Want to be a Landlord? Ten top tips to avoid the pitfalls of buy to let.
According to a recent article in The Guardian, buy to let property investments are now forecast to reach a value of £1 trillion – a huge figure! Buying a property to rent out, usually with a mortgage, is an increasingly popular type of investment. Many buyers see this as a second pension or an income source for their retirement. Buy to let investors need to plan carefully to ensure they receive the best return and protect their investment.
Here are our top ten tips:
- It is vital to have a properly drafted assured shorthold tenancy agreement- we can prepare this for you.
2. If letting a furnished house or flat always prepare a detailed furniture inventory.
3. Are pets to be allowed? Or smoking? Who will look after the garden? The tenancy agreement should cover these points.
4. The rules relating to tenancy deposits have changed in recent years. There are significant penalties for landlords who fail to protect deposits and we can advise about this. Always ensure the deposit is placed in a recognised scheme.
5. You should make sure that your buildings insurance covers renting the property. If not, you may find you are uninsured.
6. Does the property have gas appliances? If so an annual gas safety check is required and a copy of the form CP12 should be given to the tenant.
7. The rental income will be subject to Income Tax so you will need to declare the income to HMRC. However, we can advise about property ownership options and beneficial interests which may reduce the income tax bill significantly.
8. Capital Gains Tax may be payable when you sell the property. A gift by transfer is usually treated for CGT purposes as a sale and so can trigger a CGT charge. There can also be Inheritance Tax issues. We can advise and help you plan the most tax efficient way of managing these situations.
9. If things go wrong during the tenancy we can advise about your rights as landlord. There are complex rules about seeking possession if the tenant does not pay the rent, or breaks the other terms of the tenancy. It can be a slow and difficult process and we can guide you through it. A court order and a warrant of possession would be required if the tenant failed to vacate the property.
10. When the tenancy ends try to agree the cost of any repairs with the tenant so that the deposit can be released to both landlord and tenant quickly.
Many mortgage lenders now specialise in offering buy to let mortgages. We are members of the Conveyancing Quality Scheme and will work with your lender to ensure your purchase proceeds smoothly. For more information contact Anne Banks in our Housing and Property team.