Landlords & Maximising Your Property

Maximising your property's value


1. Introduction

Rentify simply want to make life easier for landlords. We think it's been too much of a hassle for far too
long. This guide will give you some great ideas to maximise profits and reputation while minimising stress and aggravation.

We realise that making more from your property is not a simple case of home improvements and colour schemes, although these are part of it. It encompasses the weeding out of bad tenants, knowing how to use tax and government schemes to your advantage, and being clued up on the law, insurance and everything in between. All of these feed into your income. It can be overwhelming for a landlord. That is why Rentify is here to help. Rentify can help you with any of the procedures mentioned in this guide. We even take the liberty of explicitly mentioning it at certain points - but only because we truly believe we are the best option for landlords!

We understand your time is valuable. If you’re overwhelmed with managing your property, we can do it all for you through our let my property or full management services or call us today on 033 3014 8505.

We understand the preparation and attention to detail that goes into creating a successful rental. But many good landlords have had their fingers burned assuming implicit points which turned out to be, in fact, non-existent. This guide will not only serve you as a source of some crafty insider-knowledge, but also as a comprehensive reminder of some often-overlooked fundamentals.

And remember: sometimes making the most from your property is simply a case of keeping
a good tenant happy. When you have a clean and tidy tenant who pays their rent on time and gives you no grief, the best thing you can do is make sure they stay put.

2. Background and basics

Expanding your potential market

Whether by accident or design, many landlords severely limit the number of potential tenants they can let to. Now may be the time to consider whether or not you are missing out on a large slice of the pie.

  1. It's a real advantage to allow pets in your property. Nearly half the UK population owns a pet so pet-friendly properties tend to be in high demand. Furthermore, they tend to have higher incomes (the tenants not the pets) and are used to doing a thorough cleaning job. They may also be more willing to pay a higher deposit.

  2. Roughly one quarter of the adult UK population are smokers so this is a potentially big market to consider. If you are still wary, ask smokers to pay a slightly higher deposit or premium rent to cover the cost of redecorating later.

  3. Have a neutral colour-scheme. It may be a cliché, but it's true: tenants love magnolia, eggshell, vanilla and all the other million shades of white-beige that exist. Controversial shades are more likely to scare off potential tenants if they're trying to narrow down a selection of properties they're interested in.

  4. Light coffee-coloured carpets are a good call. They are both neutral enough to keep tenants happy and will not show up small stains so much.

  5. Consider switching rooms around. The existing layout of the property you have purchased may not necessarily be the best way to do it. For example, bedrooms overlooking a busy road may put off potential clients.

  6. Some landlords have a blanket-ban on Housing Benefit tenants and you must consider whether this is wise. The fact that local LHA rates are based on the cheapest 30% of properties means that roughly 3 out of 10 properties (at least) in your area should be available to tenants on Housing Benefit. Consider whether your property could be around this level: it may benefit you to reach out to them. This is notwithstanding the fact that the majority are simply good tenants.

Always be prepared...

OK , so you think you've found a good tenant. Now these tips will help reduce the risk of any costly damage or even costlier legal disputes. You must always stay on top of what's going on inside the property and have as much control as possible when it comes to protecting it.

  1. Be on the lookout for unhelpful references. A tenant may think it's OK just to put a friend down as a reference, so make sure you get feedback from actual landlords where possible! On rare occasions a tenant may even deliberately try to fool you. If you are at all suspicious call the referee under the guise of being a potential tenant to see if they're the real deal. A less sneaky way is to use Rentify's comprehensive checking service which will guarantee the legitimacy of references as well as covering necessary credit checks.

  2. More generally, take time to find the right tenant for you and the property. This will tend to give you greater security in the mid- to long-term. If you have the luxury of choosing from a whole bunch of good potential tenants, it's worth keeping in mind that families and elderly tenants are, on the whole, more likely to stick around.

  3. Clean the property between tenancies. It won't just reflect well on you as a landlord, it will make the property appear in a better state of repair and so more appealing to potential clients. A fresh bunch of flowers and some smooth jazz piped into the living room wouldn't go amiss either (you get the idea...)

  4. Make a thorough Inventory and Condition Report and go through it with your tenant. Make sure this is detailed and that the tenant agrees with your findings. Get them to sign the reports to ensure you are both on the same page when it comes to the condition of the property and the items in it. This will make it much harder for the tenant to deny responsibility if they cause any damage, potentially saving you money on the cost of repairs.

  5. Make sure you have good, functioning alarms (fire and burglar), as well as fire extinguishers.

  6. If you have an HMO or separate properties in the same building, try to match tenants who will have to live in close proximity. We understand you may not always have a large choice, but ill-matched neighbours will increase the likelihood of arguments, stress for you, people moving out, void periods and re-letting costs.

  7. Try to develop a good working relationship with your tenant. Our apologies if this sounds obvious or patronising but it really is missed a lot of the time. Your tenant is essentially your client, who has possession of the property, not a guest you are letting stay in your property. It is their home. If you treat them with a professional kindness and respect, they should treat you and the property likewise.

  8. Conduct a risk assessment. This will show that you have taken reasonable steps to make the property safe, making you less liable for any injuries or damage occurring on your property. It is advisable to get a professional to do this but if you do wish to do it yourself make sure you are aware of the Housing, Health and Safety Rating System and consider what damage could be done in the worst-case scenario. See Rentify's ' Landlords & The Law' for more information.

  9. Take active steps to make the electrics in your property as safe as possible. Not only will this give you and your tenant peace of mind, it will help protect you and your reputation should anything go wrong. If you can show you took appropriate safety measure, there is less chance you will be held liable for any injury to a tenant or damage to their belongings. Steps you should consider are:

    • Get a professional electrician to do a full safety check every 5 years or whenever a new tenant moves in

    • Keep records of any checks you have

    • Do not buy second hand electrical equipment

  10. Carry out preventative maintenance. Deal with any issues before they become emergencies: this will prove cheaper for you in the long run as emergency repairs will often cost more and you do not have the luxury of shopping around for the best deal. Make yourself accessible to your tenant and talk to them about any concerns they may have about the property. Also, check the property yourself on a fairly regular basis (with the tenant's permission, of course!).

  11. When budgeting, you should have a system in place in case anything unexpected occurs such as void periods or unforeseen maintenance. Setting aside around 3 months rent should cover this.

  12. Consider joining an accredited landlord group or employing a letting agency (did someone say Rentify...?). In all seriousness, local authorities often work closely with these groups to make sure all landlords are sticking to their health and safety responsibilities and to keep them informed of important changes to the rules and regulations. If you cannot give the property enough attention, a letting agent will make sure everything is under control

Tenancy agreement tips

Let's take a look at ways of using the tenancy agreement to your advantage. Even though tenants have a right to challenge any terms under The Unfair Terms in Consumer Contracts Regulations 1999 , there are still ways to exert some control over what your tenant can and can't do.

  1. Consider adding clauses that will grant permission only with your written consent, which cannot be 'unreasonably withheld'. This would constitute a fair term so long as it is not used for something ridiculous ('The tenant cannot eat without the written consent of the landlord, which will not be unreasonably withheld' etc.). It should, however, hold for more disruptive activities such as smoking: if you are strongly against this in your property, it would be fair to argue that it is not unreasonable to withhold consent because the act is smelly and may cause damage to the property. This gives you control because the strength of the argument about what's 'unreasonable' is in your hands.

  2. Make sure you get a deposit large enough to cover the possibility of the tenant being unable to pay the rent. You can insert a clause saying that if one tenant passes on the lease to another, the former is responsible for the rent.

  3. If a tenant wishes to end an agreement early against your wishes, mind that you don't accidentally accept their surrender of the property. If you display conduct which indicates the tenancy has come to an end, this could be construed by law as acceptance of surrender of the property. This may be as basic as the tenant handing in their keys and you accepting them. This could legally end the tenancy and you will not be entitled to any further rent. If you do not give your consent for the tenancy to be ended early, you are entitled to rent up to the end of the agreed fixed term.

  4. Make sure fixed term tenancies do not end around Christmas or New Year. It will be much harder to find a new tenant at this time so if the old one decides to leave, you could be left with a significant void period.

  5. If problems arise with a tenant, make sure they know that that you can serve them with a Section 21'no fault' possession notice order. You need not follow through with it. The threat of it might get them to buck up their ideas as well as show them that you are on top of the situation and will not put up with a shoddy tenant!

  6. Be aware of the end date of the tenancy and speak to your tenant well in advance to see if it's likely that they'll want to continue the agreement. If they're moving on, you'll then have time to arrange advertising of the property to limit any void periods.

Section 21 Notice: This is issued by the landlord to the tenant when the landlord wishes to claim 'no fault' possession of their property from the tenant (i.e. without giving a reason). This is only available with an AST and can only take effect at the end of a fixed term at least 6 months after the tenant has moved in

Insurance tips

It may not seem the most intuitive step, but if you don't have the proper insurance then you are not making the most of your property.

Firstly, you're exposing it to the risk of extended void periods, if you haven't enough cash to cover necessary repairs or maintenance. You'll also miss out on income from the property during periods of rent arrears. And in the event of a large-scale disaster you may well be forced to abandon the property. In effect, insurance provides you with the long-term security that gives you the best chance of maximising your profits from the property. Please see Rentify's ' Landlords & Insurance ' for more details, but here let's look at some key tips which are often overlooked by landlords.

  1. You need to get special landlords insurance! Standard owner-occupier insurance will not cover you for all of the extra risks being a landlord entails. A surprising number of landlords do not realise this.

  2. Most lenders will make it a prerequisite of your mortgage that you have landlords insurance.

  3. Check whether Accidental Damage is covered by your Landlord Building and Contents insurance. Contrary to what you may legitimately assume, it often isn't! Make sure you add it as an optional extra, if necessary.

  4. Check whether malicious damage caused by a tenant is part of the basic cover. Again it often isn't and you'll need to add it on to your policy as protection against falling out with an angry tenant...

  5. Add Liability Insurance if it is not part of the basic policy. This will cover you if anyone is injured, dies or damages their belongings because of your property.

  6. Get Rent Guarantee. This will cover you for rent (usually for up to 12 months) in the case of your tenant falling into arrears. It will keep the cash flow coming while giving you the time to prepare the end of the tenancy and to find new tenants, if necessary.

  7. Cover for necessary evictions will take a whole lot of stress out of your hands for (usually) a reasonable premium.

3. Financial tips

Getting the most from the rent

Landlords are often faced with the decision between keeping a reliable tenant and increasing the rent to a level beyond their means. How you decide to act is of course up to you but you must have all the tools and your disposal should you wish to increase the rent.

  1. Make sure rent is paid in advance not in arrears. This is basic but worth remembering: it gives you more security and better cash flow

  2. Try to get the tenant to pay by Standing Order or Direct Debit to cut down on any human error or misunderstanding. Make sure the Standing Order or Direct Debit has a clear payment reference with the tenant's name and address

  3. Keep a close eye on your accounts so you can quickly establish when rent has not been paid, and raise the issue immediately with the tenant. This limits your losses as well as showing the tenant that you take lack of payment very seriously

  4. Avoid accusing a tenant of anything untoward straight off the bat. There could be many valid reasons for late payment such as a bank error or delayed payment of Housing Benefit by the local council. If you are too accusatory early on, you may spark an unwanted row and damage your relationship with the tenant

  5. Many landlords do not realise that with an AST or Assured Tenancy you may increase the rent by the formal procedure of notice under Section 13 of the Housing Act 1988. The necessary form can be easily obtained from Rentify. One month's notice must be given when serving the form on a tenant. If this is adhered to and the tenant does nothing, the increase takes effect. The increase may only take effect after the fixed term has ended. This Section 13 rent increase may only take place once every 12 months

  6. With a fixed term AST it is worth discussing any Section 13 rent increase in advance of the required one month's notice. If the tenant is planning on disputing it, it may be better for you to end the tenancy under the Section 21'no fault' possession order, which requires two months notice.

  7. Still, try to win the tenant over to avoid incurring re-letting costs. Look at comparable local rents: if yours are significantly lower, point this out to your tenant. Maybe tell them at what rent you would be re-letting the property and then offer them a slightly better deal to show your good faith.

  8. Consider making slight improvements to the property if you want to keep a good tenant and increase rent. A new lick of paint or a hot tub might just sway them...

  9. When offering the property for rent, consider setting the rent slightly below market value to generate interest. This may be useful when you have a property in a sought-after area.

  10. If demand is high, hold viewings close together so potential tenants are aware of it. You may end up getting the market rent anyway, as well as a tenant who has proven their commitment.

  11. If a usually good tenant falls behind on their rent, talk to them and consider closely whether their situation is rectifiable. Your first instinct may be to re-let the property but if the tenant's financial difficulties are short-term, the cost of re-letting may well leave you worse off in the long-run. Try to come up with a realistic repayment scheme. See Rentify's ' Landlord & Rent Arrears' for more details.

  12. Remember that you can reclaim rent arrears through the small claims court without the hassle and cost of removing the tenant from property.

Housing Benefit

Some landlords prefer not to concern themselves with Housing Benefit at all, but as we have remarked on the suitability of this large market to many, there are plenty of lesser-known ways to use it to your advantage.

  1. Did you know that Housing Benefit can be backdated? This only applies if the tenant had a good reason not for claiming, such as illness, but it is always worth investigating if they have had trouble meeting the rent requirements.

  2. Many people do not realise certain students can claim Housing Benefit. Usually they must be part-time students. If full-time, they may be eligible if they are legitimately claiming other benefits, are qualified for disability allowance or are a lone parent. Some other situations may make them eligible. Be aware of this if you are letting to a student!

  3. Nationwide and Lloyds have both recently lifted blanket bans on landlords letting to Housing Benefit tenants. Stipulations by mortgage lenders in the past have led to blanket-bans on Housing Benefit tenants but this is not necessarily still the case so always check with your lender.

  4. You are well within your rights to contact your local council if you wish to find out details of your tenant's Housing Benefit beyond those which the tenant can provide. You will almost certainly require your tenant's written permission to learn important features of it. Try to get this written permission as a condition of the agreement at the start of the tenancy.

  5. Be aware that local councils have the right to reclaim past payments from landlords if it emerges the tenant claimed them fraudulently, even if the landlord was unaware of the fraud. To avoid this, make sure the tenant knows that if their circumstances change (e.g. their income increases), the local council must be informed. Failure to do so may constitute fraud. Likewise, if you receive the benefit directly from the council, you must inform them as soon as the tenancy agreement ends.

  6. Make sure you and your tenants know about Universal Credit and Benefit Cap and how it will affect you both. See Rentify's ' Landlords & Housing Benefit' for more information.

Tax tips

Tax can be a complicated issue for landlords but, just as in any business, there are special dispensations and rules which you can use to your advantage. These often pass under the radar so make sure you know exactly want you are entitled to do as a landlord. Call Rentify if you are in any doubt, or else get in touch with an accountant.

  1. Many landlords do not realise just how many of their expenses are tax deductible.

  2. You can claim the following against rental income

    • Repairs and maintenance (though not any initial expenditure needed to bring the property up to a letting standard. Also, work done simply to improve rather than repair the property is not deductible)

    • Gardening

    • Cleaning

    • Ground rents

    • Service charges

    • Contents and building insurance

    • Managing agent's fees

    • Legal fees for tenancy agreements

    • Advertising

    • HMO licence costs, if applicable

    • Interest (not the capital repayments) on loans used to buy or improve the property

    • Water rates (if you pay it, not the tenant)

    • Council Tax (if you pay it, not the tenant)

    • Heating (if you pay it, not the tenant)

    • Lighting (if you pay it, not the tenant)

    • Security

    • Accountancy fees

    • Any subscription to a landlord association

    • Travelling expenses for visiting the property and for attending to matters related to the property

  3. Even if these expenses are incurred before you let the property, they can be deducted from the first-year rent as long as:

    • They are classified as revenues costs, not capital

    • The costs are incurred within 7 years of the date you first let the property

  4. Some limited backdating of claims is available: If you have not claimed for repair costs incurred in the past, you can go back and amend your tax return up to one year after the deadline for submitting it.

  5. If you are letting a fully-furnished property (so usually one including furniture, furnishings, and electrical equipment such as a fridge and cooker) you can claim either:

    • A wear and tear allowance of 10% of the net rent (i.e. the income from rent less any expenses paid by you which would normally be covered by a tenant); or

    • A renewals allowance to go towards the cost of replacing an asset

  6. Consider setting aside roughly one quarter of your profit from your property each month, so when the income tax bill arrives you have funds readily available. If you already have other substantial earnings you may need to put aside 40% or 45% of your profits to pay the tax, depending on which band you fall into.

  7. It is worth emphasising: The interest paid on a mortgage attached to a rental property is tax deductible. Many landlords do not realise this as the interest on a mortgage attached to a main residence is not tax deductible.

  8. Therefore, if you have a larger mortgage on a main residence and a smaller mortgage on a second property you rent out, you should switch the larger mortgage to the second property and the smaller one to the main residence. This means you will be able to claim more tax relief and save money.

  9. If you are married, or in a civil partnership, and living together, you should transfer a rental property from the sole ownership of the higher earner to the sole ownership of the lower earner or into joint ownership, if this will mean that all or part of the property income will be taxed at a lower rate. If you have joint ownership, tax law assumes you split the income 50:50 when you each come to fill in your tax return. Capital Gains tax is not payable on such a transfer but Stamp Duty Land Tax may be, if the property is mortgaged. Indeed, if you have joint ownership, you can save on Capital Gains tax on the eventual sale, as each of you will be able to set their annual capital gains exemption against the capital profit made.

  10. A good way to keep profit in the family is to employ a member of your family who doesn't own a share in the property to undertake property related tasks on your behalf. Their wages will be tax deductible. If you want to keep sole ownership, you could employ your spouse as a property manager. Legally you must pay them a reasonable wage and that wage must actually be paid to them. There will also be an overall tax saving if your spouse is in a lower tax band than you. You can probably sense that this is a sticky area so make sure you consult an accountant.

  11. You can make substantial savings on Capital Gains tax if and when you eventually sell your rental property if you made it your main residence for any period before, during or after you let it out. This is not a viable option for all but it is worth keeping in mind. Unsurprisingly, we don't have room to go into all of the implications here, but be aware that it's something that could save you money. Again, speak to an accountant if you would like further information.

  12. You can claim a special tax deduction of up to £1,500 of the costs of insulating the property, as long as the costs are incurred before 6 April 2015. The insulation must be fitted to a finished property, not to one under construction, and you can claim this tax deduction even if the work was completed before you first let the property. If you install wall, floor or loft or hot water insulation you would not normally get a tax deduction for the costs as this is regarded as improvement rather than repair. Another way of saving money on insulation is through the Green Deal, speaking of which...

Going green: the Green Deal

The Green Deal is the Government's policy to get people to make energy-saving improvements to their homes and businesses without having to pay all of the costs up front. Signing up for the Green Deal could mean real savings for energy bills in the long-term, especially for older properties with low energy efficiency, and of course will help protect the environment. On the other hands, there are concerns to be aware of.

If you want to sign up, you'll need the tenant's written consent. If the tenant wants to sign up, they'll need your permission.

Here's how it works:

  • You apply for an assessment by an accredited Green Deal Assessor, who will tell you where improvements could be made and what the savings on bills could be

  • Choose a special Green Deal provider to make the improvements

  • Sign the Green Deal plan with the provider, the contract saying what work will be done and how much it will cost. Work may include:

    • Loft insulation, cavity wall insulation, and/or internal and external wall insulation

    • Renewable energy sources (e.g. solar panels, wind turbines)

    • Double or triple glazed windows

    • High efficiency condensing boilers

    • Draught-proofing

The best place to get started with all this is through the official authorisation web
site where you can search for approved assessors and installers in your area:
www.rentify.com/howtoguide/7/green/

The cost of the works is paid off in instalments through the electricity bills, which are usually paid by the tenant. So, what tips?

  1. Sign up! You'll reduce costs in the long-term, help the environment and the tenant will foot the bill. Indeed, you may be worried that if the tenant is paying off the costs, they'll be rather peeved and won't agree, or else it will be difficult to find a tenant willing to pay. Have no fear: the golden rule of the Green Deal is that the charges repaid through the electricity bill must not be more than the savings resulting from the work, so the bills shouldn't go up, in theory...

  2. Watch out! That 'in theory' may be worrisome too. OK, the assessment of the property is calculated on average usage and standard criteria, so the reality of the situation may depend on the tenant's usage. Just be aware of this - the potential benefits probably outweigh the risk of this scenario.

  3. Be aware of the Energy Company Obligation (ECO) and ask your assessor about it. Essentially, if the tenant is on very low income and uses very little energy, the Green Deal won't be able to fund important works like solid wall insulation as it wouldn't be able to stick to the golden rule. In these cases the energy company will be obliged to finance the improvements. This also applies to improvements to properties which are hard to treat (usually those without wall cavities built before the First World War). This is a further thing which should make the Green Deal more attractive to landlords and tenants alike.

  4. Plan for the future (nice nebulous, non-statement!). What we really mean is: Tenants can legally demand Green Deal improvements from 2016 and compliance with the minimum standards of the Green Deal will be compulsory by 2018. So make sure your property is up to scratch now or that you have plans to make it so.

  5. If you sign up, make the most of your green credentials when you advertise. Many tenants are environmentally-conscious and will be drawn to a property with improved energy efficiency. At any rate, you'll need to show tenants an Energy Performance Certificate (EPC) detailing the Green Deal improvements and you'll need them to acknowledge the repayments.

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