A rental empire is one of the most idealised sources of income for an entrepreneur. Provided you have respectful tenants and the properties are in locations that increase in value, it can be very lucrative.
Despite the rental sector constantly facing ever-changing legislation and political scrutiny, the market is still growing. The North West housing market in particular is showing no signs of slowing and London is beginning to wake from its post-Brexit slumber. Now could be time to consider moving from letting out one home to letting out more.
However, there are multiple factors you need to be aware of when you become a multi-property landlord. From legal responsibilities to choosing the ideal location, there’s a lot to consider.
So, in this article, we’re covering everything you need to be aware of prior to letting out multiple properties.
The best places to invest
Your first letting opportunity may have come to you organically – either through some family connection or change in living arrangement. As a result, this property is in an area you’re familiar with. But when branching out to another property, you might want to consider opting for somewhere more profitable.
According to a report by Simply Business, the best locations for buy-to-let capital gains and rental price growth are:
Colchester was proven to offer the highest rental price growth despite the boom stemming from the Northern Powerhouse – promising investors an increase of 6.5%. Manchester has recently been spearheaded as an investor’s paradise, with multiple businesses ‘northshoring’ (moving from the South to the North) to the home of the UK’s Industrial Revolution, inspiring young professionals to follow suit.
What’s perhaps more interesting for property buyers, though, is the growth in the Midlands. Trends here are demonstrating that middle-England can be considered a safe bet for investors, with placing eighth in the top ten locations for rental price increase (3.49%) and Coventry placing third in the top ten areas for capital gains in the UK. Birmingham especially is one for investors to consider as it has placed in the top ten buy-to-let areas for three consecutive years – with only more interest bound to accumulate as a result of the HS2 high-speed railway.
How to find tenants
If you’re in an area that’s densely populated, close to a city centre or transport link (a major train station, for example), then provided you list on a property site, you’ll likely sign a tenant fairly quickly. However, if you’re concerned that your next property will flounder on the rental market, then emphasise the qualities of your home and boast the amenities you know are nearby.
Over 90% of people start their property search online, so you’ll struggle to reach any audience without a presence on popular sites like Zoopla or Rightmove. Be conscious of the fact that the sites you choose to list on will have a profound effect on the types of tenants you appeal to. Gumtree, SpareRoom and student accommodation offices will appeal to younger people or recent graduates, for instance. Local papers and Facebook groups will typically have an older audience.
Once you’ve determined the most suitable website, take high-quality property pictures to upload on these platforms. Remember to remove any items that could potentially put off tenants and ensure you stay out of shots.
Include descriptions that give viewers a complete understanding of your room sizes too. A floor plan enables potential tenants to effectively map out how they would use the property, or determine the difference in bedroom sizes – essential for people living in a house share. If you don’t allow pets or smokers, then this needs to be stated: it will help you find your target audience quicker.
Finally, look after good tenants. If you value them, they can help put you in touch with people who may want to rent your property once they move on. Similarly, they’ll look after your home and invest in it, helping you justify any increase in rent between tenants.
Your legal responsibilities
Being a landlord already, you’ll be familiar with what’s expected from you and the certain safety standards you’re bound to. You’ll recognise the basics:
- Smoke alarm on each floor of the property
- Gas certificate for each gas appliance
- PAT testing on all electrical devices
But there is one particular law that seems to catch out even seasoned landlords – that is, the failure to protect deposits with a UK government-approved deposit protection scheme. Landlords of assured shorthold tenancies that don’t protect deposits will be heavily fined – and with recent legislation changes, the Tenancy Deposit Scheme has reported a boom in visits from landlords checking their compliance.
As of 1st June 2019, there are a series of laws that will dramatically restrict the charges incurred on tenants. If you own a series of properties and have charged for certain admin responsibilities, this is now prohibited. No longer are landlords able to charge for credit checks or other routine procedures, potentially harming your income.
This is especially true in relation to deposits which have now been capped at five weeks’ rent. Even landlords who would typically hire professionals to deep clean their property will be subject to a fine of up to £5,000 for incurring a charge. This only applies to a first offence – multiple breaches will incur an unlimited fine.
However, landlords are still able to charge early termination fees to protect them from financial risk. According to the government, these must be capped at the landlord’s loss.
Ways to reduce your tax liability
While high tenancy turnover and stricter control on admin fees and deposits may impact your buy-to-let empire, there are still ways to maximise profit – including reducing your taxable income. For example, if you trade via a limited company, you can split your income between wages and a dividend, allowing you to bolster your take-home pay. This would, however, require taking professional advice from an accountant or tax advisor.
There’s also the option to increase your pension contribution to reduce taxable income, although this is often the subject of debate in government. There are those who think that pension contributions should be capped in order to boost funding for the NHS; however, this is yet to be the case.
Whatever method you choose, GoSimpleTax ensure that your finances are working for you. Our software helps you streamline your income so that you can reduce the amount of tax you’re liable for while remaining compliant. Get started today and feel confident as you expand your property portfolio.