Letting? Your top tips please.

CloudCuckooLand

OP, you need to check with your HA, if they will allow letting out...

https://forums.moneysavingexpert.com/discussion/3118140

tedrogers

Hi,

Glad I found this really interesting thread, because I'm essentially in the same position.

I have a home, I own about 1/4 of it. I still owe a fair whack. I am in a new relationship and we want a bigger house together.

As now is not the time to sell, and it is the time to buy (house price wise), renting my 1st home seems the best way to go in the long run.

My main concern at this stage is whether or not to use an agent. I have researched many in the local area, but I'm not comfortable with giving them up to 13% a month for a fully managed service. The other option is doing it all myself, but understandably this can be a lot of hassle, and I'm the one ultimately responsible if something goes wrong. What advice do you have on this question? Fully-managed, part-managed, let only, or do it all privately?

My other question is regarding income tax on rent. Is there a threshold at which I can avoid this? I expect the answer is no, and I will need to start engaging with self-assessment again. I didn't enjoy it for the few years that I was self-employed, so the prospect of doing it all again doesn't fill me with joy.

I do wonder if it is all worth it. If I can get £500 for my property a month, do I stand to be better or worse off at the end once the letting agent have had their 10%-13% fee, once I've paid income tax, once I've paid for upkeep of the property, once I've paid the extra 2% (and lord knows what else in future) on top of the current 2.5% I pay for my mortgage - my lender adds 2% to convert the mortgage to a BTL mortgage.

So many questions, just need some clarity and then I can hopefully make a decision.

Some great links on this forum too, so I will check them out in due course.

Thanks in advance!

Werdnal

Read the post in this thread from G_M which is basically a new LL's guide to letting.

As for DIY or through agent, I have done both. I used an agent first as didn't have a clue, and luckily we found a good one - he went to school with my hubby, and he served us well. After 9 years, I decided I had enough confidence to go it alone, and my current tenant has been in situ 12 month now, with no problems at all.

If you do your homework, and read learn and inwardly digest everything, there is no reason why you cannot do it yourself from the start. You must vet and credit check any tenants thoroughly, which can be done online through agencies for a lot less than a LA charges. Even so, changes in circumstances for the tenant can come out of the blue (redundancy, relationship breakdowns etc), which can all have a bearing on their ability to keep up with rent. You must keep it on a strictly business footing - no harm in being friendly with your tenants, but don't let your tenant become a friend - you may need to evict them at some point.

As for tax, you must declare ALL rental income. Self-assessment is easier than doing it for self-employment. There is a specific section on "income from property". Keep your receipts for any allowable costs, and you just put total income, total costs and the difference is what you are taxed on. Only the interest part of any mortgage payment can be offset for tax.

You should also keep a contingency fund of spare cash to carry out emergency repairs, and cover voids, missing rent etc. It is general consensus that you set your annual letting income on 10 months guaranteed, and anything else is a bonus!

Once you have read G_M's post, which is very informative and gives almost every aspect that you need to know, come back and ask further questions if you need to.

tedrogers

Werdnal wrote: »

Read the post in this thread from G_M which is basically a new LL's guide to letting.

As for DIY or through agent, I have done both. I used an agent first as didn't have a clue, and luckily we found a good one - he went to school with my hubby, and he served us well. After 9 years, I decided I had enough confidence to go it alone, and my current tenant has been in situ 12 month now, with no problems at all.

If you do your homework, and read learn and inwardly digest everything, there is no reason why you cannot do it yourself from the start. You must vet and credit check any tenants thoroughly, which can be done online through agencies for a lot less than a LA charges. Even so, changes in circumstances for the tenant can come out of the blue (redundancy, relationship breakdowns etc), which can all have a bearing on their ability to keep up with rent. You must keep it on a strictly business footing - no harm in being friendly with your tenants, but don't let your tenant become a friend - you may need to evict them at some point.

As for tax, you must declare ALL rental income. Self-assessment is easier than doing it for self-employment. There is a specific section on "income from property". Keep your receipts for any allowable costs, and you just put total income, total costs and the difference is what you are taxed on. Only the interest part of any mortgage payment can be offset for tax.

You should also keep a contingency fund of spare cash to carry out emergency repairs, and cover voids, missing rent etc. It is general consensus that you set your annual letting income on 10 months guaranteed, and anything else is a bonus!

Once you have read G_M's post, which is very informative and gives almost every aspect that you need to know, come back and ask further questions if you need to.

Hi there,

I'm reading the direct.gov info on Tax On Property And Rental Income (not allowed to post link sorry, as I'm a 'new user')....and I am somewhat confused about what 'profit' is?

I would hope that the rent I pay covers the mortgage payments on a BTL, even if I have to extend the term to achieve this.

But if all the money coming in as rent, is just going straight off on a mortgage, is this technically still profit? I'm guess the harsh reality of this is "yes", it's equity so it's profit! Is that correct?

Thanks for your prompt response to the above post. I'm not afraid of reading and inwardly digesting, it's just a minefield as I'm sure you appreciate.

Thanks again - it's nice to know there is help out there. :j:T

BitterAndTwisted

You can only offset the interest part of the mortgage against the rental-income for tax purposes. However there are other legitimate expenses you can offset as well. The margin may be too small to be worth bothering once you've factored in the effort required.

In my book one mortgage is always better than two. Especially if you are dependent on a stranger for part of the payments.

tedrogers

BitterAndTwisted wrote: »

You can only offset the interest part of the mortgage against the rental-income for tax purposes. However there are other legitimate expenses you can offset as well. The margin may be too small to be worth bothering once you've factored in the effort required.

In my book one mortgage is always better than two. Especially if you are dependent on a stranger for part of the payments.

This is a good point...I was wondering how you would find out, in a timely manner, what the interest was on the mortgage so you could offset it. I guess a call to the lender would suffice. Otherwise you'd have to wait to be notified by the mortgage statement.

In my case though, as my mortgage is quite large, and will be on the BTL (if/when) it is converted, the interest could be significant...so would probably be worth offsetting.

The direct.gov website says you can offset the following:

The expenses you can deduct from letting income (unless it's under the Rent a Room scheme) include:
 				 					
[LIST]
[*]letting agent's fees
[*]legal fees for lets of a year or less, or for renewing a lease for less than 50 years
[*]accountant's fees
[*]buildings and contents insurance
[*]interest on property loans
[*]maintenance and repairs to the property (but not improvements)
[*]utility bills (like gas, water, electricity)
[*]rent, ground rent, service charges
[*]Council Tax
[*]services you pay for, like cleaning or gardening
[*]other direct costs of letting the property, like phone calls, stationery, advertising
[/LIST]

Thanks for clearing that up for me.

thegirlintheattic

re: gardener. I would check if your tenants want one. I'm pretty sure if it is not in the agreement then they can refuse access.

Many tenants, including myself, would prefer to do the garden themselves and would not want the intrusion of a gardener.

G_M

thegirlintheattic wrote: »

re: gardener. I would check if your tenants want one. I'm pretty sure if it is not in the agreement then they can refuse access.

Many tenants, including myself, would prefer to do the garden themselves and would not want the intrusion of a gardener.

The 'gardener' query was way back in Febrary. I reckon it's resolved by now - one way or another!

thegirlintheattic

G_M wrote: »

The 'gardener' query was way back in Febrary. I reckon it's resolved by now - one way or another!

Sorry, didn't notice the OP was so old.

sandsni

Hi. I had a glance through this thread but couldn't find anything to answer my query, so I apologise if I'm duplicating an existing post.
If a letting agent sends someone to assess a potential problem in the property, is the landlord within their rights to ask for proof of that person's qualifications to assess and comment on the problem, as per "Staff are properly trained and qualified and they are fully conversant with letting laws including the requirements of the Housing Act 2004" (I'm not sure if this also applies in Northern Ireland). Or is it enough for that person to say he has "a background in the building trade"? We have a builder who we know and trust (he has worked for us for about 25 years) but the letting agent doesn't seem to accept his opinion. This is one problem we didn't foresee when we signed up with the letting agency (a reasonably well-established estate agents, but they are new to the property management side of things).
Thanks, in advance, for any advice or tips.