Letting your property – or investing in buy-to-let property – is often an excellent way of generating additional income.
However, the whole process of acquiring property, maybe renovating it, and renting it out to tenants is associated with considerable expenses at several turns.
Here are four tips to help you cut back on those expenses, and get the greatest possible profit out of letting your property.
First off, only spend money on elements that add or sustain rental value in the long term.
In practice, this means opting for hard-wearing and easy-to-maintain materials. Opt for tiled bathrooms, decent-quality furniture and appliances, and materials such as hardwood and laminate floors.
This strategy does increase your initial investment costs, but it pays off in the long run, according to experts.
For example, Just Landlords, a provider of landlord insurance, finds that their clients reach a break-even point fairly quickly: “As tempting as it is to save money by purchasing cheap furniture, you might spend more on fixing or replacing items that easily break.”
If something does get broken, fix it right away, and regularly carry out maintenance checks. Leaving things broken can quickly lead to expensive follow-up damage, or even liability lawsuits.
Another great way to cut back on expenses – at least on your first rental property – is to harness your own skills, and those of your friends and family, to put in some DIY work.
Giving the place a deep-clean, painting walls, replacing carpets, installing appliances – these are all jobs you can do yourself with a minimum of skill. And paying contractors for this type of work quickly ramps up your bills.
However, stick to what you’re confident doing. Otherwise, you’ll quickly end up paying more for fixing faults than for contractors to do it right the first time round.
Also: Gas and power lines, installing boilers and other plumbing, or anything else you need a special licence for, should be left to the experts.
It’s staple advice when it comes to saving money, but it’s just as valid for first-time landlords as for anyone buying groceries: shop around.
Whether it’s landlord insurance packages, letting agents, tenant referencing, or safety certificates – there are countless offers out there. It might take some time and research to find the provider that best suits your needs, but it can save you thousands.
As a rule of thumb, compare at least three offers for any major expense. Local suppliers might be your best choice for specialised work, but online vendors can often negotiate the best rates with service companies thanks to their higher volumes of customers.
Finally, look into tax-deductible costs. There’s a lot that you can deduct from the tax you pay on your rental income – so save receipts and file your taxes accordingly.
Maintenance and repair costs, replacing furnishings, and buildings insurance are all tax-deductible. Claiming these expenses can save you thousands of pounds annually, and might even push you down into a lower tax bracket.