As many people have already discovered, investing in property to rent out to others can be extremely lucrative. Many people have made an excellent income and accrued a lot of wealth as a result of purchasing and renting out their homes.
However, without taking steps to try and cut costs, a buy to let property can actually become something of a money pit for landlords. This is why it is so important to ensure that when you have an investment property it is run and managed properly, as otherwise you could end up losing money hand over fist.
Of course, you don’t want to have the properly empty and untenanted for long periods of time, as a void property means lost money by way of rent. However, on the other hand you do not want to have a tenanted property that ends up costing you more overall than it would have had it been left empty, as this simply defeats the object of having an investment property at all. As an investor, your aim is to make an income from renting out the property and still have an asset at the end of it all. With this in mind, you need to be smart when it comes to dealing with how to reduce landlord costs and expenditure.
As a landlord, there are a number of different areas that you can look at in order to try and reduce landlord costs. There are steps that you can take that could help you to eliminate unnecessary expenses in relation to your buy to let property as well as help you to cut costs in other areas, which means that your investment will instantly become more profitable. Some of the key steps to take when it comes to finding ways to reduce landlord costs include…
Many landlords find themselves having to pay out a fortune after a tenant moves out because of the state of the property, damage that may have been caused to decor or furniture, and various other costs that were down to the tenant not maintaining the property properly. However, if you do not have an inventory and photographs in place – and make sure that the tenant has a copy and signs it to demonstrate that they agree with everything in there – you won’t have a leg to stand in if you want to try and recoup the costs of repairs and cleaning.
When you have potential tenants that want to move into your property, never skimp when it comes to getting references and carrying out credit checks. You may have seen the movie ‘Pacific Heights’ with Michael Keaton, where a young couple rent out part of their property to a tenant and fail to carry out checks. The tenant turned out to be some sort of psycho who also destroyed part of their property – a lesson for every landlord when it comes to being stringent about checks. By carrying out references you will have a far better idea of how the tenant is likely to treat and look after your property as well as how likely he or she is to keep up with rent payments.
If you do need to have work carried out on the property before, after or during a tenancy, you need to make sure you shop around just as you would if it was for your own home. You should aim to get at least three quotes for the work that needs to be carried out so that you can get the best price.
When it comes to the tenancy agreement, you need to ensure that you are crystal clear about your responsibilities and the tenant’s responsibilities when it comes to maintenance and repairs issues. This way you won’t end up footing the bill for something that the tenant should realistically be paying for.
Many landlords do not realise that they are losing money through property taxes by not knowing what they can and cannot offset against their tax bill. If you are unsure, it is worth making an appointment with an accountant to go through your specific situation. Even if you have to pay for your appointment, you will probably end up making money because of the amount that you may be able to save on your tax bill.
In order to ensure you do not end up paying out compensation or find yourself facing penalties, make sure you use an official government backed tenant’s deposit protection scheme. You must also ensure that you adhere to the rules and regulations of the scheme you choose in terms of providing your tenant with the necessary information regarding their deposit.
The key reason why anyone decides to go into property investment is in order to make a profit and to build up assets. If you are actually losing money every month or on a regular basis, then something is wrong. By following the above steps, you can boost the chances of making an impressive profit as a landlord.
While some landlords are happy to deal with all matters relating to their rental property, others may be better off looking at a management agent to deal with everything. While there is a fee involved, it could save you money in the long run as long as you select an experienced and established lettings agent. They will deal with everything from the inventory and credit checks on potential tenants to getting the tenancy agreement sorted out and carrying out regular check on the property. This could be ideal for those that are pretty new to the buy to let market and needs a helping hand.