In this post we’ll discuss some basic tips that will help you become a successful landlord if you are thinking about getting a buy to let property. Below are some of the main things you’ll need to consider when choosing and selecting a buy to let property to invest in.

Before investing in any buy to let you should put together a financial forecast working out how much money you expect to make from the property. Such a forecast should include income and expenses such as mortgage repayments, expected rental income, maintenance costs, income tax, service charges etc. Only by forecasting these things will you be able to decide if the property is a good investment opportunity.

Plan for 9 Months Occupancy

One common mistake new landlords make is presuming that the property will be let out for the full 12 months out of the year. In reality the actual occupied time of the property you rent out will be much less. Your rental property may be empty for a period of time after tenants have moved out while you look for another tenant.

There are many reasons why you may have periods where you are receiving no rental income from your property. Depending on the local market the property may be left vacant for a while while you struggle to find someone to move in. You may need to do maintenance work to the property between tenants again increasing the time the property is not receiving any rent. And of course every landlords worst nightmare, your tenants might stop paying their rent which may mean you go without rental income for a few months while you evict them.

As a general rule most experienced landlords do their financial planning assuming they’ll receive rental income for 9 months out of the year. While you may get lucky and have tenants stay for several years you can equally have tenants move out after every 6 months lease is up. Planning for 3 months unoccupied will hopefully be conservative enough to deal with any rent free periods without causing you financial problems.

Factor in Interest Rates Rising

With interest rates at incredibly low levels it is easy to lose sight of what might happen to your rental business should interest rates begin to rise again. In the 1980’s in the UK interest rates reached over 15%. Could you afford to keep paying your buy to let mortgage if that happened again?

OK so rates probably won’t reach 15% again in a hurry however your variable rate buy to let mortgage could well get 2-5% more expensive in a relatively short period of time. When you are working out the finances on a new buy to let property it is well worth considering what the mortgage repayments would be if interest rates rose by a few percentage points. You can work this out easily by using are mortgage repayment calculator.

Buy To Let Income Is Taxed

If you are going to be making an income profit from your buy to let it is important to realize that your profits will be liable for income tax. Basically that means that you have to pay the government tax on any profit you make from your buy to let.

Taxable Income = Rent received less Interest Paid On Mortgage less Maintenance Expenses

Tax Paid = Net Profit x Your Income Tax Rate

It is worth noting that mortgage interest is a tax deductible expense in the UK. This means that you can offset any payments made as interest on your buy to let mortgage against the profits, before working out your tax bill. In addition any direct maintenance expenses such as wear and tear, decoration, legal fees etc can also be offset against your profits, reducing your tax bill.

If you do not do so already you will need to start submitting a self assessment tax return each year as soon as you start receiving income from your buy to let.

Factor in Maintenance Costs

As mentioned in the point above you should also bear in mind the fact that you will incur maintenance expenses on your property. Hopefully these will not be too excessive, maybe a lick of paint every couple of years, however do not lose sight of these in your financial forecasts.

Also try not to ignore the maintenance needs of your property. If you fail to spend small amount regularly on small jobs, you may find you have bigger problems (and bills) to deal with a few years down the line.

It is a very good idea to plan for larger one off maintenance bills (such as a new roof, new kitchen, new bathroom suite etc) by setting aside a small amount of the monthly profits into a contingency fund you can avoid having to find a substantial amount of money for an unexpected one off expense.

Insurance For Tenants In Rented Property

If you are living in rented property then you should be sure to understand what types of insurance you require. Usually it is the landlords responsibility to insure the building and any contents (furniture and furnishings) that belong to him or her. This insurance will not include your (the tenant’s) possessions or any accidental damage you may cause to the landlord furnishings. It is essential that you obtain tenants insurance to make sure you are covered incase anything happens to your possessions.

It can be very easy to forget about buying rented propert insurance when you move into a new property. You should not think of contents insurance as an option but instead as a necessity. Should you get burgled or accidentally damage anything in your new home the right insurance policy will ensure it gets replaced with minimum fuss.

When you choose an insurance policy it is worth taking the time to ensure it covers your for your particular needs. Many policies for example will have a limit on high value items so if you have a particularly expensive stereo or camera for example you may need to specifically state this to the insurer when you take out the policy to ensure it is covered. Another item that is often not covered unless you state it are bicycles.

Above we’ve already mentioned some of the key things to look out for when choosing your property insurance. Other features of a good policy should include the following:

- Theft of possessions (via break ins)
- Theft or loss of possessions when you are not at home (say if you lose you ipod)
- Accidental damage to the landlords property or possessions (for example damage caused by a burst pipe)
- Replacement locks should you lose your house keys
- Replace old items with new ones should they be stolen
- Accident or injury to you and your guests
- Loss or damage to possessions by fire, floods etc

One thing you should do is be honest when obtaining insurance quotes. Insurers will ask you all kinds of questions such as where you park your car, what your profession ism the value of your possessions. Be sure to give them honest answers to ensure your policy is valid.

Also beaware that some policies will only be valid if you have particular locks fitted. In this instance you may be able to get your landlord to fit better locks to windows and doors, or at least to share some of the cost.

Insurance for Landlords of Rented Property

Many landlords forget that they still need to insure the property that they rent out. As stated above all landlords should at least take out buildings insurance on the property. While many owners of rented property do do this there are other types of landlord insurance that should be considered.

One of the most popular types of insurance taken out by landlords is insurance against your tenants not paying their rent or insurance against rent free periods when you are looking for new tenants. Many landlords fail to see how dramatic the impact can be if say they had to go for 6 months without receiving any rent from their property. How would they pay the mortgage? Depending on your financial situation it can be a great peace of mind to know that you are insured against any rent free periods, allowing you to plan your finances with much great certainty.

All landlords should take out landlords liability insurance. This is basically insurance against any accidental injury or damage that your property may cause your tenants or their guests. Typical causes of injury may be a faulty light switch, leaking gas pipe or simply any injury caused by the property.

Of course as a landlord you should insure your property for the contents you have in there. At the very least you are likely to have curtains, carpets, a few white goods that are left in the property with your tenants. These items should be insured in case they are damaged or fail.