For landlords who are struggling to make a success of their buy to let business, Which? magazine on the 23rd of February suggests some ways in which they might boost their profits:
Invest anew
- while smaller – and “accidental” – landlords may be leaving the market, demand for private rented accommodation remains strong;
- as we reported on the 5th of March, those with larger portfolios are taking advantage of that fact by investing in additional buy to let properties;
Management costs
- one of the biggest drains on landlords’ profits is the cost of management and lettings fees – which can range from 12% to 20% of your rental income, says Which?
- shop around carefully, therefore, when choosing your agent and aim for the deal you need at a competitive price;
Set up a limited liability company
- after the cost of managing your let property, the next biggest loss is likely to have come from the withdrawal of income tax relief on mortgage interest repayments;
- by transferring your buy to let business to a limited liability company you avoid income tax and instead pay corporation tax – since the latter is a standard 19%, higher and additional rate income taxpayers (40% and 45% respectively) may gain significantly;
Remortgage
- consider whether you can get a more attractive deal on your buy to let mortgage by remortgaging – the market continues to adjust to the Bank of England’s recent reduction in the base lending rate from 0.75% to 0.25%; and
Short-term lets
- if you are finding it difficult to fill assured shorthold tenancies, consider offering short-term lets through online listings such as Airbnb – do note, however, that you must inform your insurance provider to ensure that you have the necessary property insurance. This is because standard landlords insurance typically may become invalid if you switch to a different type of let.
Some or all of these tips and suggestions may help to keep your buy to let business healthily afloat.
