Insider tips for new landlords: maximise ROI
- 8th December 2009
- Landlord Property News
A top ten list of practical know-how tips for new Landlords from ludlowthompson, London's Letting Agent.
ludlowthompson.com, London’s Lettings Agent, has put together its Top 10 Tips for new landlords. Falling house prices have attracted new cash investors and also home-owners who cannot sell and do a letting instead.
Stephen Ludlow, Director of ludlowthompson.com, explains: “A lot of cash-rich individuals have taken advantage of the fall in property prices over the last year to pick up a buy-to-let bargain. Some of them have never been residential landlords before. Others have entered the market as they have been unable to sell their property and are letting for the first time.”
“They may not have had time to research the market beforehand and may not be clear on how to attract the best tenants or their legal obligations as landlords.”
The Top 10 Tips for New Landlords:
1 Work out what kind of tenant matches your letting requirements. For example, if you want a long term let but don’t mind and taking slightly less rental income then target a family by investing in a higher quality interior. If you prefer tenants who will pay more rent but who might only stay in the property for a year or two then try to sign a group of young professionals.
2 Most tenancies now include a break clause, allowing the tenant to leave before the full term of the contract has expired. You should avoid the risk of void periods by trying to plan the tenancy so that break clauses only become active when it is easy to let the property. Most tenants look for new properties in the summer and after Christmas.
3 Set aside 10% of your rental income as a buffer to pay for any repairs to the property. Repairs will reduce your taxable income when you have to file your return with HMRC.
4 For peace of mind you should consider taking out a rental warranty, a product that covers your losses in the event your tenant is unable to pay their rent. The warranty costs as little as £300 per year and pays for rent in arrears after 60 days. It is often much better value than car insurance. For example for £300 you can cover rental loss and legal expenses costs up to £10,000, whereas car insurance with that kind of cover would cost three or four times as much.
5 Don’t over-furnish the property. The trend for tenants to rent for longer before buying their own property means that they are now more likely to own at least some of their own furniture. Try to keep the décor neutral and don’t personalise the property with paintings or ornaments as tenants may hide these in cupboards where they are likely to be broken.
6 Don’t make the mistake of including bills in the rent. With volatile energy costs, landlords could find that their rental income is significantly lower by the time the tenancy agreement comes to an end.
7 Put electrical appliances and boilers under a service contract so that the tenant can call an emergency engineer directly. You should provide details of emergency phone numbers in a tenant’s handbook which could also give details on how to use the household appliances, how the boiler and the heating is operated and details regarding the local authority, such as the amount of council tax payable, car parking, bicycle storage and when refuse and recycling is collected.
8 Ensure that you are letting your property to a reliable tenant by asking a reputable lettings agent to run a comprehensive reference and credit check before the lease is signed. You should also ask your agent to compile an inventory and take a damage deposit equivalent to six weeks rent.
9 If you have a mortgage you must obtain written permission to let your property from your mortgage provider as failing to inform your lender may put you in breech of your mortgage conditions. If you own a long leasehold you will also need the written consent of your freeholder or their managing agent.
10 You will also need to tell your buildings and contents insurance provider. Even if you are letting an unfurnished property it is a good idea to take out contents insurance as this will provide you with a level of public liability insurance.
...plan the tenancy so that break clauses only become active when it is easy to let the property.
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