Author: Theresa Woodall

A Guide to Buy-to-let Mortgages for South Devon Landlords

In this three-minute read, we compare the different types of buy-to-let mortgages.

When choosing the right buy-to-let mortgage, landlords face a key decision: go with an interest-only deal or opt for a capital repayment arrangement.

Both options have their pros and cons. Let’s take a closer look.

Interest-only mortgage

Your payments only cover the interest on the loan and have no impact on the capital.

Pros

• Lower repayments

Your monthly repayments are lower than that of an equivalent capital repayment mortgage.

For example, with a 25-year interest-only mortgage of £200,000, monthly repayments would be £573 (4.45%, fixed for three years). With a similar capital repayment mortgage, you’d pay £996 a month*. That’s a difference of £423 a month.

• Less financial stress in between tenancies 

If the property is vacant for any reason, it will fall on your shoulders to cover the repayments. Lower repayments equal less stress.

• Bigger monthly income

As your mortgage repayments are lower, less of the rent goes to your lender. Instead, it winds up in your pocket.

• More flexibility

You can spend this extra cash on the upkeep and improvement of the property or divert it to other investments.

• Sell and make a profit

If the property appreciates in value over time, you can sell up and make a tidy profit.

Cons

• You won’t own the property

As you won’t be repaying the capital loan, you’ll still owe a substantial sum at the end of the mortgage. (Although you can sell the property, pay this debt, and hopefully still be ahead.)

• The lender earns more

You pay more interest to your lender over time compared to a capital repayment mortgage. This is because you never reduce the size of the capital loan, so the interest charges never reduce.

• Risk of negative equity

Historically, property prices have been on an upward trajectory – last year, they grew in the UK by a whopping 8.5% – so the risk of negative equity is low.

And even if prices do drop, if you’re prepared to ride out market fluctuations, then the long-term outlook is positive.

The real risk comes if you need to sell in a hurry. If the property’s value has dropped, you could end up owing more than the property is worth.

Capital repayment mortgage

Your monthly repayments cover the interest and gnaw away at the capital.

Pros

• Ownership

At the end of the mortgage term, the property will be yours. 

• Less interest

You pay less interest overall because the capital loan decreases – albeit gradually – with every repayment.

Cons

• Higher repayments

As we mentioned earlier, the monthly repayments will be higher, and you’ll need to cover them when the property is vacant.

 Choosing the right option

There’s no one-size-fits-all solution, although most landlords opt for interest-only**.

Landlords need to weigh up their circumstances and investment goals carefully. For some, the priority is earning a monthly income; for others, it’s working towards owning a property that they can pass on to their children or even move into themselves.

For advice about making a buy-to-let investment work for you, contact us here at Chamberlains.  If you would like a free financial review with award winning advisors click here and fill in the short form. 

*Approximate figures only, based on a property worth £265,000. Always seek independent financial advice.

** National Landlords Association

6 Reasons Why South Devon Landlords Shouldn’t Get Lax with Inspections 

In this three-minute read, we look at why regular inspections should be central to your property management strategy.

When you’re a busy landlord juggling a multitude of responsibilities, it’s easy to let a crucial part of managing a property – regular inspections – slide.

Landlords usually carry out inspections with clockwork regularity at the start of a tenancy, but things can get a little lax over time.

Perhaps the tenant presents as a model citizen, and the landlord develops a false sense of security. (To which we say, remember Walter White, the unassuming science teacher turned crystal meth baron in the TV series Breaking Bad.)

Or maybe, the tenant pays their rent on time and never says a peep, so the landlord assumes that everything is ticking along nicely (silence is golden, right?).

No matter how much you like your tenant or how busy you are with other commitments, never skip or delay a property inspection. They are one of the best ways to protect your investment – and head off disaster.

Here are six reasons why South Devon landlords should carry out regular inspections.

• Maintenance

It’s easier (and cheaper) to rectify a minor maintenance issue than a major one. A tenant may not mention a leaky tap or a little bit of damp, but these problems can morph into expensive repair jobs if left unresolved. It’s also essential that you check that carbon monoxide monitors and smoke alarms are working.

• Paper trail

The photographs and notes you take during each inspection (yes, you should be doing this) create a valuable paper trail. If there is a dispute at a later date, you’ll have evidence to support your side of the story.

• Build rapport

If your tenants find you approachable, they’ll be more likely to let you know when there is an issue and treat your property respectfully.

• Contractual obligations

It’s important to know that your tenants are complying with their contract and haven’t sublet the property or sneakily adopted a pack of Great Danes.

• Spot illegal activities

With regular inspections, you can ensure your property isn’t being misused by a criminal gang. We know this sounds far-fetched, but gangs – particularly those involved in cannabis production – are becoming increasingly brazen. Trust us, the last thing you want is a police cordon and Sky News reporter outside your property.

• Insurance disputes

Many insurers won’t pay out on a major claim if the landlord hasn’t conducted regular inspections. They argue that by neglecting to visit the property, the landlord has not been vigilant and has therefore invalidated the policy. Whatever you make of this justification, cover yourself, so you don’t wind up out of pocket.

For advice about our property management services, please contact us here at Chamberlains.

I’m a South Devon Landlord: Do I need to Register with the ICO?

This two-minute read takes a look at the ICO and what South Devon landlords need to do.

Back in 2018, the rules around the General Data Protection Regulation (GDPR) and data handling changed. Things like ‘This website uses cookies; do you accept?’ popped up everywhere.

The ICO is the Information Commissioner’s Office and covers the whole of the UK. The ICO website explains that they are ‘The UK’s independent authority set up to uphold information rights in the public interest, promoting openness by public bodies and data privacy for individuals.’

It’s the law

It doesn’t matter how many properties you have, how many tenants, nor how many people you work with or have working for you. It is the whole business that must be registered. As a landlord, you are considered to be a business, even if you’re a sole trader. 

Not just for agents

Some landlords think that their letting agent has to be registered and therefore, they themselves are exempt. This is not the case. Anyone who handles personal data and stores it electronically must register. This could be as little as a name or phone number for the tenant that was texted or emailed to you.

What are the costs?

The ICO fee will be between £40 and £2,900 per annum. The fee is paid annually. It is worked out depending on the size of the business and turnover. There is a self-assessment you can carry out on the website. Have a look at it here. This will show you what amount you will have to pay.

What’s the risk?

Tenants could raise complaints about you to the ICO if they believe you’re misusing their data. The ICO might then investigate. If you had a complaint about the tenant, like unpaid rent, the tenants could use your non-registration against you. If you don’t register with the ICO and get caught, the fines can range from £400 to £4,350.

How to do it

It’s a simple 15-minute process to get registered. It’s not something an agent can do on your behalf. Visit this webpage to get started.

You’ll need to give the ICO:

• The name and address of the business that needs to be registered
• Turnover and staff numbers
• Business details
• Credit/debit card details

The fee will be due again in 12 months’ time. It could be easier to give the ICO direct debit details.

If you are a South Devon landlord and would like further advice about this or any other lettings issue, please don’t hesitate to get in touch for a free, no-obligation chat on 01626 365055

How to Maximise Your Investment as a South Devon Landlord

This three-minute read guides South Devon landlords to declaring their rental income in the best way possible.

If you rent out a property and receive a rental income from that, you must declare it. You have to pay tax on any profit. It doesn’t change your employment status to ‘self-employed’ though, as it’s considered an investment.

Of course, HMRC can be more complicated than a day at Hogwarts. The best advice will be to seek professional advice from an accountant but we’ve picked out some key points to start you off.

Start hoarding

HMRC unimaginatively call this ‘record keeping’. Be disciplined and keep receipts, bank statements, invoices, rent books, even mileage logs, so you (or your accountant) can easily make the deductions against your tax bill. This means you get to keep more of the profit away from ‘the tax man’ in a legal and ethical way, of course.

Expenses claims

There are a range of other allowable expenses. They are deductible only if they’re exclusively for renting out a property and if you pay for them yourself. This could include:

• Water, council tax, electricity, and gas
• Insurances
• Services of, for example, cleaners or gardeners
• Accountancy fees
• Ground rents
• Service charges

Maintenance and repairs

The definition from the gov.uk website is: ‘A repair restores an asset to its original condition, sometimes by replacing parts of it’.

If the property requires new guttering after a storm, this would be considered a repair and therefore, a deductible expense.

However, if you wanted to improve the guttering for another reason, like changing the colour, this would not be allowable.

Improvements are not an allowable expense, like replacing a laminate kitchen work surface for granite. The exception to this is updating things to their ‘nearest modern equivalent’. This could be things like changing single-glazing to modern, double-glazed windows.

If you replace an item with an upgrade, then you can claim the cost as if you had replaced like-for-like. Take the work surface example: a 2m length of laminate would be £150. The same size granite work surface could be £600. You could claim the £150, not the £600.

Domestic item replacement

Furnishings like carpets and curtains are likely to be able to be deducted, as long as you’re replacing like-for-like. Beds and free-standing wardrobes, or other items that can be considered ‘movable furniture’ are also deductible. Appliances, such as TVs or fridge/freezers, and even smaller items, like cutlery and crockery can be offset against your income.

Partial expenses

If you’re letting a property that you have a mortgage on, you can’t deduct the full amount of the mortgage payment. You can only offset the interest element of the mortgage repayment against the income. Similarly, if you use your car for a purpose related to the rental property, you can only deduct the vehicle running costs for that particular purpose. This includes mileage rate deductions.

For rental opportunities in South Devon, get in touch with us on 01626 365055. Our lettings specialists can help you consider the market and the best options out there for you.

© Chamberlains 2021

Calculating Your South Devon Buy-to-Let Return

A two-minute read to help you quickly determine the return on a buy-to-let property in South Devon.

If you’re looking for a property to rent out, it’s important to understand the numbers involved. You may have inherited a property and are thinking of letting it. Use the information here to identify if that is a prudent thing to do or if the capital from selling the property could be better invested.

Find the numbers

The simplest way to work out your gross return on a rental is to estimate some numbers. You can have a browse on the property portals to get a vague sense of what properties in your budget sell for and let for. These figures change across the country so it’s important to start with your own research.

Quick and easy

Here’s a simple calculation to get you the basic overview. Let’s use an example of a £150,000 property that rents out for £500 a month.

500 x 12 (months in a year) = 6,000 p.a.

Divide 6,000 by the purchase price of £150,000 = 4%.

For some investors, a 4% gross yield would be sufficient. Others look for higher but it’s all rather area dependent. Here in South Devon, we normally suggest looking to achieve around 5%.

Deduct your deductions

We’ve worked out your gross figures. But it’s the net figures that are the ‘money in your pocket’ numbers. To work these out, you’ll need to employ a little more guesswork. Better still, ask a local property expert, like us, who deals with these things, day in, day out. Then you’ll be closer to an accurate estimate. The figures you need are:

• Solicitors’ costs (if you’re purchasing a property)
• Landlords’ insurance
• General property maintenance
• Agency fees
• End of tenancy cleaning costs

These can be off-set against your income for tax purposes.

Taxes, taxes, taxes

It’s reasonably straightforward to submit your tax returns yourself. They need to be done annually and submitted by the following January. It’s recommended though to use an accountant. They will be up to date with all the latest options open to you. Not only that, they can often help in other areas, like looking at your pension or investment options.

For rental opportunities in South Devon, get in touch with us on 01626 365055. Our lettings specialists can help you consider the market and the best options out there for you.

© Chamberlains 2021

A three-minute read for landlords

Having a rental property can be a great way to earn some extra income. Like anything, there are a variety of things that can go wrong. We break down five of the most common ones. 

The wrong property

Being a landlord means running a business. You’re not buying a property for you to live in. Tenants often have very different expectations when looking for a rental property. Don’t turn down a great opportunity because you wouldn’t like to live in it.

The wrong tenant(s)

Choosing a good tenant is the second most important decision you’ll make as a landlord, (selecting an excellent letting agent being the first). Rushing into it without applying the correct referencing and selection process could put you at risk. You can end up out of pocket with unpaid rent, no deposit to cover damages, or even squatters.

The wrong timing

Unexpected maintenance is a normal part of owning property, as you may well know from your own home. Tenants often don’t notice little things that need immediate attention. This is because they’re not the homeowners. What can start out as a small leak can quickly turn into a massive problem if not attended to promptly.

The wrong tradespeople

If your rental is not in the area where you live, you might struggle to find decent tradespeople. One common problem, even when you’re local, is finding someone who is great at their trade and available at short notice. You can end up with shoddy work that you have to repair later. We can recommend trusted local traders. 

The wrong paperwork

In the UK, there are over 300 rules and regulations governing property rental. These can vary across the different countries. If you don’t have the right paperwork in place, if things go wrong and you end up in court, you will always lose. It doesn’t matter the ‘rights and wrongs’ of the situation at that point. If you don’t have every box ticked, the judge will always award against you.

The solutions

Treat your rental property like a business. Don’t buy with your heart. Find great tenants who understand and accept the correct referencing procedure. Don’t let to a friend’s “cousin who really, really needs the help right now, pretty, pretty please!”. Carry out regular property inspections, especially at the start of a new tenancy. Don’t fall into the trap of doing it all yourself. The government regularly changes the paperwork requirements. The advice online is often out of date. Don’t risk it. Use a lettings agency with the three Es – Experience, enthusiasm and expertise.

We’ve been helping landlords in South Devon for years. We know the pitfalls and how to help you avoid them. With regular training and professional bodies, we stay on top of the inspections and paperwork so you don’t have to.

© Chamberlains 2021

In this three-minute read, we look at how landlords can avoid getting a bad insurance deal.

If you’re a landlord looking to take out insurance or renew a current policy, there are a few things you should know.

The insurance market is “hardening”, or in other words, insurers are tightening their belts.

The rising costs of claims due to extreme weather events such as last year’s Storm Dennis and low interest rates (meaning insurance firms make less on their investments) have hit the industry hard.

As a result, insurers are upping the cost of premiums and employing other – less obvious – tactics to increase their bottom line.

But first, a quick reminder

Landlords need specific insurance; a standard home and contents policy will not suffice. Landlord insurance is usually a condition of a buy-to-let mortgage, but even if you’re debt-free, it’s worth getting. (You hope the worst won’t happen, but if it does, you’ll be covered.)

Standard policies include buildings and liability cover, although you can also opt to include things like legal costs, accidental damage, or loss of rent.

Insurance tips for South Devon landlords 

Follow this checklist to get the best deal

– If you already have a policy, read it thoroughly before you start your research. It might not be the most exciting few hours of your life, but your diligence could save you time and money in the long run.

– Note in your diary when your policy is due to expire and leave yourself enough time to shop around. You won’t get the best deal if you’re in a last-minute panic.

– Look at what the premium covers. Is there a gaping omission that could leave you exposed? If it’s an existing policy, has your coverage been reduced?

– Check the standard excess (excess rates have been creeping up). The policy premium might be appealingly low, but if the excess is high, you could wind up paying more in the long run.

– Be aware that some types of claims have a higher excess. For example, escape of water (which covers leaks and burst pipes) has a higher excess as it’s a more common occurrence.

– Check the rules around vacancy as some policies become void if the property is empty. As there could be a rise in tenant turnover when furlough ends later this year, ensure your policy gives you a bit of leeway on vacancy periods.

– Have your paperwork to hand when talking to insurers. They’ll want to know (and see proof of) the age of the property, state of repair, and claims history.

– Some policies only cover certain types of tenants – for example, professionals – who are viewed as low risk. It may pay to include other tenant groups, such as students, in your policy to give you more flexibility.

For more advice about protecting your rental property, get in touch with us here at Chamberlains.

©Chamberlains 2021

In this three-minute read, we look at a study that found some landlords were putting themselves and their investment at risk by cutting corners on checks and maintenance.

Landlords are leaving themselves exposed to the risk of criminal and civil prosecution by failing to conduct critical safety checks and taking a back seat on maintenance, a survey of renters has revealed.

The study by property management platform Plentific found that a surprisingly high proportion of landlords aren’t meeting their legal responsibilities regarding gas safety and that in some cases, tenants are handling maintenance and repairs.

The survey of 1,000 tenants found that:

• 46% of private tenants don’t believe their gas appliances have been checked in the last year.
• 52% of private tenants don’t have a gas safety certificate.
• 56% of private tenants don’t have a carbon monoxide alarm.

What the law says

Annual gas safety checks must be carried out at all rental properties by a qualified engineer and all tenants should receive a copy of the subsequent safety report.

Landlords who fail to meet these obligations could face prosecution – and be fined or imprisoned.

Furthermore, landlords could wind up embroiled in a civil suit if a tenant is injured or killed in a fire, explosion or carbon monoxide poisoning at the property.

Other maintenance issues

The survey also looked at how landlords respond to maintenance concerns raised by tenants.

About 40% of private renters said requested works were completed within three days, although overall, the average was ten days.

Issues raised included damage to the garden (26%), property damage (24%), ­maintenance (21%), and electrical problems (20%).

Worryingly, 37% of renters said they had organised repair works themselves (20% with permission from the landlord, and 16% without).

We would advise landlords in South Devon to oversee maintenance and repairs (or to entrust a property expert like a letting agent to handle it) to ensure that work is done to a safe standard for a fair price.

Faulty work could result in further problems down the line or damage to your property that proves costly to rectify.

Managing your responsibilities

Being a landlord comes with a host of legal responsibilities. If staying on top of all the paperwork and red tape feels overwhelming then you could benefit from working with a reputable letting agent like us. We can shoulder the burden for you and will advise you expertly and honestly.

Let us take the stress out of managing the property and use our experience to make your life a whole lot easier.

Please get in touch with us here at Chamberlains if you have any questions about property management.

© Chamberlains 2021

In this two-minute read, we look at how landlords can foster a good rapport with tenants.

Every successful landlord needs a rock-solid tenant retention plan or what we like to call “a happy tenant strategy”.

This is because happy tenants are loyal tenants. And loyal tenants are more likely to stay in your property for longer, helping you to avoid the ultimate landlord bugbear – high tenant turnover.

Whenever a tenant moves out, the landlord gets hit with extra costs such as end-of-tenancy cleaning and repairs and marketing and reference checks to cover the new tenancy.

Then there is the issue of lost rent when a property sits empty in between tenancies.

So, it makes good business sense to minimise turnover by going the extra mile to keep hold of good tenants.

Here are six tips for South Devon landlords for avoiding tenant turnover. 

• Choose the right tenant

By following a detailed selection process and carrying out thorough credit and reference checks, you’re more likely to land a “keeper” in the first place. 

• Good communication

Ensure your tenants can quickly get in touch with you (or your representative) when they need to. If they raise an issue, listen to their concerns and try to be accommodating. While you want the relationship to be business-like, it also needs to be personable. 

• Keep on top of maintenance and repairs

Ensure the property is kept in good condition and respond promptly when there is an issue. If you ignore a tenant’s complaints, they’ll wonder if the grass is greener elsewhere.

• Be honest 

Don’t overpromise or be economical with the truth. Trust is important in the tenant/landlord relationship. 

• Don’t set the rent too high

Setting the rent too high can be a false economy. If a tenant feels that they’re getting ripped off, they’ll quickly move on – leaving you to fork out to find a new tenant.

• Be flexible

Give requests about decorating or having pets due consideration (even if you’re initial instinct is to say no). If a tenant feels that they can create a home environment in your property, they’re more likely to stay for a long time. If a tenant is working out well, consider offering them a longer lease.

Get in touch with us here at Chamberlains to find out how we can help you find and retain good quality tenants.

© Chamberlains 2021