Here we share 5 property investment expenses for you to keep an eye on looking forward, ensuring your next property investment is cash flow positive and not a drain on your finances. Take a look at our guide below or download the handy pdf version here:
- Mind the gap
In an ideal world, your property will pass seamlessly from tenant to tenant without any problems. But the reality is that from time to time there will be void periods in your leases when your property is vacant. The cost of maintaining the property combined with the lack of rental income during this time requires solid reserves to prevent the erosion of your return. It’s advisable to factor in at least one month’s void period to ensure that any gaps in tenancy don’t wipe you out.
- Covering costs
When a property’s occupied, you don’t normally need to worry about council tax. However, if you’re in a void period then you’ll need to cover this payment in the absence of a tenant. Be aware that there is a 6-month exemption period for empty properties but, if you own any of the furniture in the property and you let it furnished or part-furnished, then you’re entitled only to a 50% discount.
- A helping hand
If you enlist an estate agent to find tenants and manage property for you, then you’ll need to set additional funds aside to meet the costs associated with this. Although this means creating further room in your budget, it can mean avoiding strain – both financial and on your time – at some point down the line.
- Beware of wear and tear
All property is inevitably subject to wear and tear. In light of this landlords should ideally build a contingency fund to pay for unexpected or costly repairs, in addition to normal rolling maintenance. With this in mind, be mindful that the rules on the wear and tear allowance changed this year, and since April 2016 residential landlords can deduct only the actual costs incurred on replacing furnishings in the tax year.
- Paying your dues
The 3% increase in stamp duty came into effect on the 1st April 2016 and is a factor current and prospective investors should consider. To minimise the impact of the stamp duty boost, it’s advisable to look at commercial as well as residential opportunities – for example car park investments that do not incur stamp duty charges.
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