8 Things you need to be doing in 2017 to ensure successful letting in Clapham
The new year is upon us. Now that the Christmas meal has digested and we are in full swing in our diets, gym sessions, yoga and other things that will take our mind off our immense indulgence it's wise to turn to our property portfolios to ensure successful letting in 2017. Here is what you need to know and do.
- Tax changes - mortgage/loan interestIf you have not heard already, you will not be able to fully deduct mortgage interest as a cost from your rental income. Instead, for this year, you can deduct 75% of it. 25% of the cost will be added as a credit at the end. See my other post here for further details. Don't, however, go restructuring and panicking. Especially if you have an expensive property in London the cost of incorporating will likely outweigh any benefits for years to come. Take independent advice though, this will vary person to person, portfolio to portfolio.
You will be pleased to know that repairs are still fully deductible. However the 10% wear and tear allowance has been scrapped. A fine time to replace, as these costs are now fully deductible. White goods are a common one to replace, but when you are refurbishing a property you've bought and the old sofa was part of the purchase price you may find that you are able to replace it and deduct the cost from your tax bill. You are, after all, replacing... Do take advice though as to which items in particular as there are exceptions.
Don't be that landlord that doesn't do repairs and ends up with a substandard property towards the end of the tenancy. Tenants will still be living there and likely to be putting off prospective tenants. Let's face it, if they are leaving they have little inclination to keep the place spotless, sure, but don't give them more ammunition to shoot you down in front of your new tenants or customers. You want a glowing recommendation from them, so email them now and ask if anything needs doing. Ultimately any repairs that are done properly will enhance capital value, rental value, make tenants stay longer and reduce voids because your property is desirable and well-maintained. And believe it or not landlords that are responsive and carry out repairs to a good standard are still a rare breed! On that note, if you do receive notice, talk to your tenants. You may find some shocking things that they just didn't bother reporting was ever wrong, but they thought it was easier to move than to ask you for repairs.
Don't be the landlord that everybody hates. You know, the one that wants top dollar for their mud hut. Let the agents decide, or the comparables on the market if you do let privately, what your property is worth. Remember that the cost of your holiday/mortgage/car payment/etc has no bearing on the actual value of your property. The lettings market isn't a flea market. Price competitively, get multiple offers, choose the tenant that suits you best. Don't start ridiculously high against everyone's advice, get no offers, then drop it last minute and end up getting one offer after you drop the price for a move date that allows a month void. Plan ahead and put your property on the market two months in advance of the move date so that allow time for professional photos and proper marketing. A tenant who leaves it until 14 days before their move date to make a decision is arguably not the most desirable tenant. I personally prefer one that makes plans in advance, like most educated, high earning tenants do. Exceptions are there of course - if they had a letting fall through last minute for instance - but these are rare for the demographic you are aiming for.
Make sure your house is in order. Have you done your annual gas safety/boiler service? Given it to the tenants? Did you register the deposit for any new tenants? Have you served them the "How to rent" booklet? EPC? If this is alien to you then by all means start the conversation and I can help you get acquainted with the legislation changes to make sure you comply!
Make sure that you are able to. This year the mortgage lenders have been asked to tighten up their lending, so your rent must be 145% of the interest only mortgage payment, not 125% like in days gone by. Here's the clincher though, they STRESS TEST at 5.5%. So it's not the payment that you pay today that counts, it's the interest payment at 5.5%! Be advised that there are a few exceptions to the rule but on the main you will be able to borrow a lot less. Make sure you are raising your rents in line with the market. Do your repairs, redecoration and increase those rents in order to be able to value up as high as possible. Even if you are not withdrawing money out of the equity you will have a lower LTV which means better rates.
Stamp duty, ugh, lots of it. Again if you are buying an additional property you are getting taxed a lot more than before. In a nutshell you will be paying a 3% surcharge on the whole amount. Details here in this article.
- The property market
Nobody knows the future, but I have predicted sharp rent rises in London over the next few years, namely due to the extra red tape in the sector, the consultation on agency fees to tenants being banned and various other costs that ultimately are going to be paid for by the customer, tenant in this case. Capital values in the 1mil+ sector will likely stay stagnant/fall slightly, and so will the bottom of the market, the 1beds and 2beds. This sector of the market will likely be fed by accidental landlords selling off their small flats as they have found they will be making a loss on them with the tax changes. I think the real winners are the people that are investing for yields. As tenants are not cohorting until they are older, and living independently and renting longer I foresee a sustained demand for bigger units, the 3/4/5 bedroom properties. As you know that is certainly how I'm investing my money.
I hope you found that useful. If you are looking to make a change in your portfolio, or are looking to add to it, then by all means get in touch. I have built property portfolios worth millions of pounds for my clients over the years and I can certainly help you. Whether you own 1 flat or 10 or 100 - I have maximised profit to the tune of tens of thousands of pounds per client. If you would like to start the conversation do drop me an email:firstname.lastname@example.org or come along to the Clapham Property Meet on Tuesday 31st Jan. We have two main topics on the night: sourcing the best deals through estate agents, a talk that I will be giving, and Mike Holt, fellow investor will tell us more about unlocking your pension and using that money to invest in property.