Letting property can be a very lucrative business. Landlords in the UK earn £15,000 on average. However, that’s before taxes and operating costs. Expenses from major repairs and sudden void periods can also cleave into your profit.
Maximising the income you take home from your rental property requires a bit of digging and meticulous planning. There are a few areas where enterprising landlords can cut costs and mitigate unexpected expenses.
Be Selective Of Tenants
For eager, first time buy-to-let owners or landlords looking to fill vacant properties, accepting tenants after the bare minimum background check can be tempting. But the folks you find may turn out to be more trouble than they’re worth.
Irresponsible tenants can cause damages beyond normal wear-and-tear, depreciating the value of a property and making it harder–and costlier–to fix the property for the next tenant. Tenants who also have a habit of paying rent late makes balancing your books more difficult.
Good tenants will take care of your property as if it were their own home. They’re also easier to communicate with about the status of the property, giving landlords visibility into issues that need attention before they cause major damage.
Don’t Skimp On Paintwork
Paint will cost you. Between the painter’s fee and the materials you can find yourself footing a £900 bill for a 40sqm flat. Some landlords try to knock a few pounds off by going for cheap paint by the bulk.
In the long run, that will actually cost you more. Paint isn’t just about aesthetics. Durable emulsion protects against mould. In the kitchen and bathroom, paint needs to contend with a daily onslaught of grease and steam. Cheap paint flakes and peels faster, so you’ll have to repaint more often.
You’ll also want to mix up the variety of paint you’ll use. Surfaces react differently to paint. Matching the material to the appropriate paint will improve the longevity of the paintwork.
As does the finish of the paint. Matte makes colours look thick and saturated, because the finish reflects little light. No gloss also makes it ideal for hiding little imperfections. However, matte is harder to clean, which means you’ll want to use it in low traffic rooms like bedrooms. A glossy finish is more durable and basically wipes clean–perfect for busy and messy rooms like kitchens and bathrooms. Varying the finish based on how much traffic a room gets will help you maximise every paint job.
Design for Energy Efficiency
Record high fuel costs are putting the pressure on tenants. Rent has also risen by 9.9 percent since last year, the fastest increase on record. Around 65 percent worry about not being able to pay their energy bills. Yet while you can’t control fuel prices, landlords can still significantly ease the burden–and lower costs long term.
Many rental properties aren’t designed for energy efficiency. Upgrades like additional insulation, smart metres, and modern boilers are expensive. It’s tempting to settle for the bare minimum. And many do, with 28 percent of renters saying they feel landlords don’t help manage energy use.
When tenants struggle to pay utilities, that means they also struggle to pay rent. Lower energy bills means a better ability to make rent. Plus, a cosy flat means happy tenants who’ll gladly renew the lease. Upgrading to an A grade boiler from old, lower-tier units can also help save money on repair and maintenance, a top cost for landlords in the UK.
Conduct Regular Property Inspections
In real estate, prevention is significantly cheaper than the cure. Leaking pipes and broken boilers can cost a lot to fix.
Dropping by once or twice a year to check on the health of the property helps landlords spot issues before they become major repairs. Seemingly small problems like a chipped tile leaves the property vulnerable to rising damp. Leaky pipes cause penetrating damp from the outside.
Both cause the growth of mould and mildew–and are totally preventable. Routine inspections catch these problems before they endanger the lives of tenants and cause significant damage to your walls and floors.
Keep A Detailed Inventory
Renters stay on a property for an average of 4.3 years. That’s a long time. It’s inevitable that some damage will happen to the property. But not all of those damages will fall under normal wear-and-tear.
Without records, charging these damages from the security deposit can be very difficult. Has that stain always been there? Was there always a rip in the carpet? Gaping holes in the wall and cigarette burns are hard to miss, but there are many little things that can go unnoticed–that’s money out of your own pocket for repairs that should be shouldered by tenants.
Taking inventory before tenancy gives landlords an accurate record of all the changes and damages that occur to the property. Make sure to be fastidious: list everything including light fixtures, appliances, and any existing marks or damages. A detailed inventory will be key for settling any disputes at the end of tenancy.
Maximise Void Periods
As the nation completely lifts all pandemic restrictions, a number of people are embracing their restored freedom with a change of location. Void periods in the South West rose from 18 to 26 days, the highest in any region. In other places like Greater London, the void period is also rising, albeit modestly at one day on average.
Empty properties can cost landlords around £800 per month. That’s a hefty sum that could go towards maintenance, refurbishing your property, or your bottomline instead.
To minimise losses and keep overall costs down, landlords can look into monetising void properties. One way to do that is through short term letting. In London, which houses a considerable number of short-term lets, property owners switch between long term tenancies and short term stays to maximise profit.
Negotiate With Your Insurer
Insurance is a critical protection for landlords. Disasters like floods and fires can deal a huge, potentially fatal blow to your business. Paying for injuries and legal disputes out of pocket can also be devastating without coverage.
Yet just because insurance is a necessary evil doesn’t mean landlords can’t take steps to reduce premiums. While discounts vary from insurer to insurer, landlords can try negotiating for better deals.
Low vacancy rates and adding security devices to the property are just some ways to knock a few pounds off your premiums. Insurers are naturally risk-averse, and demonstrating due diligence when it comes to making sure a property is secure and profitable makes them more predisposed to grant discounts.
Take Advantage Of Tax Breaks
Even in the world of letting, only taxes are permanent. Many landlords dutifully file the paperwork, pay, and call it a day.
However, what some owners may not know is that they may be leaving money on the table by not taking a closer look. There are a handful of loopholes that let landlords claw back a significant chunk of their income.
One way to do that is by expensing upkeep costs against your taxes. Landlords are eligible to claim expenses spent on insurance, legal and accounting fees, and maintenance-related services like cleaners. You can also deduct money spent on advertising, including texts and calls made in relation to the property. If you own multiple properties, you can expense the cost of travelling between them.
Rental properties can generate considerable income. But they also come with a bevy of costs. Many, like insurance and routine maintenance, are unavoidable. However, with careful planning and diligence when it comes to maintenance, landlords can minimise their expenditures.
