6 Helpful Tips for Landlords to Beat the Credit Crunch

In the past, renting out a second property has been a great way to make money. Cheap buy-to-let mortgages were quite easy to come by as banks were happy to lend. However the recent economic downturn has soured the market, and whilst the figures are slowly getting better, bank managers remain strict about who they will lend to.

If you haven’t been put off and are looking to expand in the future, now is definitely a good time to take stock of what you have and to ensure your portfolio is looking attractive to lenders and tenants alike. So here are 6 helpful hints to help you ensure you are getting the most out of what you have got.

1. Getting started
If you are looking to buy, keep your eyes open for a bargain and shop around. Go to auctions, and don’t be afraid to haggle; those keen to sell might be willing to drop their price.

Best buy tables can be helpful but remember to take into account the fees section. Depending on the size of the mortgage, it might be worth opting for an arrangement with higher fees rather than 1 that is shown as a percentage of the loan. If you get all that you wanted to borrow, bear in mind that you might not have the option to remortgage at the same rate in 2 years time and your property might not necessarily increase in value.

2. Finding Tenants
Everyone has felt the pinch recently. However, this doesn’t necessarily mean that people’s standards have dropped when it comes to choosing their home. People looking to rent can be savvy and willing to shop around. So make sure you are creating the right impressions with those first viewings.

It’s advice you will have heard a million times before; neutral tones and clean lines sell; try not to impose your own style; people are looking for standards not statements. Knowing where to advertise can cut out those hefty advertisement fees.

If you are advertising over the Internet, remember to always use photos; adding just one photo gives a house-hunter an idea of the property, and could potentially double your hit rate.

3. Make sure everything is in order
Get your credit report and make sure everything is present and correct. Don’t make registering with your local council an after thought – this should always be done before tenancy agreements are signed. It is now only £55 per registration (per county), and £11 per property; a small price to pay to become an approved landlord.

4. Claim all your tax allowances/Make the most of mortgage tax relief
Make sure to keep your records organised; open a separate business bank account so whenever you withdraw money, it is treated as drawing money from your business.

Any money that goes towards repairs, agents fees, utility bills, can be claimed back as tax relief against the rental income. If the property is furnished, set aside a £10 wear and tear allowance.

The biggest expense you will encounter is likely to be mortgage interest – offset this against the mortgage interest to reduce your bill.

5. Make your existing portfolio work harder
If you have been in the game for a while and have had to tighten the purse strings over the last couple of years, you may be tempted to sell up and ship out. If you can afford not to; don’t, stay put and make your existing portfolio work harder.

Try to be creative with the space you have. For example, can you get an extra room in a property? Perhaps lose that living area and add an extra bedroom thereby potentially increasing rental income. On the other hand, you have to be realistic about the future; if one of your properties is not performing well, and has struggled for months, it may be time to cut your losses.

6. Up the rent
The good news for landlords is that the demand for rented properties is on the increase, and rents are at their highest for years. Are you charging market rent or is it time you considered an increase? If you’re unsure of what is reasonable – shop around and see what other landlord’s are charging.