Now that you have decided to invest in property, whether to move into or if you are going to buy-to-let to make an extra quid, you need to watch for some common mistakes people make. It is true that property prices are rising and there are more tenants than ever before. However, it is not a bed of roses, as you may have imagined. Here are some pointers that should help:
Lying vacant for too long?
You can’t afford to invest tens of thousands of pounds in a property and keep it vacant for too long. The property can fetch you decent returns only if you have some tenants occupying your property. Keep in mind that you need to pay your mortgage EMIs regularly irrespective of whether the property is fetching rent or not. Hence make sure you avoid voids while letting out, and make sure you have all the dotted lines in place while drawing up the tenant agreement. Don’t let it out to tenants who want it for a short period, look for tenants who will hang on for longer.
Be informed about tax liabilities
As a new landlord you may not be aware that you need to pay tax on the income you receive as rent from tenants occupying your property. If you are making more than £10,600, which is the threshold for personal allowance, be informed that you need to pay taxes, failing which you could be fined heavily, and worse, you can be sentenced to prison. Moreover, landlords need to remain updated as the tax structures keep changing. Since April 2017, interest relief on mortgage interest tax is to be reduced to 20 percent (maximum), resulting in additional burden on landlords.
Look out for the hidden costs
Although buying property to let makes sense as it is a sound investment, you’ll have to shell out money initially if you want to make money in the long run. There are the mortgage repayments and letting agents’ fees and some other expenses that you hadn’t planned for. There’s building insurance premium, and payments to be made for annual checks for gas safety certification. Also, as a landlord you are expected to maintain the property in a fairly good condition.
Choose the best location
Just because it is a cheap and attractive deal, some people choose the wrong location. It could be a location that has a dubious reputation, or far away from civilization. In such cases, you can’t find a tenant that easily, even if you do, you won’t be able to charge a decent rent. It is quite difficult to predict how a locality will turn out in the future; hence it is better to go for one that is good in all aspects, in spite of the steep prices.