The various components of financial planning in the modern British climate is akin to being up the creek without the veritable paddle. After all, we are in the eye of the storm. Brexit is making a shambles of everything, devaluing the British name, but, more importantly, the British pound. This means that younger Britons are scrambling for any slice of the financial pie, purely so they can have a small dose of security. Naturally, the idea of buy-to-let comes with its fair share of positives. Buying a property that you let to tenants can, on the surface of it, be a very simple way to earn money. But with this in mind, is being a landlord in the current climate a worthy investment, or is it a waste?
Buying A Property
It’s important to purchase a property that will let well. It’s so easy for us to focus on the current climate, but we’ve got to think about the property increasing in capital value over the years. There are different aspects that need addressing, most importantly, the area. Choose the wrong area, and it will drain your finances. This is why a local letting agent is invaluable. They can provide you with authentic knowledge in terms of the returns you want. Supply and demand can be a damp squib in certain areas. It’s far better for you to purchase a property in your local area, rather than getting somewhere hundreds of miles away. When problems arise, and you aren’t able to deal with it up close and personal, this becomes a financial and emotional drain.
Is Cash Flow An Issue Now?
Of all the available capital allowances services out there, we can be confident in the fact that there are ways to cover our bills. But we’ve got to ensure that the idea of cash flow is about preventing, rather than curing, an issue. You need to decide if you have enough cash flow to cover the necessary outgoings for the property. You may have to use savings or borrow money, and if these are feasible, you’ll have to sell the property. You need to decide if you have the necessary means to generate enough income to cover the costs. So many landlords make the mistake of purchasing a property that’s just out of reach financially, thinking that it will provide more than its fair share of returns in the long run. You have to find the property that you can afford at the outset, but covers enough of the outgoings as well as giving you that opportunity to put some money aside. And always remember, there are many maintenance issues that come with buy-to-let.
The Rules And Regulations
Being a landlord a few decades ago seemed like easy money. After all, there were a lot fewer regulations in place so landlords could do whatever they wanted. And while landlords originally passed on the fees of tenant referencing and inventories to the people renting the property, from the 1st of June, it’s down to the landlord. Currently, this is only in England, as Scotland banned letting fees a long time ago and Wales are looking to implement a similar bill. What does this mean for you as a landlord? The more hoops to jump through, the more it comes out of your pocket. It’s not just about the financial implications, if you don’t follow the rules to the letter, you could get fined, but it’s also possible that you would face a conviction. Working with the right letting agency that is either a member of the Association of Residential Letting Agents (ARLA), the National Approved Letting Scheme (NALS), or the Royal Institution of Chartered Surveyors (RICS) means that you stand a better chance of working with an agency that is hot on the Code of Practice.
The Personal Strain
Even if you go into a buy-to-let scheme prepared in a legal sense, there are numerous emotional investments you have to be aware of. You may very well feel that renting a property out to tenants is an easy way to get some extra money, but with this comes a lot of additional hassle. One of the main ones is if you rent it out to bad tenants. Bad tenants can cost you additional money, either through damage to the property, not paying their rent, or even causing issues with the neighbourhood, prompting the local council to jump in. It’s important to work with the letting agent in this respect, but you can also keep on top of this if you are planning on self-managing. You can undertake regular checks, ensure that you reference the tenants properly, but also be ready to pounce if there is a potential issue with a tenant. As it’s likely that you’ll find yourself lumbered with a bad tenant from time to time, it’s important before you jump into this that you are aware of the personal strain. Many landlords find it’s not worth the hassle for minimal profit, and as such, they give up after a few years. This isn’t indicative of the entire practice of being a landlord, but it can certainly take the shine off.
How Can All Of This Be Offset?
One of the best options is a landlord business plan. This way, you are able to plan ahead for any discrepancies, but it also makes the entire process more clear cut. It gives you the opportunity to see your capital in clearly defined columns, giving you a true picture of what you need, but also how you project your costs over the next few years. It gives you the opportunity to plan for intermittent works, like a new kitchen. It also gives you the opportunity to prepare should there be rises in interest rates.
It’s not an easy thing to get your head around. But buy-to-let isn’t a waste. It certainly seems that it’s not as popular as it was, but this may very well be to do with the red tape rather than anything else. Being a landlord isn’t easy money, but in this modern climate, where people are clutching at straws, they’ve got to be aware of what they’re getting themselves into. Financially speaking, it can yield you a profit and be a lifelong investment, but it comes with a few clauses.