The Bank of England are comtinuing to keep raise interest rates at a record low, so while you’re still making profit from property we suggest putting some cash back into your investment. We speak to four property experts and find out why 2011 is going to be the best year for re-investing in your existing properties
Liz Biddle,
Finance Director,
Philip James
“With historically low interest rates and high tenant demand, buy-to-let landlords have had a good couple of years. But the party won’t last forever and with the spectre of interest rate rises on the horizon we think now is a vital time to put some of your existing profits back into your property.
“If you’re a buy-to-let investor it’s vital you take care of the tax implications of rising profits. Putting 10-20% of your last three years profits into your portfolio can help reduce your tax bill and save you money in the future. If MPC interest rates top 3% by the end of 2012 your cash flow could be significantly reduced and you’ll have less opportunity to fix problems when they go wrong.
“Older properties are more likely to need work but don’t overlook new-build investments. Even if your buy-to-let property is relatively new there are still ways to invest money and increase your income. Developers don’t always install the best-quality fixtures and fittings so if you want to attract higher-paying tenants consider purchasing quality kitchen appliances or putting smarter carpets in living rooms and hallways. Small changes like this can make all the difference in attracting a better-paying tenant.
Pete Flood,
Maintenance Manager,
Philip James
“The first thing that will stand out as you walk in to a property is if the paintwork is dirty and scuffed or if it is an undesirable colour. On rental properties, guidelines advise that they will require repainting every 3 to 5 years. If your property has not been redecorated for a longer period than this, we would advise that this is done to freshen up the property and make it more desirable for tenants.
“Flooring is another area that is noticeable as soon as you walk in to a property. Old fashioned/ stained carpets or old laminate flooring which is worn or lifting in places can be very off-putting for tenants. Various ranges of replacement flooring to suit all budgets can be fitted to update the property and this can make a big difference to the overall look of the property.
“If your property has an old fashioned kitchen or bathroom then it is highly recommended to replace these with a more modern one. Many Landlords keep the rest of the property updated with new carpet, redecoration etc but the kitchen and bathroom is often left out. Even if the rest of the property is well presented, tenants will generally be put off if they get to the bathroom/kitchen and find it is old fashioned. To do this can be quite costly compared to other maintenance on the property but once done, it should last for years to come and can make a huge difference to it’s rental potential.
“Replace any damaged furniture. Many Landlords will leave torn sofas, mattresses with springs poking through, tables with wobbly legs etc in the property and again, this can be off-putting for Tenants. Many ranges of budget furniture are now available so it is inexpensive to update any damaged furniture.
“Having good, modern windows in the property can be important for many tenants. Properties with old windows, especially with wooden frames, can often have problems with drafts, water ingress and areas of rotting. Updating the windows in your property can be costly but again, this is something that will last for years to come and will add value to your property.
“It is worthwhile spending some money on ensuring the exterior of your property is well maintained to prevent leaks and damp patches. Check over the roof for broken/missing tiles, damaged flashing etc. If there are problems then it can be much cheaper to repair them before the problem develops and causes damage to the interior of the property, therefore costing much more as remedial works would be required on top of the roof repairs. Another area to check is the pointing of the brickwork as this can often be the cause of water ingress. Any external paintwork should always be kept fresh.
“Boilers are often costly, especially in winter when they are used more frequently. In order to help prevent unnecessary breakdowns, we would advise that an annual service is carried out (This is different from the annual gas safety inspection which only checks for gas leaks and that the gas appliances are safe for use). This can prolong the life of the parts within the boiler. Unfortunately, there is no guarantee that this will stop future issues occurring within the boiler but it is a preventative measure.
“And finally, electrics. We recommend that fixed wiring inspections are carried out at your property to ensure the safety of the electrics within the property. This is especially important on older properties where the wiring may be sub-standard.
Ray Grady, Manchester Property Investor
“I’m planning to invest my 2009/2010 profit into my buy-to-let portfolio in 2011. It’s not just about reducing my tax liability; it’s about keeping my tenants happy too. If my tenants see me investing in their home and keeping it in tip-top condition, they’re more likely to stick around. And that’s as much of a long-term investment as property itself.
“In 2009 I broke even and last year I made a profit for the first time. It’s very tempting to take the money and use it for other things, but that’s a short-term view and there’s tax to pay as well – so I’d much rather put the profit back into the property. And with buy-to-let properties you can offset the cost of replacement furniture up to 10% of the yearly rental value under the HMRC’s “Wear and Tear” rule.
“My first investment is a 1950s house. It needs a bit of work here and there so I’m planning to put in a new kitchen and bathroom in the summer of 2011. My second investment is a new-build house, it needs less work but I’m still going to put some money into it, probably new carpets and re-decoration.
“Just because it’s a landlord’s market at the moment, it doesn’t mean you can take your eye off the ball. It’s all about competition and keeping one step ahead of your rival landlords. And if I can take a small temporary dip in profits to do this, it’s worth every penny.
Ben Hall, Furniture Supplier
“The last 18-months have been very busy for us and the largest expansion has come in the private buy-to-let sector. Our landlords clearly have more disposable income due to lower mortgage rates and many are spending money on upgrading their old furniture.
“Interest rates are hopeless for savers, so any excess cash landlords have from a low variable-rate mortgage they are choosing to invest in furniture. It beats leaving it in the bank to earn pennies. But landlords are thrifty so they rarely go for top-end prices. In fact our five most popular sellers are all under £250 and that includes our 2-seater leather sofas and glass dining sets.
“There’s a growing market in helping landlords identify where to spend their profits wisely and this is something we’re looking to offer in the long-term. It’s great to make money from property investment, but a shame when it’s not re-invested wisely.