It takes time and patience to keep up with the latest buy-to-let regulations to ensure your property is up to code and remains profitable.
Managing a successful buy-to-let in today’s post-pandemic world isn’t easy. It takes a lot of time and patience to keep up with the latest rules and regulations to ensure you deliver a property that’s safe for tenants.
During the pandemic, since March last year, there have been 47 changes to how you let a property! And some of those changes, such as how to carry out evictions, were issued one week and then changed the Friday before they were due to be implemented the following week! Blink and you could easily have missed a change or two.
With that in mind, here are my 7 top tips to help you manage your buy-to-let properties:
Keeping up to date with your rental income and all your ongoing costs is essential. If you misplace receipts for works carried out or don’t keep track of your mileage when making trips related to the property, you can end up paying more tax than necessary, so be diligent with your admin and make sure you’re able to claim every expense you’re entitled to. Also, if you pay for utilities, it’s worth checking every few months that you’re on the best deal and bills aren’t unnecessarily eating into your profits.
You also need to be aware of costs that have increased recently and are continuing to rise – such as building materials. If you’re carrying out works in the near future, make sure you know exactly what costs are involved – particularly if you’ve renovated before, as prices may have substantially increased since your last project.
One of the financial issues landlords often hit is not being prepared for the bigger jobs – things like roof repairs, a new kitchen, or a replacement boiler. To make sure you don’t get caught out, it’s essential to have a 10, 15, or 20-year maintenance schedule, based on how long you expect to own the property.
Boilers last around 10-15 years, windows are likely to need replacing every 15-20 years and a roof might need a complete overhaul during your ownership of the property – and these aren’t small costs either. It’s likely to be around £5k for each of these fixes, so that’s £15,000, just over a 10 to 15-year period. Even if you’re making a decent amount of rental profit, that’s still a lot of money to budget and save for – and there may be other significant upgrades required as well, such as in the kitchen and bathrooms.
On top of the bigger works, you’ve got regular painting and décor refreshing, repair and replacement of appliances, and various emergency fixes. Although each of these may only be a few hundred pounds, this ongoing maintenance can still add up over the years.
As if that wasn’t enough, in addition to these ‘usual’ works the Government is keen to improve the energy efficiency of all properties and they’re mandating standards for landlords. It’s already illegal to let a property that is F and G rated (unless it meets the criteria for an exemption) and there are proposals in the pipeline to make C the minimum EPC rating by 2028, with moves afoot to bring this forward to 2025. Have you budgeted for the energy upgrades you’ll need to make? If not, it’s worth doing that now.
Even I struggle to keep up with all the rule changes for letting a home, so I work with a network of professionals to help me, and I strongly suggest you do the same. The best thing to do is use an ARLA or RICS member agent to let and manage your property or, at the very least, join a landlord association that will keep you up to date with the latest legislation and other changes.
Even if you use an agent, be aware that it is ultimately your responsibility to ensure your property is let legally and safely to tenants, so you must do due diligence on any agent before engaging them. “I didn’t know” won’t protect you if it turns out your property isn’t legally let. Rules come from your local authority as well as government (licensing, for example), so it’s worth putting aside an hour or so each week to check for changes to make sure you don’t get caught out.
Part of staying up to date with the rules and regulations is making sure that any work on your property is carried out to the standards required for a rented property. A good tradesperson will keep up with the latest regulations (such as the electrical changes implemented in March 2021) and will understand what upgrades are required, so make sure you only hire accredited, professional contractors and tradespeople – and, importantly, check they have the correct insurance before they carry out any work.
I come across lots of cases where a landlord has decided to let a property themselves and, instead of investing in a new tenancy agreement that has been verified as the latest legal version, they simply ‘amend’ a previous one that had been issued by an agent. Even worse, some add in a few clauses of their own that would never be enforceable.
Good agents will update their tenancy agreement two or three times a year, so it’s essential you don’t just buy any old version ‘off the shelf’, but pay for one (ideally a digital version) that is updated when the law changes.
The government has a model tenancy agreement you download and can use for free here. Be aware that a new clause inserted in January 2021 means you can’t just refuse to accept pets, which, personally, I’m supportive of. So you do need to read the entire agreement – a whopping 64 pages! – and you will need to keep checking back for changes, as the government won’t let you know when the agreement is updated.
These are essential to a successful buy-to-let. The inventory helps you be transparent with your tenant about the condition of the property they’re moving into and should be a detailed record with photographs. Then, if there is any damage or other dilapidation during the tenancy, you’ve got a clear record to help you decide what’s natural wear and tear and what isn’t – i.e. what you need to repair or replace yourself and what you can charge the tenant for.
Don’t think of periodic inspections as ‘checking up on your tenant’. The purpose of the visit is not only to check whether anything needs fixing, that the tenant hasn’t moved someone else in without telling you (count the toothbrushes!), and also to make sure the tenant is okay and happy in the property.
When you have a good relationship with your tenant, they’re often much more honest with you about issues and changes – e.g. having someone else move in, getting pets or telling you right away if something needs fixing – which can save you a fortune in the long run. It also usually means they’ll discuss their future plans with you earlier than legally necessary, which can help you (and your agent) plan well ahead in preparation for the tenant leaving.
Many landlords keep their rent the same year after year – particularly if they have a long-term tenant – and I think this is a mistake. Ideally, you want to increase your rent in line with inflation each year, which could mean you have less to spend on maintaining the property down the line. Typically, you can increase rents whenever inflation is running lower than wage rises, but if real wages are decreasing, then it is more difficult.
And a lack of annual rent rises can also be bad for your tenant. If you don’t do little incremental increases each year where you can and say average rents increase by 20% over the time the tenant’s in your property, when they eventually move, other rents are bound to feel extortionate and they may not have prepared themselves to pay more.
It’s also wise to check the value of your property each year so you know whether you might be able to re-mortgage to a better rate or take equity out, either to enjoy or to invest in another property.
All in all, letting can be a minefield, but with the right help and support (and a lot of hard work!) it is possible to run a hugely successful buy-to-let property that your tenants will love living in and that will reward you financially over time.