Re: Just bought a House for Buy to Let

doors away. The last thing I want are the people to know it is me who owns it and knocking my door every other day. Also the legal side of problem tennants. Also what if they get funny with money !!!!!!!!

Martyn

You will be totally much more likely to get a tenant who is going to trreat your place ok, if he /she knows your next door.

Forget giving it to an agency they will take your money and you'll have no profit left.

Much depends on the agency. A good one will find you the tenant, handle rent collection, periodically inspect the property.

They will also know the area and can give good guidance on what the rent should be. It's in their interest to get you a good rent because they take a percentage. About 15% is the norm. Allow for this and tax and maintenance when setting rent.

We have two properties rented out, and we use an agent for one. (The other one our son is living in, so that's not really applicable).

Unless you are prepared to devote time and effort to being a landlord I would say the best route for a novice is to use an agent. You can always dispense with them later.

Well the fact is my opinion is as valid as anybodies. Just because you talk from experience gives no more credibility or any more validity to your opinion than anybody elses.

Why? Did you get a good deal? This is not the best time to get into this thing, you know. A few years ago, perhaps, but now? Hmm.

The taxman's leaflet IR150.

Not really necessary if you keep proper logs of everything, which you have to do anyway.

Probably not worth the hassle. If you don't have spare cash to pay for all this, then you've already made a big mistake. Having said that, if you choose to get one anyway, you might as well use it.

Basic decorating and "gutting" are hardly the same thing. But redecorating a whole house on your own in a month of spare time sounds like a bit of a tall order. Are you expecting to use professional decorators?

Oh well, if you're sure, I'm sure.

You can get reasonable deals with reasonable exit clauses. For instance, two years ago I got a couple of BTL flexible mortgages with a stepped discount (1% in year 1, 0.75% in year 2, and 0.5% in year 3) with a stepped early redemption penalty of 3/2/1% in year 1/2/3, and no tie-in beyond year 3. That was with Legal & General, business now transferred to Northern Rock. Not too bad if you think it could go long term. I don't know if similar offers are still around.

Yours and your partner's? It might make sense from a tax point of view, yes. If one of you has spare income tax allowance, it means you will pay less (possibly no) income tax on rent collected. It also means you will have two lots of CGT allowance when you sell.

Keep receipts, by all means, as proof of expenditure, but above all keep proper records of *ALL* expediture and income. You will have to pay income tax on the profit (rent minus expenses). Remember, mortgage interest is an expense, but mortgage capital repayment is not.

You can substantially reduce CGT, even to zero, if you make the property your home for part of your period of ownership.

Renovations which are basically "maintenance and repairs" count as recurrent expenditure and count as expenses against (rental) income. Renovations which are upgrades or improvements count as capital expenditure, which counts against the CGT account.

In both cases, the expenditure doesn't "come off the tax", it comes off the income (or gain), so you pay less tax. For example, each extra pound you spend on maintenance means one pound of rent is not taxed as income, so you will pay 22p less tax.

You mean letting agents, not estate agents (estate agents sell houses, they don't rent them, unless they happen to be letting agents too).

The problem with letting agents is that they prefer to offer a full management service, which is expensive and can cost you 15% (+VAT) of the rent. If your margin between expected rental income and outgoings of maintenance, loan interest, etc, is tight, then the agency's cut can make all the difference between your effective profit being positive or negative, and that would place you in the position of having to rely more heavily on capital gain for the deal to pay off.

Some letting agents offer a partial service, whereby they will find a tenant for you, and charge a one-off fee equivalent to maybe 6 months' worth of the full management fee. Then, if the tenant stays longer, you're quids in. Or you could try advertising yourself. There are web sites and newspaper ads of people actively looking for accommodation, so you could try scanning those in addition to (or instead of) advertising yourself.

It depends on the local market. Unfurnished tends to attract longer-term tenants, furnished shorter-term ones, but there are no hard and fast rules. Ask a letting agent. Often, even if nominally unfurnished, you might have to expect to provide white goods (no matter what colour they actually are).

An agent isn't going to keep your identity or address secret. I'm pretty sure that even if they don't disclose it as a matter of course, they are required by law to do so on demand.

If there are no problems, they won't knock on your door. If there is a problem, it is in your interest to get it fixed before it gets worse, and living virtually next door means you can pop round to assess it. This is more of an advantage than a disadvantage. Agents are good for people who live hundreds or thousands of miles away.

Definately open a separate bank account (if not 2 - one for the income and one for the expenses). It definately makes administration easier as you can quickly check to see if rent is paid. In addition, I think it makes you look more professional when it comes to keeping records for the Inland Revenue as the income and expenses are never mingled in with your personal expenses.

Everything you spend bringing the property to a state where it can be rented for the first time should be treated as a capital item.

Letting houses out is a job. If you do it yourself you have to put time in and you might save some money.

However, in my experience (in London) agents are worth it because they obtain a premium rental in some segments of the market (i.e. professionals) that probably more than offsets their cost. This is because the tenant does not want to deal directly with the landlord (because of the horror stories they have heard about deposits and maintenance) and because they have one point of call when looking for a place (rather than calling dozens of landlords who advertise in the paper) and as a result are prepared to pay. On the other hand if you intend to rent out bedsits to the Local Authority - do not bother with the agent as the LA will do it all for you.

One tip is to make sure that *you* inspect your property at least once a year and every time the tenant changes. As the only part of your job when you use an agent is to make sure they do their job properly.

Thankyou for your advice. Did I get a good deal ...YES Was a closed bid on the house and I knew that everyone thought it would go for lots more but only 3 bids were received of which mine was the highest. I also know the house was valued at xmas for 120k and my accepted offer is 90k. The reason it is for sale is it is a divorce and needed very quick sale before the mortgage company reposses. I will take 2 weeks off work to do the decorating. It has a new kitchen and bathroom aleady. All it needs is a new fireplace which is my business. Flooring and painting and decoration.

The letting agent has quoted me 10% which I feel is fair.

Why now ? well I feel it is an obvious bargain which I don`t feel I could afford to miss. Thasnkyou for everybodies opinions. I do realise there is no right and wrong way but by listening to everyone it will give me an informed choice.

Martyn

It's true in my case as well. I the property I let, my ARLA agent failed to spot a cracked, leaking, bath, an integral plastic air vent removed from a window frame, holes in plaster caused by the installation a child gate and cratered plasterwork and released the deposit to the tenant. They then refused to answer questions and tried to argue their way out of it. I was lining them up for the small claims court, when they saw the error of their ways and backed down; a lucky escape, for them. And the person I was dealing with was the ARLA representative for the company.....and it wasn't a small company.....

Non ARLA agents are better in my experience as both a landlord & tenant.

Daytona

I too own properties that i let out and although letting agents do very little for their money i think you'd be better of using one if the property you are letting is that close ,you will be running round there all the time for one problem or another.If the property was further a field I'd say let it out yourself you'll make more money. It's good that you've got equity in the property. Hope it works out.good luck..

I was not saying what RR does is wrong and I apologise if I caused offence.

The points I was trying to make were based on my own experience:

1. I find using separate bank account easier as I do not need to remember anything other than to use it for the property. It makes life definately easier if the Inland Revenue ask questions. I also use separate account for other reasons as there is no cost to me and the bank effectively does my accounts for example I have one only for share dividends and at the end of the year I know exactly what I received for my tax return.

1. Using an agent is a matter of personal choice and you need to do your homework as to what their net cost is in terms of money and your time. In my experience they do manage to obtain higher rents that do offset their cost and you can get on with your life. This is not universally true.

2. If you do not check your agents work how do you know they are working for you. I actually make a point of talking to tenants to ask what they think.

Ronald Raygun replied (amongst other things)

Doesn't this leaflet apply to non-resident landlords? e.g. people who don't live in the UK?

Rachel

None taken.

Have you actual experience of the IR asking questions? I'd agree that a separate bank account might make you look more organised, but so does a lever arch file with all the receipts for expenditure cross referenced into your bookkeeping journal. There are certain items of expenditure which are just not convenient to use cheques for. I dare say you might have a separate Switch card on the business account, but if you're buying a tap washer it's sometimes easier to pay cash.

Well, not quite. There is little more to doing your rental business accounts than collecting all transactions together. You need to categorise them so you know what to put down on the tax return. You need to know that a certain pay-in is actually part deposit part rent, for example, or that a certain pay-out to your lender is part interest and part capital, and one to your insurer is partly for the current year and partly a pre-payment for next.

Needing a separate bank account depends on circumstances.

If Ronald records expenditure on a document basis then a file of documents is sufficient. If someone else uses a bookkeeper or accountant to prepare accounts then it would be best to have a separate bank account so they don't waste time trying to identify business transactions.

I got a new client recently. I asked him if he had a separate business bank account. Yes.

I asked him if only business expenditure went through this account. No.

I asked him if any business expenditure went through his personal account. Yes.

Peter Saxton from London snipped-for-privacy@petersaxton.co.uk

It might mention them once or twice, but no, it is much more general. Section 24, for example, deals with the question of apportionment of profits from property in joint ownership which I've just answered elsewhere (and it does say that in the case of husband and wife the default assumption is a 50-50 split and if you want to change it, you have to tell them).

And when I say "leaflet", that's a bit of an understatement. It's a 145 page tome.

It's like a Golden Gun reply! Without the snipping that leaves someone else's signature after his reply to cause confusion!

Peter Saxton from London snipped-for-privacy@petersaxton.co.uk

Eh !? I understood it.

Daytona

Pardon?

Sorry, I must have totally misunderstood. I thought you were comparing my short interjection to one of GoldenBoy's ramblings, which made no sense at all, and I was beginning to wonder whether I had done something to upset you.

But now I take it it's the tome itself you were meaning. I think that's being jolly unkind to the IR. :-)