Many people assume that being a landlord is the easiest job ever. It feels like one of those things that’s guaranteed to be successful - the only challenging part is finding a property to rent out. In reality, a lot of landlords aren’t that successful when they start out, but this quick guide will provide some key tips to help you make money with this endeavour!
Step 1: Apply for a limited company buy-to-let mortgage
That’s a mouthful, but a limited company buy-to-let mortgage could be a better financial option than a BTL mortgage in your name. This is because limited company mortgages gain tax relief benefits - all the profits made from rental payments are technically company profits, so you pay corporation tax on them. Most of the time, this works out much cheaper than paying tax on rental payments as part of your personal income.
So, set yourself up as a limited company and then apply for one of these mortgages to cut your tax bill, ensuring you maximise any earnings!
Step 2: Find a profitable property
Some properties are better suited to being rental properties than others. Ask yourself, where are people most likely to rent homes? More often than not, you’re finding lots of rental properties in built-up areas, particularly around busy cities. This is where you find workers or students looking to rent flats or houses, so there’s a higher chance of attracting lots of potential tenants. By comparison, a country home is so unlikely to be rented by anyone, so it doesn’t make a very profitable property in this scenario.
Invest in an apartment or home in a busy area where the rental market is thriving. The whole idea is to get loads of people applying for the tenancy, so you create competition. From here, you’re able to charge a slightly higher rental price than average because there are so many prospects vying for the flat. As a result, you’ll be getting more money each month.
Also, it’s worth adding that the rental price should always be slightly above your mortgage. It helps you pay off the mortgage quicker so you can make bigger profits.
Step 3: Be a good landlord
Last but not least, be a good landlord!
This is such a simple piece of advice, yet so many landlords are terrible. They think they can get away with anything, but this can lead to lawsuits or lots of short-term tenancies. The key to making money is having a tenant in your property at all times. This generates a stable income source, which you can use to invest in more properties to get more tenants. Keep your tenants happy; listen to their concerns, provide regular maintenance if they ask for it and be empathetic. People will want to stick around for longer when their landlord is nice, so you don’t go months with an empty property that’s not making money!
And so concludes our very quick guide to making money as a landlord. Start with the right mortgage to save money on tax, pick a profitable property and set the right rental rate, and then be a good landlord to retain tenants for as long as possible. When you see it written out like that, it seems very easy!
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