Any tips for becoming a landlord?

[Teaandtoast1]

Hi. We are going to be renting out our 2 bed terrace as we are in the lucky position that we have a deposit for another house.

So does anyone have any tips or good books they can recommend?

We want to go through an agent as this looks easier bit I'd still like some tips on things like.......

• ensuring we pay the tax
• landlords insurance
• deposits etc

Anything else really we may not have thought of?

Thanks.

Hmmmmm lots to consider then.

How feasible is it to try it for a bit then sell if it doesn't work?

Sounds like a few of you on here are landlords. Is it worth it do you think?

Rent out or sell?

You absolutely can claim lettings agents fees as an allowable expense.

My advice is to make sure you are absolutely cut out for all the hassle that being a landlord entails. It can be very stressful. Alongside all the costs everyone has mentioned, think how you'd feel if you got a call from a tenant with a leaking pipe or other issue whilst you were trying to chill out on holiday. There are so many things to consider and unless you are likely to get a good income from letting I would seriously consider selling the property instead.

By the way, just in case you're not aware, you'll need to get permission from your mortgage lender to let the property. They may charge you a consent to let fee ( I had to pay £395).

If you're going to sell it sell it now before you buy somewhere else. Otherwise it becomes subject to capital gains tax etc

you do have a couple of years before it becomes liable to CGT as long as it has been your principal place of residence and there are annual allowances to offset the gain. However you probably won't make money short term as an investment.

I've lived in it for 5 years so say if we rent it out for a year or two and see how we go. If it gets too stressful maybe sell it then? Will I have to pay capital gains tax if I rent it out for a few years?

Would you need to fill in a tax return if you didn't earn anything so didnt use your tax free allowance and the rental income, minus deductibles was less than the £10k a year?

What's the tax free allowance and 10k a year about please superscrimper?

Personal Tax Allowance is currently 10k. If your total personal annual income (think wages, investments , interest, some benefits etc) is less than this you would have no tax to pay on your share of the net rental income. If you go above this then it is 20% until the Higher Rate threshold of 31.8k then 40% on anything above this. Your dp/dh's circumstances may differ of course.

yes, agents fees are deductible. The 10% 'wear and tear' allowance to which someone refers only applies to furnished properties, i.e ones that come with everything someone needs to live in them. Most UK properties are rented 'unfurnished' - this may include white goods but doesn't include beds, sofas etc. So the 10% does not apply.

you can and MUST insure against legal expenses and malicious damage.

change agent. This lot have already proved incompetent.

oh, and re CGT; the last 18 months of renting are treated as if you still lived there. Your liability is determined by the ratio of time you lived there and time you rented it out. You and your partner have 10k CGT allowance each.

this tends to get changed in budget small print, keep an eye on it.

ps again (sorry) - I suggest you get an accountant for tax return year one as you don't have basic tax knowledge. You'll still need to get all the info but the accountant will help you get it right.

I'm looking at taking the plunge into the same. My sums seem a bit different to yours though.

I'll get £600 rent a month, mortgage payments on a repayment mortgage are £430.

So I pay 20% tax on £400 a month (£600 - £230 which is roughly the interest part of the mortgage. So £80 a month tax.

However I can also off set a few things against tax like £12 a month for using my home for administration/office work, the cost of a gas certificate.

Bit roughly £80 a month and £430 a mortgage leaves me with £90 a month.

I need building insurance and landlord insurance which again I can off set tax against. Will cost about £35 a month and I can off set about £6 tax. So another £29 gone.

Leaves me with £61 a month.

If I was to use a letting agent that would be 10%. So £60 a month, but would save £12 tax.

So would have £13 a month left.

I have to save that £13 for any repairs. It doesn't factor in letting agent fees for stuff like a tennant finder fee of £50, contract renewal fees which I'll have to pay. If I have any void periods I'll have to pay the mortgage but at least I wouldn't have to be tax while the property is empty.

I mean this in the nicest way, and I understand you are trying to gain clarity by asking questions which is a good thing, but I'm not sure you are cut out for this. The margins seem too tight, and you have some big gaps in basic knowledge (income tax/mortgages) that I feel you would struggle to keep on top of the vast red tape and legislation that comes with being a landlord.

I think as long as you make every effort to find the correct information out you can be cut out for it. Two weeks ago I was clueless about the tax and also thought you just pait it on the difference between the rent and your mortgage repayments rather than on all the rent.

I've since asked on here, on money saving expert, talked to a letting agent and an accountant and people I know who rent houses out. I feel I now have enough knowledge to do it.

However I'm still deciding if financially I can do it as my margins are so tight. I do have savings I can use if necessary to cover repairs or void periods but am reluctant to put myself in a situation where I'd have to use a lot of savings. It would be a gamble, but one that if I got a well behaved tennant would pay off in the long run.

Vivalebeaver, the 10 percent charge will have vat added onto it, so more likely to be £72.

Also, don't forget to factor in council tax and utilities for unlet periods - although you can get a tax deduction for this, rates can be a good whack on top of the mortgage.

Also, if you do make a loss, you can offset it against future years profits.

I would also recommend getting an accountant at least for the first year, OP.

Lots to consider thanks everyone. This is why I posted here so I could learn about it, plus other research.

There seems to be a great deal of smaller things that I didn't know, such a landlord friend told me she claims for the cleaning products she uses for the deep cleans inbetween tenants. I'd of never thought of that. Small amount but all adds up.

I'm sure everyone needs help to learn what to do at first so it's good to hear all about it, both the good and the bad. I suppose it's not a final thing because if I try it for a year and it doesn't work I can always sell.

Speaking to an accountant is probably for the best to further my understanding. Thank everyone.

somewhere above it says £50 for a tenant find - if only! Its normally a months rent plus VAT. Renewal fees £100 +VAT. Gas safety another £100, 6 month inspections £50. Is an inventory included by the Agent? If not thats another £150. Cleaning between tenants at least £100, carpet cleaning between tenants £100.

I honestly think your margins are too tight, unless you switch to an interest only mortgage. Aswell as this you need alot of time to spare, a few hours every week for routine stuff, but if the s**t hits the fan, it can be very time consuming.

Trying it for 2 years is one way to go, but do you have the house perfect to sell now? ie repainted, new carpets, new kitchens, bathrooms? If its all perfect now, I'd sell now - you wont believe what 2 years of tenants (even good tenants) can do to a property.

We've been quoted a lot less than that but I'm in manchester so maybe that's why. £395 for the one off payment when you get a new tenant that includes inspections and inventories. then it's £70 for gas inspection. The fee is 10%. Cleaning I'll do. It's in an ok state now, it's a Victorian terrace so the whole things just painted white with wooden floors really.

I suppose I'm debating on keeping it as it's looking like in the future owning your own home may be rare so to speak and rental may be a good way to keep this as an investment.

Yes, houses are definitely an investment. There are loads of statistics as to how over x period they outperform stocks and shares etc. There is no question about this.

BUT in effect you have paid too much for the house for the numbers to work right now, so you are going to have to put approx £1k a year into it for the next couple of year, then £2k a year (mortgages increased) until such time as the rent has increased by approx £170pcm.

Or do interest only, or pay a lump sum off the mortgage now. Or sell that house, but buy another one, with a better return, for letting

Thanks for the advice. We didn't buy it as a rental, it's the house we live in.

Just heard from our estate agent that the house we've offered on is going to best and final offers so doesn't look like we are going to be able to go ahead anyway with it all. Gutted. Really liked that house too.

Back to the drawing board.