Landlords are set to see some significant changes to mortgage tax relief in 2017, which could affect your ability to turn a profit on your buy-to-let property.
From April, landlords paying a higher tax rate will no longer be able to claim the current rate of 40% of their mortgage interest back before paying income tax. Instead, this figure will be reduced to a flat rate of 20% by 2020, meaning that tax is due on the full rental income.
This move to tax landlords on their revenue, rather than profits, could dramatically hit their annual turnover.With 10 weeks to go, here are our top 5 tips for staying profitable, without having to raise your rents.
1. Secure reliable tenants
Keeping your property occupied is crucial to staying profitable. Finding reliable tenants on a long-term basis will avoid costly empty periods and also gives you added security each month.When a lease does come to an end, make sure that you are ready to remarket your property as soon as possible. Preferably, you should look to market your property 4-6 weeks before any potential new tenants can move in. This will reduce empty periods between lets and keep your buy-to-let investment profitable.
2. Find a competitive rent
To keep in line with tax changes and annual inflation, reviewing your rent can help balance these unavoidable costs. When it comes to reviewing your monthly rent it’s important to find the right balance for both you and your tenant. Put your rent too high and you will alienate potential tenants; too low, and you will reduce your annual income.Booking regular property valuations between tenancies will make sure that you care charging the right rent for your property, and will keep you competitive in the local market.
3. Keep your property fresh
Keeping your property looking fresh will make sure that you can attract tenants as quickly as possible in between lets, and encourage tenants to stay in the property for longer.Ultimately, tenants are looking for a modern, fresh and clean living space. Making sure that your property meets these standards will help you stay competitive and generate demand for your property. This needn’t be costly, hiring a professional cleaning company in between lets and touching up tired looking areas with paint will keep the property looking fresh.
4. Schedule regular property inspections
A large proportion of annual costs for landlords come from property repairs and improvements. Keeping on top of any damages, and attending to repairs before they become a major problem, will reduce unnecessary costs. Organising regular inspections throughout tenancies will help you spot any areas for attention.Of course, accidents are unavoidable. Having an inventory check in and check out will enable you to account for any damages, and recover the cost of any damage from the tenancy deposit.
5. Organise your expenses
Make sure that you keep all paperwork and receipts for expenses. Although landlords are unable to claim on renovations or improvements, you are still able to offset the costs of general maintenance and repairs to the property. Having an organised inventory of your expenses will mean that you can claim expenses on your rental income, before paying tax, which will reduce your annual costs.
If you would like further advice or guidance please call Helen Griffin-Booth on 0151 709 9638 or e-mail firstname.lastname@example.org