The Upad Landlord: How to survive the landlord tax changes and banned letting fees in 2017?
2017 is set to be one of the most challenging years ever for landlords due to a combination of increased taxation for many from next April, tougher lending criteria for buy-to-let mortgages kicking in on January 1st and the government’s proposed ban on admin fees for tenants.
Then there’s the uncertainty surrounding Brexit, with no-one quite sure what will happen to the rental market and interest rates once the Prime Minister triggers Article 50: to signal the official start of our uncoupling from the European Union early next year.
No wonder then that many are feeling nervous about 2017, but we’ve put together some essential survival tips to help landlords get through the next 12 months and beyond.
Book a consultation with an independent financial advisor / tax specialist
Don’t dig your head in the sand, find out sooner rather than later how the tax changes coming in next April will affect your finances and then you’ll have time to take the appropriate action.
It might be that you need to sell off some low-yielding property, reduce some of your mortgage payments or change the ownership of your portfolio to protect the profitability of your business, but whatever it is, don’t delay.
Re-assess your borrowing
Mortgage lenders are introducing tougher criteria for borrowers from January 1st (in fact, many have already done so), which means that anyone who is highly leveraged might find it difficult to re-mortgage. So if you’re coming to the end of a fixed-rate or tracker in the near future, it might be a good idea to speak to one or two mortgage brokers as soon as possible to find out your options.
Negotiate with your letting agent
High street letting agents who have got into the habit of charging tenants hundreds of pounds in admin fees to flesh out their profits are likely to want to pass these charges onto landlords, if the government goes ahead with a proposed ban on tenancy fees next year. Our advice is simple - don’t let them.
If your agent tries to increase their commission or other fees, find another one who is prepared to negotiate more favourable terms. Better still, why not save yourself hundreds of pounds and switch to an online letting agent, like Upad, instead? We’ve never charged tenants’ admin fees, only the cost of referencing, which might still be allowed under the new rules due to be announced soon.
Improve your portfolio
Higher tax will mean lower profits for many of us, which is why some are warning that rents will have to rise next year. However, rent rises are likely to be deeply unpopular with tenants so think about adding some cost-effective, tax deductible improvements to your properties that would justify asking for an increase. For instance, could you provide complimentary Wi-Fi, upgrade the appliances or spruce up the kitchen or bathroom? Or consider replacing an old carpet or just offering your tenants a free spring clean, or some other simple touch to soften the blow.
Cut your costs
On the other hand, if you don’t think you can raise the rent, you’ll need to think about ways to cut your outgoings. As the 10 percent wear and tear tax allowance landlords used to receive for furnished lettings has been removed, you might save money in future by letting your property unfurnished.
Obviously this might not always be possible, some tenants - including students - will want at least the bare essentials such as beds, wardrobes and sofas. Remember to keep receipts for anything you do provide so you can knock the cost of replacing items from your future tax bill.Perhaps you’ve got some survival tips of your own you’d like to share?