As we embark on a new year, Tom Entwistle, founder of LandlordZONE, shares his new year’s resolutions for the buy to let landlord. Calling on his experience of investing in residential and commercial property over many years, Tom has ten top tips to help landlords be successful in 2024.
As we approach the self-assessment tax return deadline on 31 January I suggest, if you haven’t already done so, you should get on top of your paperwork. At its simplest, accounting for rentals means keeping a record of just two things: income and expenditure. Keep a lever arch file for all your invoices paid and record your rental income as it comes into your bank account. A simple spreadsheet or more sophisticated landlord accounts software will both suffice. Read Total Landlord’s guides, Complete guide to tax for landlords and Tax deadline on 31 January: what landlords need to know for comprehensive advice on landlord tax.
Make sure you claim all your available tax-deductible allowances. Now that mortgage interest relief is restricted it’s more important than ever to claim what you can against your rental income to minimise your tax bill. If you’re not confident about identifying what you can claim for or submitting a valid tax return, then consider using an accountant – a good accountant will rattle this off in no time and they are worth their weight in gold. Make sure though you have all your paperwork in order, to minimise the accountant’s bill.
Knowing where you stand with regard to your cash balances is important at any time, but more so if you are finding times are tough with rising mortgage rates. You need to know ahead of time if you are approaching a cash-shortage crunch, so a rolling 12 months CFF is a great business tool to help you. The spreadsheet – on paper or ideally on a computer – consists of 12 columns, one for each month of the year. Column one is headed by your current bank balance, to which is added in rows below it, all your income from rentals. From your total here, you deduct all your listed forecasted expenditures in the rows below that, the grand total of which is your bank closing balance, a figure which is then added to the top of the next month’s column. By forecasting for 12 months in this way, you will instantly see if you have a problem, giving you time to do something about it. Keeping doing it means you get very accurate, and you will be surprised at the peace of mind it gives you.
Section 24 of the Finance Act 2015 made a big difference to how landlords calculate the profits of a property business for income tax purposes, especially after the tax year 2020-21, where mortgage interest tax relief is restricted. One way of overcoming some of the negatives is to incorporate your rentals business. This can prove very effective but it does not suit everyone, so consult a tax expert before you do anything.
Don’t be tempted into any of the tax saving schemes being advertised around Section 24 and incorporation, capital gains tax, inheritance tax and stamp duty (SDLT) avoidance. If the saving seems too good to be true, it usually is. As a general guide, if you can assume that Parliament didn’t intend it (the path of the avoidance scheme) when drawing up the rules, then it will probably fall foul of the rules and you could end up paying more, not less, tax.
Determine to keep up-to-date on all the latest letting rules so that you don’t fall foul of any during 2024. There are many inexpensive books available, say on Amazon, and property news websites like LandlordZONE, and you might consider joining a landlord’s association like the National Residential Landlords Association (NRLA). Even if you use a letting agent to do all your lettings and management it’s a good idea to keep abreast of the many changes in legislation affecting lettings. Read Total Landlord’s guide, Legislation for landlords: everything you need to know, for more detailed guidance.
Setting-up a new tenancy yourself can be a nightmare if you don’t have all the necessary details to hand. Without a checklist to go through you are almost certain to forget something important. You need a check-in and check-out list to go through methodically when signing up a new tenant, to make sure you have dotted all the I’s and crossed all the t’s. The list featured in my article for LandlordZONE, ‘What documents do I need when letting a property’, should help.
Even though some of the new requirements for meeting a higher EPC rating have been put back, sooner or later you are going to have to meet them, probably EPC “C” or above. Take advantage of any void periods you have to start upgrading your properties now, if they need it. It is almost impossible to do this when the tenants are in occupation, for example if walls need to be insulated. Otherwise, things like boilers, loft insulation, double glazing, draft proofing and ventilation systems all may need your attention. Total Landlord’s Ultimate guide to having an eco-friendly property contains lots of practical tips and advice.
Unless your agent is doing this for you, you need to do regular inspections. It keeps you in touch with your tenants, you can give specific advice when it is needed and you can check on safety issues such as some alarms and any other obvious defects. In any case, this may be a requirement of your lenders and insurers.
We’ve all seen the recent stories about this problem in rentals and the Government’s statement that it’s landlords who will be held responsible for mould. You don’t want a tragedy in any of your properties, so make sure you monitor it closely and give advice and take action when necessary.
Good luck with your rental property business in 2024. Times are tough at the moment but my view is that, if you act like a responsible landlord, renting properties out at reasonable prices while providing good quality accommodation, you will survive and thrive in a market with unprecedented demand for renting.
For more advice on how to be a successful landlord in 2024, read Total Landlord’s article, ‘Nine steps to becoming a good and successful landlord’.