January can only mean one thing. A large proportion of the population are trying to stick to New Years’ resolutions, and even for those who tend to steer away from resolutions, there’s probably still a few things you can think of that you have had the best intentions of doing, (change doctor surgeries, fix the scuffed paintwork on your shed etc.) but just never got round to doing! Well, Landlords out there, we’ve got some advice for you.
Our list of ‘top 5 things landlords should complete in 2019’ with the help and input of Franklyn Financial Management will help you get a list of things together so you can feel organised and productive this January, whilst putting yourself into a better position in general.
Franklyn Financial Management Ltd was established in 1999 and has been working with the Belvoir group for over 12 years supporting Landlords with all areas of financial planning. Being a landlord creates a very different, and much more complex financial position than most, so protecting and growing your wealth is more important than ever; which is why Belvoir has partnered with Franklyn to offer a bespoke financial planning service to our property landlords. Below you will find some of the key topical issues where we have supported Belvoir landlords:
· Understanding the implications on Income tax due to the removal of mortgage interest rate relief
· Understanding how capital gains tax will impact your profit after sale
· Understanding the effect of inheritance tax on your portfolio
· Understanding the impact of long-term care costs
· Intergenerational wealth planning
Please see www.franklynfm.co.uk for more information
1. Writing a will
Not the happiest of topics, but certainly important! It is essential that landlords make a will because they can decide who receives their assets including their buy-to-let properties following their death.
If a landlord does not write a will and that landlord then dies, they have died intestate. Intestacy rules are, of course, made in broad terms and cannot take account of a landlord’s individual wishes.
A landlord should consider:
· How much money and what property and possessions you have
· Who you want to benefit from your will.
· Who should look after any children under 18 years of age.
· Who is going to sort out your estate and carry out a your wishes after your death
2. Adding one property per year to your portfolio
Building a property portfolio can be daunting – but with the private rented sector growing at record rates, it can be a highly valuable financial decision. Adding a property per year to your portfolio in the correct way could have hugely positive impacts for your pockets! When expanding your portfolio you should consider the following:
· Identify goals
· Start Small
· Offer low
· Keep an eye on cashflow
· Ensure tenants are satisfied
· Grow cautiously
3. Tax planning
Many investors pay more tax than strictly necessary because they have not structured their investable assets in the most tax efficient way.
In recent years the Government has sought to clampdown on tax reliefs available to landlords, which has resulted in significantly higher bills.
Everyone wants their business to be successful, but the amount of tax you pay is naturally linked to the profitability of your business.
Despite these changes, landlords and property investors can still make strong returns and saving with careful planning. Make time to sit down and organise your tax planning efforts this January
4. Pro-active maintenance that will increase your yield
Neglecting to visit your rental properties regularly to oversee conditions and dilapidations is a false economy. We recommend that each property should be visited once every three months as this ties in well with the change in seasons and the effects they have on aspects of your investment property whilst also coinciding with your obligations to check and record the correct operation of Smoke and Co2 alarms as required by law.
For our managed properties this is also where we conduct your electrical and legionella periodic inspections.
We have found that regardless of the target market, the better standard of property you provide, the more conscientious tenant you will attract. This in turn with a regular schedule of attendance will ensure that any issues that develop can be attended whilst in their infancy and more often than not when at their cheapest.
Leaving a property for 6, 12 or even more months between visits can often give rise to situations whereby an initial requirement like a bath seal which would typically cost £20-£30 to resolve, could increase to re-decorating/plastering and even repairs to electrics and ceilings below if water ingress is sufficient enough to cause lasting damage.
I know what you are thinking – Surely this is a tenant’s responsibility to raise this with a landlord or agent? - and you would be right! But the reality is that this rarely happens and retrospectively costs the same to fix.
5. Mortgage and rent reviews to maximise your investment
Property is a long-term investment and people treat it as such, and an ‘if it’s not broke don’t fix it attitude’ can easily prevail. But most landlords come in to this type of investment with a focus on yield rather than capital gains and you can literally loose thousands of pounds by sticking with a lender and not reviewing your terms on a regular basis.
I would recommend reviewing your borrowing at least every 3-5 years and those who haven’t, I’m certain would be quite surprised how much harder their investment could have been and still be working for them without any day to day effort for themselves and how much greater return they could have gained over the years of ownership.