Contrary to popular belief, the landlord business can be a tough one to profit from.
With complex and ever-changing tax rules, and other legislative barriers concerning tenant fees and rent, there’s no doubt that most landlords have to think outside the box in a bid to boost their profit margin.
However, like with anything in business, there are options. In today’s article, we will look at five simple methods landlords can use to transform their profit margin.
Take any action you can to eliminate void periods
One of the biggest enemies for any landlord is void periods. Void periods are gaps between tenancies, meaning you don’t receive any rental income (yet still pay council tax, landlord insurance fees and plenty more).
The best way to avoid void periods is to have a robust marketing strategy in place so that you’re already on the way to securing a new one as soon as one tenant leaves. Generally speaking, this means keeping on top of your letting agency to ensure they take action as soon as one tenant hands in their notice.
Review your rental prices regularly
It’s important to remember that rental prices are not static; they can and do go up and down depending on various factors.
Therefore, keeping on top of your local market is important and ensuring you’re charging a competitive rent.
The best way to do this is to keep an eye on what similar properties are being advertised in your area and ensure you’re either in line with or slightly below the average.
While you can’t excessively increase your rent, you are legally allowed to initiate modest increases, which you should take full advantage of.
Use every possible taxable expense
With mortgage repayments and tax being a sore subject for landlords, it means that you well and truly need to think outside the box with your tax. In other words, document everything.
If you have any expenses related to your property – such as decorating costs, travel expenses, agent’s fees etc. – then make sure you keep a hold of all the receipts as you may be able to offset these against your taxable income. The list can go on, but if you track the expenses in real-time, you’re more likely to remember to get the full benefit at the end of the tax year.
Don’t take shortcuts with your repairs and maintenance
While saving a few pounds here and there with your repairs and maintenance can be tempting, this is often a false economy. In the long run, taking shortcuts is often much more expensive as it generally means the repair won’t last as long. Furthermore, it increases the chance of tenant turn and, ultimately, dreaded void periods.
Keep an eye on the small print in your mortgage agreement
When it comes to your mortgage, it’s important to be proactive and not simply sit back and accept whatever terms your lender offers you.
Try to get a mortgage that doesn’t have any penalties for overpaying – this will give you the flexibility to make overpayments when you have the cash available and reduce the interest you pay in the long run. It will also mean that you won’t be paying yet another fee if you decide to sell the property later.
