With 2016 having being a pretty rough year for landlords from a tax and cost perspective, and 2017 likely to bring more challenges, it’s important to keep a good business head on your shoulders.
Here are my top five things that landlords need to do during the year in order to stay on top of letting a property legally and ensure buy to let remains a profitable investment.
Essential landlord job #1
If you haven’t done so already, work out how to keep up with central government and local authority legislation changes. That’s not an easy task, particularly because new laws, taxes and things like licensing can come in within a matter of months or may take several years, during which time changes can be made from the original proposals that hit the headlines.
To me, the easiest way to keep on top of everything is by using an agent such as Belvoir. Each office is backed by a national support team that includes an excellent legal helpline, which I benefited from myself when I used Belvoir Maidenhead to look after a flat I let in Reading.
If you don’t use Belvoir for full management, then you should take advantage of the free seminars or workshops they offer, I have two coming up in February: one with Belvoir Stoke on Trent and one with Belvoir Shrewsbury. It’s also a good idea to sign up to the excellent value landlord associations; some are run by the local council and others by the likes of the National Landlords Association or Residential Landlords Association.
Essential landlord job #2
One thing I often have to chastise landlords for is not putting together a maintenance schedule and sticking to it. Very few newcomers to buy to let invest with a 15 to 20-year maintenance programme – but you should. Boilers may need replacing every 10 years and flat roofs within a few years of purchasing. Things like decorating and general fixes are likely to be needed on an annual basis and these can easily add up to £500-£1,000 each year.
During the winter months, every time there’s a cold snap or a particularly windy or rainy day, you must check the property to ensure it remains wind and water tight. This will also reassure your tenants that you’re keeping an eye on the property for them.
If you use Belvoir to fully manage your property, you won’t need to worry so much, as they will do periodic checks inside and out to alert you of any problems.
Essential landlord job #3
Ignore news headlines! This is important advice for landlords, and especially buy to let investors, because much of the property market ‘news’ is just scaremongering. Prices, rents and their movements tend to be reported at the most extreme levels, for example, using blanket national or very regional data, neither of which are terribly useful or relevant for most landlords. We know from the government’s UK HPI index that: “The most expensive residential sale in November 2016 was of a detached property in the London Borough of Kensington & Chelsea, for £24 million. The cheapest residential sale in November 2016 was of a semi-detached property in Swansea, for £5,500.” So, taking an average of figures that include extremes like these simply doesn’t help investors wanting to know local property price changes.
For 2017, I’m predicting some pretty ‘poor’ headlines about low sales volumes and falling or static property prices. This is because the property price and volume figures for 2016 were massively influenced by the stamp duty changes at the start of April and then the Brexit vote over the summer, so the much used year-on-year comparisons will be almost pointless. As a result, the only place to go for accurate information on the local market and your property’s price and rental value is your local agent; remember, headlines are created to stimulate newspaper sales!
However, what you shouldn’t ignore is that bad property news headlines tend to be good news for investors who want to expand their portfolio or are thinking of buying for the first time, as they tend to result in a fall in demand, which can create opportunities to pick up some bargains if supply is maintained.
Essential job #4
The next job comes as a result of the tax changes that take effect from April 2017, and if you don’t do it, don’t be surprised if you get hit with an unexpected tax bill this year or next. With taxes for landlords changing adversely, it is vital to have your current and future investment returns analysed now, taking into account ALL your earnings and assets, not just those that are property related.
You need to understand the impact the changes will have on your overall wealth (including your take-home salary and income from other financial investments), as the tax bracket you’re in may be affected and you may end up losing any current tax benefits.
Anyone that isn’t getting professional help to ensure they understand future taxation changes is, in my view, likely to get things wrong, as it’s an increasingly complex task and not one that should be done without expert advice.
Essential job #5
If you don’t already have an exit plan for your property investment, make one this year. The harsh reality is that buy to let returns have been adversely impacted over recent years, whether or not landlords accept that reality. Capital gains tax, the way your taxable income is calculated and the level and types of relief you can access have all changed. This may affect how you decide to invest in the future, when and if you sell your property investment, and how you need to arrange your affairs to make sure your property assets are left to your children/family tax efficiently.
Fortunately, your Belvoir agent is one of the few in the country trained on exit plans and they also offer the support services required to make sure you’re professionally looked after. So if you haven’t yet made an exit plan or aren’t sure how to do it, find and contact your local Belvoir office here, and they’ll be able to help you.
