People invest in property for all sorts of reasons, and one of the most common is the potential to earn rental income while the property earns value over time. There are many kinds of people who become property investors, including the ‘accidental landlord’ or someone who inherits a portfolio, and those simply looking for a better return than stocks and shares. Whatever the reasons for your property investment in the UK in 2021, you need to have a plan in order to succeed in such a volatile market.
The current economic climate for private landlords
For many landlords in the UK, owning and renting a home is becoming a frustrating, unrewarding, and tiresome affair. According to data from the National Landlords Association, landlords’ confidence is at a record low, with 71% posting a negative outlook in the sector. The number of landlords in Great Britain is said to have dropped to 2.66 million, the lowest level since 2012.
A survey of 750 UK landlords conducted by Accumulated Capital indicated that 37% of those surveyed have plans to exit the property market by selling their property. Approximately 72% of the investors in the property sector felt that regulation changes were making it extremely expensive to be a landlord.
However, the good news is you can still make money from property investment in the UK in 2021 as tenant demand for rental properties has continued to grow and rents are still forecast to rise.
You can also use online portfolio management software to make your landlord responsibilities more manageable. To help you stay on top of the competition in the private rental market, here are some smart property investment strategies you can use.
Make use of online letting agents
To cut down costs, an increasing number of landlords who are investing in the private rental market are opting to do more things autonomously. After all, most landlords pay service fees that vary between 12 and 20% of their rental income for a letting agent or property management company. You can save part of this money by comparing agents and doing away with certain services that you don’t need.
One such cost-effective and practical option is the use of online letting agents; many online letting agents charge a fixed, low fee to list your property on the main UK property portals. Landlords can use these online letting agents to advertise on reputed property portals, getting a chance to list their properties in front of millions of prospective tenants.
Review your mortgage
Your primary expense as a landlord will be your mortgage so it stands to reason that you should regularly review it and do due diligence to ensure you’re getting the best deal.
Simply get an up-to-date online property valuation and your lender will need to recalculate your loan-to-value (LTV) ratio. A lower LTV typically means you’ll be able to get a better interest rate and have access to more lenders.
Find out if a company structure is more beneficial
One of the biggest threats facing landlords right now is the changes to mortgage interest tax relief. If you have a broad property portfolio, setting up a company structure may make more sense as setting up a company structure allows you to offset your mortgage interest when preparing your tax. Therefore, you will pay the tax bill as a corporation with tax interest based on your rental profits, which may be a better option in some cases.
Consider short-term lettings
Short-term lettings are a major attraction for many private landlords as they offer higher profits, and reduced tax burden as their income is classified as a company rather than individual income. However, make sure to do your research before launching into anything, and be aware of the licensing policies, listing limits, and mortgage implications.
Consider improving your property
Today tenants are looking for quality accommodation, so if your property is a little tired or outdated, or if you’re suffering from long void periods, now may be the time to consider a makeover.
Attending structural issues and repairs is one way that can boost the appearance of your property. You can also consider redecoration, upgrading the carpet or flooring, repainting, creating an attractive outdoor space, or replacing any old windows and fixtures. Anything that makes your property more appealing will help you get tenants fast, and the value of your property should increase if you do it right, too. After this, you may want to consider doing an inventory before leasing out your space.
Use tax reduction strategies
Tax reduction strategies help you minimise your tax bills. If you aren’t aware of the legal tax exemptions you qualify for, consider using a tax resource that will give you updated tax information relating to your property.
Some of the notable legal ways you can reduce your tax bill include:
- Offsetting property maintenance and improvement expenses against your rental profits.
- Claiming for all your costs before you submit your tax returns.
- Splitting your rent if your property is under joint ownership.
- Claiming letting expenses incurred when your property is empty.
- Claiming expenses for running your rental business and the costs of having a home office.
- Claiming your finance costs such as your property’s loan interest.
- Claiming private residence relief by moving into your buy-to-let rather than selling it.
- Getting your tax return in on time to avoid penalties.
- Finally, if you have many properties located in the same locality, you can use one agent and use this as a negotiating tool to get a cheaper deal.
Thank your loyal tenants
Tenants who pay on time, are respectful, and take care of your property are every landlord’s greatest asset. Consider keeping such tenants happy to encourage them to stay in your property longer. Lengthy void periods when your property is empty can be costly to you and comes with the hassle of vetting for new tenants. Some ways you can use to keep your current tenants happy include:
- Reaching out during this difficult time and checking they are okay with rent payments or have any concerns.
- Proper property maintenance and checking if you can improve the property in any way.
- A quick and fair response to complaints.
- Maintaining a good relationship.
- Building a sense of community for your tenants.
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There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.
Please remember that investments of any type may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.