With savers continuing to receive poor returns from banks and building societies, thousands of people unsurprisingly continue to turn to residential property as a means of supplementing their income, supported by record-low mortgage borrowing rates, solid demand from tenants and stable yields, as buy-to-let consolidates itself as the investment of choice.
It looks as though 2018 will be a mixed year for landlords. Some will start to feel the pinch of the legislation that’s recently come into force, such as the loss of mortgage interest relief, while a number of tenants may give notice, due to incentives to buy. At the same time, there are likely to be some good deals around for landlords looking to expand their portfolios. For the rest, who may not have the means to buy in the next 12 months, it’s a good opportunity to take stock of their portfolio and make small improvements where needed to help translate rental income into better profits.
As from the 1st April 2018 there will be a requirement for any properties rented out in the private rented sector to normally have a minimum energy performance rating of E on an Energy Performance Certificate (EPC). The regulations will come into force for new lets and renewals of tenancies with effect from 1st April 2018 and for all existing tenancies on 1st April 2020. It will be unlawful to rent a property which breaches the requirement for a minimum E rating, unless there is an applicable exemption. A civil penalty of up to £4,000 will be imposed for breaches.
Renting a property is as simple as purchasing the property and letting it out, you need to ensure the property in maintained and that you money set aside to cover these expenses. Although lenders will typically require the rental income of your investment property to be at least 125% of your mortgage payment amount, this doesn’t always mean that the property will generate positive cash flow or give sufficient net profit to cover all the expenses of maintaining the rented property over the typical 15 to 20-year ownership.
As well as regular and one-off maintenance expenses, allowances need to be made for times when there may be no rental income. Tenants may stop paying their rent and the property is sometimes empty between tenancies, and you still need to be able to cover the mortgage and other costs during this time.
It is therefore vital that you budget properly to ensure that the investment is worthwhile and not going to cost you money month-on-month, before you commit to buying a property to let.
As a landlord, no matter whether you have one property or a large portfolio, it’s important to keep on top of all the paperwork associated with owning buy to lets. Here are ten key pieces of documentation you should have up to date and to hand:
We employ the services of an external referencing agency to ensure thorough checks are carried out on every applicant. These include, full credit checks, employment references, affordability checks and previous accommodation reference. We are also required under the immigration Act to check each applicant has the Right to Rent in the UK. As an agency it is important for us that we find you the right tenant for your property.
The question of renting a property furnished or unfurnished does depend on the location and type of property. For example, if your particular property is more suited to a family, they may already have their own furniture which they would prefer to use. However, young professionals renting flats may prefer the property to be furnished. One of the most important things to note is that any furniture supplied must comply with safety regulations and if it was to break you would have an obligation to provide a replacement for the tenant.
As an overseas landlord, your letting agent would be required to deduct tax from your rental income before sending it to you unless they have permission from HMRC to pay the rent to you in full. This tax would then be paid to HMRC quarterly and at the end of the tax year you would be provided with a certificate in order to complete a self-assessment tax return and prove how much tax you have paid. If you would prefer the rent to be paid in full so you could complete a tax return and pay any money owed directly, HMRC will provide your letting agent with an approval number once you have registered with them which they need to pay the rent to you in full.