HELP! NEWBE WANNABE LANDLORD!!!

[amelia.lew]

Hi,

Any help/advice needed. Basically I have bought a property with my partner (this is our first buy) and we want to rent it out for 2 years before moving into it ourselves. We want to rent it out to either a group of friends, or individually, and ideally we would like to do it privately to save us estate agents cost.

First of all how do we go about doing this.... like paying tax, forms to be filled etc?! We want to charge approximately £1200, where we have to pay £1000 on the mortgage per month (interest only). We are getting a residential mortgage.

So any help much appreciate as we know nothing!!!

Many thanks

Amelia

[GPEL]

Alarm bells ringing if you really are this inexperienced to it. Buy a good (recent edition) book on the subject as there're too many facets to cover all in a single reply. The following list headlines just a few considerations:

Lender permission

Landlord's insurance

HMO criteria

Safety - gas/electric checks etc

Referencing

Good tenancy agreement

Property checks

Tax issues

Realistic rent

Notices

Rent Guarantee matters

Dispute handling

Deposit issues including protection

and so on

[Melboy]

Amelia everything that GPEL says and as a matter of interest what sort of BTL property have you bought that can command £1200 per Month then?

[Trenners]

Amelia,

If you want to take legal action, you use a solicitor, if you want to collect a debt, you use a debt collector, if you want help with your annual tax return, you use an accountant. WHY? Because these people do these jobs for a living and are not going to make (hopefully) school boy errors.

My point - if you want to let your house then use a LETTING agent (not an estate agent) who are experienced in letting property. You will have to pay them a fee for their services but, like the other professions listed above, you will find that they will save you money rather than cost you money in the long run.

For example, whilst you search for your own tenant your property will sit empty thereby costing you £40 a day and £1200 a month in lost rent. This money can never be recovered and if the property sits empty for 6 weeks you will lose £1800 in lost rent. If a letting agent can find you a tenant within 3 weeks then you will only lose £900 rent (thereby saving yourself £900.

Remember - the biggest cost to a landlord is not the letting agents fee - but the number of weeks the property sits empty every year !

Good luck,

Mark

[stevetodd]

Hi Amelia,

About not using an agent, I have only rarely used them, but know my market well and as a chartered quantity surveyor I am well used to issuing contractual documentation (I don't mean to make it sound difficult as it is really quite simple, but like everything else only when you know how). Also I rent out in London where there are lot's of prospective tenants using loot and gumtree. The success of not using an agent depends on whether you have a good alternative market, don't assume you have, find out for sure. I am currently buying into a new area (Tottenham), I am only at the valuation stage but I have already had an advert in loot and gumtree varying the price seeing how many calls I get at each price. I have also spoken to letting agents and may advertise it myself but also put it on with an agent simply because I will be trying to market it near xmas and know this is a very quiet time of year. There is nothing to stop you using a letting agent and trying to do it yourself at the same time. I have only used an agent when I once went on holiday and also when the market went particularly bad for about a year. But don't dilly dally get it rented.

Steve

[Simon Dewsberry]

Hi Amelia

Lots of things to consider !

And an awful lot at stake if you get it wrong ....you cannot imagine some of the nightmares bad tenants can cause you !

But in essence it is a fairly simple process -

1.If res Mort permission from lender is essential -as is checking insurance covers you for this

2.find suitable tenant - reference "properly" (see other threads for loads of info on this)

3. do inventory AST (download fom this site for free!)

4 protect deposit (legal reauirement,,Now)

5 make sure gas safety icert is in place

6 collect rent

7 visit prop regularly !

Loads of info and help on here .....if not confident to go it alone then use LA to find and "install" tenant (fees vary hugely from free to LL to 6 weeks rent ....) After this you can manage or pay agent to manage (collect rent -keep 7-15% -then give you the rest !

i am no fan of LAs personally -if you are going to use one make sure it is well established - has a high street presence - ask for half a dozen LL tel nos to reference the LA to b sure ....

Simon

[GPEL]

Also consider subscribing to www.landlordlaw.co.uk It's more than just legal related information and is fact-based advice.

[plym77]

Hi Amelia

Apologies for the delay, I have been on annual leave.

To introduce myself, my name is Sherena and I am a Chartered Tax Adviser.

With regard to tax. If you are not already under self-assessment you will both need to register for self-assessment by 6 October following the year in which you first rent the property out. you will each need to prepare an annual tax return detailing your rental profits and any other income (bank interest, employment etc) and the tax will be payable by 31 January following the end of the tax year. Also, depending on profit levels you may be subject to paying payments of tax on account towards the following tax year.

May I ask why you are not going to live in the property initially? The reason I ask is that the way in which you are going it will mean that unless the property is sold within 3 years of purchase, it is possible that a Capital Gain may arise on the first two years as a proportion of the whole gain (depending of course on the figures involved). It is possible that Lettings Relief would reduce the gain, but who knows the future? The gain may not be wholly exempt by this relief.

However, if you were to live in the property for say 6 months, then let it for 2 years, then live in it again. then the 2 year gap will automatically be exempt by 'Deemed PPR Relief' - this could equate to a substantial saving, depending on the figures.

Also, you mentions you purchased the property with your partner, so I assume that you are not surrently married. Is there a substantial difference between your incomes? If so, there may be justification in amending the ownership of the property between you, weighting profits in favour of the lower earner, thus potentially saving higher rate tax. As you are not married, you do not have the same inter-spouse reliefs available. Therefore, if this is a consideration you will want to consider it whilst the property has not increased in value as transfers between non married couples will need to be considered for Capital Gains Tax (CGT) and Stamp Duty Land Tax (SDLT). Whilst there is no increase in value, there will be no CGT issue, and with regard to SDLT, there should be no issue if the total transfer/s are less than the lower SDLT threshold. Whether you do this, will not just depend on your incomes, but whether you are likely to sell quickly, how lond you will have the property as your main resident etc.

I know it all sounds very complicated, but whilst there are burdens to being a landlord, there are also benefits!

Should you decide you would like to employ an accountant on your behald, please do feel free to contact me on sherena.glanton@horwath.co.uk and I would be happy to discuss this further with you.

Kind regards

Sherena Glanton CTA