitchen. My policy is the property must be at a standard for myself to live in as why would I expect anyone else to live in it if not.
- Consider paying for a window cleaner?
- Should the property benefit from a garden, the investment in a gardener would ensure the property doesn’t become uncared for.
- Invest in a boiler breakdown policy and provide the number to the tenant. One of my most common issues is boiler related.
This article should not be considered as investment advice.
If you are looking for a landlord accountant – get in touch.
About the author
Pete Edwards is a director of Warr & Co Chartered Accountants. As an avid property investor he has over twenty years of experience in all aspects of property taxation and owning and managing a portfolio of residential and commercial property.