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Six Ways for Landlords to Cut Costs to Increase Property Rental Profit

By Chris Horne

The days of 10% yields are now all but a distant memory for landlords.

Interest rates are still moving upwards and seem destined to hit 6% by the end of the year.

So what can landlords do to drive up margins & help cashflow. The answer is to cut costs and here are six ways for landlords to do this.

1. Buy cheap – landlords need to be tough negotiators

There is still money to be made in the property market whether landlords buy at auction or they find a residential investment property in the local estate agents or over the internet.

The secret for landlords is to always drive a hard bargain. Landlords should view 50 residential investment properties, put in 50 ‘ridiculous offers’; 49 will be rejected but the chances are one will succeed. Then a landlord will get a buy-to-let bargain. That way a landlords rent will reflect the value say of a £200,000 property but if a landlord has managed to secure a 15% discount their costs will only be that of a £170,000 residential investment property.

2. Landlords need to get the best finance deal

The biggest cost to any landlord is their mortgage. If a landlord can cut this by even a 0.5% that will work out as a cost saving of £62.50 per month on a £150,000 buy-to-let mortgage.

For a landlord to ensure their mortgage is competitive they need to keep checking their rate against the best BTL mortgage rates currently available.

Landlords should never, ever pay the mortgage company standard variable rate, the chances are you will be paying 1-2% above what you need to. Most landlords can save at least 0.5% on their interest rate if they shopped around.

3. Save on managing fees by DIY Landlording

How ever landlords look at it if they get in a letting agent it’s going to cost. For the full management of a landlord’s property this is likely to be between 8-12% of a landlords’ rent. For many landlords this can represent 20% of their annual costs. By landlords DIY, they can boost their profits and cashflow immediately. This gives landlords greater scope to perhaps swap to a repayment mortgage.

In this way landlords will gradually cut their loan repayments because of their reducing mortgage balance.

If landlords think that managing their investment property themself is a daunting prospect then they shouldn’t. There are plenty of Free Assured Shorthold tenancy agreements available and I provide a fully solicitor prepared Free assured shorthold tenancy agreement available for UK landlords to download within the Free Online Property Management software on my site. This saves a landlord £15 for the book, £10 for the Assured Shorthold Tenancy Agreement, £100 for the property management software. In total £125.

4. Landlords must avoid the void

Experienced landlords dread the void. This is the term given to a landlords residential investment property when it is empty. At all costs landlords should avoid this. Many novice landlords who have been told by a letting agent often desperate for business that their buy-to-let property is worth £750 pcm, will then end up with it empty for 3 months only to then have to let it for £600 anyway. Far better is for landlords to have it let at the outset for a realistic rent. Once a void is experienced then a landlord will never get this money back. The average void for a buy-to-let property is probably about one month per annum. If a landlord can cut this to zero then this is about the equivalent of cutting their annual costs by 10%.

5. Competitive insurance

It is very easy for a landlord to over pay for their buy-to-let insurance. Often buy-to-let mortgage companies will try and sell landlords their own insurance product. Never buy this. Buy-to-let mortgage companies rely on the apathy of the average consumer not to check out the best deals through a specialist landlords insurance broker which enables them to charge inflated prices. Landlords should make sure they get a number of quotes and know what landlord insurance product they are getting before they buy.

6. Don’t pay tax

Well prepared landlords should pay little or no tax. Not because they are criminals but because landlords need to be shrewd businessmen as well as good property investors. Tax avoidance is not illegal; it’s what the billionaires do. Landlords should be fully informed about their landlord tax allowances and keep up to date records to ensure that they don’t have to pay out unnecessarily.

Avoiding tax could save hundreds if not thousands of pounds per annum to a landlord. This money can then be re-invested by a landlord in growing their buy-to-let portfolio or cutting their costs further by paying down their debt.

Property Hawk is a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liability. The service is totally free to use at www.propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
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How Can Landlords Keep Their Tenants Warm This Winter?

By Chris Horne

“Save on heating bills, put them on the fire” I’ve heard one landlord remark. Landlords should clearly implement a slightly more responsible attitude.

Seriously with the last vestiges of the ‘Summer’ disappearing, a landlord’s thoughts naturally turn towards securing their buy-to-let investment property for the Winter. This probably means a landlord trying to get the various outside jobs done before the weather turns.

One concern for any responsibly landlord is to ensure that the tenants are warm. This is not only a concern but also a legal obligation under section 11 of the Landlord & Tenant Act 1985

“(c) To keep in repair and proper working order the installation in the dwelling for space heating and heating of water.”

Whilst this legislation does not set out any legal minimum in terms of the temperature, keeping tenants warm does make good business sense. A warm tenant is a more likely to be happy tenant and therefore more likely to stay longer. A cold tenant is very likely to be off as soon as they can, exposing the landlord to a possible void period and to additional letting costs.

There are two ways that a landlord can make their property warmer. Firstly a landlord can insulate their buy-to-let investment property more effectively and secondly a landlord can look to increase the effectiveness of their heating system.

INSULATION IN RENTAL PROPERTY

Many buy-to-let residential properties particularly the older buy-to-let properties have sub-standard insulation. There are a number of ways that a landlord can improve the insulation of their buy-to-let investment property.

The main ones are:

Cavity wall insulation

Insulation in the loft

Draft proofing

Pipe and tank insulation

Glazing – normally installation of UPVC double glazing

There is some excellent advice on the Energy Saving Trust website on the kinds of ways landlords can insulate their investment properties, the costs involved and the potential financial savings.

Insulation doesn’t need to cost landlords the earth

The big issue that landlords have with the laudable aim of energy conservation is that, whilst the capital investment is incurred by them as the landlord; it is the tenant that effectively receives much of the financial benefit in the form of cheaper heating bills.

However, what landlords may not realise is that recent changes in the tax system means that individual landlords (and other landlords who pay income tax) who let residential property and install loft insulation, cavity wall insulation and solid wall insulation to properties have been able to claim a deduction in their income tax bill, this is called the Landlords Energy Saving Allowance (LESA).

The maximum amount which can be claimed is £1,500 per property.

Following the 2006 Budget, from 6th April 2006 the Landlords Energy Saving Allowance (LESA) has been extended to enable landlords to also claim the allowance for expenditure from installing draught-proofing and for insulating hot water systems in dwelling houses which they let.

Further information is available from Her Majesty’s Revenue and Customs.

Landlords do however need to be wary that they do not by improving their residential investment properties insulation, then cause damp problems through inadequate ventilation.

IMPROVING THE HEATING

The other way a landlord can keep their tenants warm and happy is by improving the heating. The vast majority of housing including buy-to-let investment properties now have central heating. In 2005 the English House Condition Survey found that just under 9 out of every 10 properties (88%) had central heating a further 7% had storage heaters.

The reality therefore for most landlords is that an improvement to the heating system involves an upgrade to the central heating system. The efficiency and effectiveness of a heating system largely depends on the type and age of the boiler, with most boilers lasting between 10-15 years. The difficulty for many landlords can be deciding when to upgrade to a new model. I was faced with this exact conundrum recently. I had a problem with a 10 years old boiler which packed up depriving tenants of hot water & heating making prompt action vital. The plumber suspected it was one of two parts the gas valve or the PCB board, both costing over £150 with fitting costs on top.

What did I do? Risk having one part fitted to find out it was actually the other that needed replacing? Then potentially having replaced 2 parts would I have been better off having a new boiler fitted at the outset? In the end I contacted the manufacturer and their technical department were able to run through a few diagnostic tests to pinpoint the part I needed. I am now hoping that the boiler lasts several years longer before it has to be replaced by a new condensing boiler.

Condensing boilers

Many landlords may not be aware that since the change in the Building Regulations in 2005 all newly fitted boilers have to be high efficiency, which generally means condensing boilers.

Condensing boilers are have also required to be fitted in Scotland since 1st May 2007 with the revision of section 6 of the Building Regulations.

A high efficiency condensing boiler works on the principle of recovering as much as possible of the waste heat which is normally rejected to the atmosphere from the flue of a conventional (non-condensing) boiler. The best high efficiency condensing boilers convert more than 90% of their fuel into heat, compared to 78% for conventional types. I found this useful site for a ranking of boilers in relation to their efficiency.

How do they work?

The extra efficiency is accomplished by using a larger heat exchanger or sometimes two heat exchangers within the boiler, which maximises heat transfer from the burner as well as recovering useful heat which would normally be lost with the flue gases. When in condensing mode (condensing boilers do not condense all the time) the flue gases give up their ‘latent heat’ which is then recovered by the heat exchanger within the boiler. As a result the temperature of the gases exiting the flue of a condensing boiler is typically 50-60°C compared with 120-180°C in a current non-condensing boiler. At the same time an amount of water or ‘condensate’ is produced.

The fact is if a landlord’s boiler is between 10-15 years old then it probably is not efficient by modern standards. Replacing a landlord’s old boiler with a new high efficiency condensing boiler is likely to save around a third of the heating bills straight away.

Costs

A new condensing boiler will cost about £750 inc. vat for a decent make.

However the additional plumbing kit will probably cost another £250 and then there is the fitting costs of at least £250. Bank on at least £1250.

Having purchased a new boiler landlord can then insure themselves against further maintenance costs by taking out boiler insurance.

I would caution landlords from automatically taking out this type of cover without carefully considering the benefits. This is mainly that it guards a landlord against an unexpected large bill. If a landlord’s cash-flow is stretched then this might be the safe option. However landlords should appreciate that at a minimum of £100 pa the cost of the insurance over the lifetime of the boiler would amount to the entire replacement cost. Therefore, they may be better off setting up a monthly ‘sinking fund’ equivalent to that of the insurance. This way they can build up a cash fund that is available should disaster strike. Should this not happen then the money can go towards the eventual replacement cost of the boiler.

One thing is for sure, keeping the tenants warm and happy this Winter isn’t getting any easier or cheaper!

Chris Horne is an experienced landlord and property professional who now runs the website Property Hawk, a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liability. The service is totally free to use at propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?How-Can-Landlords-Keep-Their-Tenants-Warm-This-Winter?&id=783091

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Six Ways for Landlords to Cut Costs to Increase Property Rental Profit

By Chris Horne

The days of 10% yields are now all but a distant memory for landlords.

Interest rates are still moving upwards and seem destined to hit 6% by the end of the year.

So what can landlords do to drive up margins & help cashflow. The answer is to cut costs and here are six ways for landlords to do this.

1. Buy cheap – landlords need to be tough negotiators

There is still money to be made in the property market whether landlords buy at auction or they find a residential investment property in the local estate agents or over the internet.

The secret for landlords is to always drive a hard bargain. Landlords should view 50 residential investment properties, put in 50 ‘ridiculous offers’; 49 will be rejected but the chances are one will succeed. Then a landlord will get a buy-to-let bargain. That way a landlords rent will reflect the value say of a £200,000 property but if a landlord has managed to secure a 15% discount their costs will only be that of a £170,000 residential investment property.

2. Landlords need to get the best finance deal

The biggest cost to any landlord is their mortgage. If a landlord can cut this by even a 0.5% that will work out as a cost saving of £62.50 per month on a £150,000 buy-to-let mortgage.

For a landlord to ensure their mortgage is competitive they need to keep checking their rate against the best BTL mortgage rates currently available.

Landlords should never, ever pay the mortgage company standard variable rate, the chances are you will be paying 1-2% above what you need to. Most landlords can save at least 0.5% on their interest rate if they shopped around.

3. Save on managing fees by DIY Landlording

How ever landlords look at it if they get in a letting agent it’s going to cost. For the full management of a landlord’s property this is likely to be between 8-12% of a landlords’ rent. For many landlords this can represent 20% of their annual costs. By landlords DIY, they can boost their profits and cashflow immediately. This gives landlords greater scope to perhaps swap to a repayment mortgage.

In this way landlords will gradually cut their loan repayments because of their reducing mortgage balance.

If landlords think that managing their investment property themself is a daunting prospect then they shouldn’t. There are plenty of Free Assured Shorthold tenancy agreements available and I provide a fully solicitor prepared Free assured shorthold tenancy agreement available for UK landlords to download within the Free Online Property Management software on my site. This saves a landlord £15 for the book, £10 for the Assured Shorthold Tenancy Agreement, £100 for the property management software. In total £125.

4. Landlords must avoid the void

Experienced landlords dread the void. This is the term given to a landlords residential investment property when it is empty. At all costs landlords should avoid this. Many novice landlords who have been told by a letting agent often desperate for business that their buy-to-let property is worth £750 pcm, will then end up with it empty for 3 months only to then have to let it for £600 anyway. Far better is for landlords to have it let at the outset for a realistic rent. Once a void is experienced then a landlord will never get this money back. The average void for a buy-to-let property is probably about one month per annum. If a landlord can cut this to zero then this is about the equivalent of cutting their annual costs by 10%.

5. Competitive insurance

It is very easy for a landlord to over pay for their buy-to-let insurance. Often buy-to-let mortgage companies will try and sell landlords their own insurance product. Never buy this. Buy-to-let mortgage companies rely on the apathy of the average consumer not to check out the best deals through a specialist landlords insurance broker which enables them to charge inflated prices. Landlords should make sure they get a number of quotes and know what landlord insurance product they are getting before they buy.

6. Don’t pay tax

Well prepared landlords should pay little or no tax. Not because they are criminals but because landlords need to be shrewd businessmen as well as good property investors. Tax avoidance is not illegal; it’s what the billionaires do. Landlords should be fully informed about their landlord tax allowances and keep up to date records to ensure that they don’t have to pay out unnecessarily.

Avoiding tax could save hundreds if not thousands of pounds per annum to a landlord. This money can then be re-invested by a landlord in growing their buy-to-let portfolio or cutting their costs further by paying down their debt.

Property Hawk is a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liability. The service is totally free to use at www.propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?Six-Ways-for-Landlords-to-Cut-Costs-to-Increase-Property-Rental-Profit&id=725940

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