Tips on How Landlords Can Manage Their Expenses
To the uninitiated, buying property with a view to letting it out can seem like a very easy way to make money, but like most things in life, when you take a closer look it is rather more complicated. Being a landlord is an excellent way to generate a regular income and has the bonus that the rental property will always increase in value, however, it is not money for nothing.
The incautious landlord will soon find that a poorly managed property is more likely to lose money than turn a profit. Having a clear understanding of the costs involved in running a rental property is crucial to the success of your business. It’s important to remember that if your property is tenantless and your rental income is stopped, you will still need to pay the standing orders for services.
Have separate accounts and cards for personal expenses and property expenses
Keeping your personal finance separate from your business finance is one of the cardinal rules of business. If you ensure that you have a business card from the outset this will make your record keeping far simpler, especially when it comes to claiming back expenses. Having the rent paid into a business account will ensure that there is no confusion about the amount of tax you should be paying.
Understand which expenses you can claim
The government rules for allowable expenses are subject to periodic change so make sure that you stay abreast of developments. Currently you can claim for water rates, gas and electric (unless paid by the tenant), insurance, agency and property management fees, services such as cleaning and gardening and the cost of replacing domestic items.
Track your expenses
By using a prepaid credit card, such as Soldo, you will be able to track your expenses in real time via a mobile app or software. Being able to track data instantaneously will make budgeting more effective and will enable you to predict future expenditure with greater accuracy.
Keep receipts and invoices in order
Time spent keeping all paperwork dated and labelled as you go along will save you time and stress in the future. Keep all electronic invoices and correspondence in one file and make sure that it is backed up.
Know your outgoings
As long as you have a tenant, keeping track of your income is pretty straightforward. You know the date on which the rent will be paid each month, but do you know when and how much you will be paying out? If you employ a letting agent, you are likely to be paying between 8% of your rental income, for a basic service, and 15% for a full service, per month. In addition, you are required to carry out regular maintenance on gas and electric appliances, smoke alarms and fire extinguishers. There will also be various legal fees concerning the drawing up of contracts and it is likely that you will also need to pay for cleaning and redecoration.
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