Tips to improve your buy-to-let business in 2019
The end of a calendar year is one of those natural ‘breaks’ when it pays to assess how the previous year has worked out and how you can improve your lot going forward. For you as a landlord, it provides a period of reflection during which you can consider how to improve your buy-to-let business.
Even if your buy-to-let business finances have turned out as you expected this year (or, perhaps, beaten forecasts), there is always room for improvement. These New Year’s resolutions will help you take an honest look at your finances and ensure that you hit the road running in 2019.
1. I will develop a reserve fund for each buy-to-let property I own
A reserve fund is essential. Having a pot of emergency cash helps you tackle any eventuality or emergency (such as a costly void period) more easily and with a clear mind. You’ll make better financial decisions. With a reserve fund behind you, you won’t need to borrow money to pay for an emergency repair – and this will save you money. The question is, how big a reserve fund do you need? Here are a few pointers:
- Consider the size of your property portfolio
- The size of your reserve fund will depend upon the age of your property
- You’ll need to think about other running costs (e.g. mortgage interest, service charges, etc.)
- You should factor in your investment plans
When you’ve figured out how big your reserve fund needs to be, start topping it up from your rental income.
For more information and a straightforward method of how to calculate your reserve fund requirements, read our article ‘5 facts you need to know about a reserve fund for rental properties’.
2. I will review my buy-to-let mortgage
It is likely that your largest cost is your mortgage interest payments. In the New Year, take advantage of the benefits of using a buy-to-let mortgage broker and review your buy-to-let mortgage. If you think it looks likely that interest rates could rise again next year, it may be worth considering a fixed rate deal to eliminate uncertainty.
Whichever type of mortgage you currently have, taking a long, hard look at it and comparing to the current options is a useful exercise to undertake every 12 months. The New Year period is an ideal time to do this, before the traditional pick-up in housing market activity makes mortgage brokers busier in the Spring.
3. I will review my landlord insurance
Landlord insurance is a must-have. You never know what or when something may go wrong.
There are two things to focus on when you review your landlord insurance:
- Cover
- Cost
Make sure that your policy covers you for all you need. This may include public liability, damage to property, and non-payment of rent. Don’t reduce cover to reduce cost – it’s a misjudged saving. When buying landlord insurance, focus on the cover first and then compare costs on insurance policies that provide the cover you need.
4. I will make sure I collect a tenant deposit and handle it correctly
If you don’t take a tenancy deposit before a tenancy begins, you are asking for trouble. If you take a tenancy deposit and don’t handle it correctly, you will be in trouble.
A tenancy deposit protects the landlord against malicious damage caused to the property and unpaid rent at the end of a tenancy. However, when taking a deposit, buy-to-let landlords must place it in a tenancy deposit scheme. If you don’t, you will be breaking the law and, if you need to evict a tenant, you could find that a court allows your tenant to stay.
5. I will focus on my tax
If you haven’t registered for Self Assessment yet, you only have until January 31st to do so. Get that done now!
To reduce your tax liability as much as possible, you should ensure that you keep all the receipts for your allowable costs, insurance premiums, service charges, maintenance and repair bills, and mortgage interest, costs, charges and fees. You can also offset the cost of investment property management against your profits to reduce your tax bill.
If you haven’t done so already, gather all your receipts together, put them in order in a file, and list them down in a cash book or, better, an Excel spreadsheet. This will help when it comes to filling in your Self Assessment forms or having your accountant do your tax return for you.
Are your buy-to-let finances prepared for 2019?
2019 promises to be an exciting year, but one in which it will be more important than ever to keep on top of your buy-to-let property, its tenants, and your finances. We’ve got the uncertainty of Brexit, a European Union that is looking increasing divided, global trade wars, and interest rates are forecast to rise.
Now is the time to get your buy-to-let finances in order, and to maximise the net income from your property portfolio while maintaining your lifestyle. For help doing this through effortless property management, contact Ezytrac today.
Live with passion,
Brett Alegre-Wood