Thursday, April 10, 2008
Record keeping for landlords in buy to lets – from LettingFocus.com
The cut in base rate today will be a shot in the arm for the housing market. And the news that the biggest mortgage lenders will be passing on the cut in full is better news still.
As you may know, I have all my mortgages linked to the Bank of England’s base rate, not to the lender’s arbitrary SVR rate – the SVR is, of course, only adjusted when the mortgage lenders feel like it or when competitive pressure forces a change on them. Many people have found this to their cost recently!
And in recent years I have tended to opt for lifetime base rate trackers too.
The reason I like lifetime trackers is that I tend to hold my properties for a long time and the hassle of switching to a lower mortgage rate is something I can do without.
Being on a lifetime tracker also ends up costing less in the long run as you won’t have to pay the mortgage companies ever steeper “application fees” every few years.
Shorter term variable rates mean you have to change to a different mortgage deal to avoid the dreaded SVR every time your deal expires -each time costing you money in fees.
What about the housing market?
Well, house prices are going down and bargain properties are there to be had. I know, I’m out there and there are bargains galore to be had.
As you know, I don’t think the downturn will be that hard for well located bread and butter type properties where tenant demand is strong, so it is now time to get out there and negotiate good deals.
RECORD KEEPING
Before I go, just a quick note on landlords record keeping….
As landlords, we can be so busy running about building up our property portfolios and then managing them that it is often all too easy to forget the paperwork or leave it “to another time”
However, keeping up to date with your records is essential.
Here are my tips.
At the start of a tenancy you will have the tenant’s application form and / or references combined with any background checks that you do on them. Keep these until the tenancy has run its course because this is gold dust if you need to trace a tenant.
Get into the habit of keeping a written record of when something happens on each of your properties. This might be as simple as a record of a phone conversation where you agreed to do (or not do something) or it could be a written record of a report of say, a physical inspection or a gas or electrical certificate or an estimate for a repair or a change to the inventory.
Landlords who don’t have a thorough and up to date inventory which lists the state and condition of the property and everything in it –right down to the colour, make and model number of each item – risk losing out when the tenancy comes to an end.
Another good idea when decorating is to keep a note of the paint colour used in each room in case you need to “touch it up” at a later date.
Right now I’m advising a landlord who let a property without doing an inventory and who has now fallen out with his tenant. In the worst case the tenant could take all the furnishings that were in the property when the tenancy agreement was entered into. If that were to happen the landlord would have a very difficult job to recover any losses to his inventory.
Keep records for the taxman too. This would include records of allowable costs incurred, rents charged, dates that the property was let out, bank statements, invoices and receipts.
HMRC INVESTIGATIONS
HMRC could, if they were doing an investigation, ask you about any payments made into your bank account so it is useful to make a note of what these are for as well.
These sorts of records should be kept for six years if you are self employed or running your rental property as a sideline to your main job or seven years if you have a limited company.
Some records should be kept for longer than six years for capital gains tax purposes. Where you sell a property you may be liable to CGT so you will need a record of the dates you bought and sold it and the prices paid until you sell.
Look out for me in the Daily Mail on Friday and Daily Telegraph on Saturday.
I’m David Lawrenson from property investment mentors lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title. buy the book
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying below market value. I’m an expert on the UK property market and a well known property investment blogger and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and run a landlords advice service.
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.You can read more of my blog & find details of my networking, advice, buy to let networking programme at my website.What’s unique about lettingfocus.com is that we offer independent property mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.
As you may know, I have all my mortgages linked to the Bank of England’s base rate, not to the lender’s arbitrary SVR rate – the SVR is, of course, only adjusted when the mortgage lenders feel like it or when competitive pressure forces a change on them. Many people have found this to their cost recently!
And in recent years I have tended to opt for lifetime base rate trackers too.
The reason I like lifetime trackers is that I tend to hold my properties for a long time and the hassle of switching to a lower mortgage rate is something I can do without.
Being on a lifetime tracker also ends up costing less in the long run as you won’t have to pay the mortgage companies ever steeper “application fees” every few years.
Shorter term variable rates mean you have to change to a different mortgage deal to avoid the dreaded SVR every time your deal expires -each time costing you money in fees.
What about the housing market?
Well, house prices are going down and bargain properties are there to be had. I know, I’m out there and there are bargains galore to be had.
As you know, I don’t think the downturn will be that hard for well located bread and butter type properties where tenant demand is strong, so it is now time to get out there and negotiate good deals.
RECORD KEEPING
Before I go, just a quick note on landlords record keeping….
As landlords, we can be so busy running about building up our property portfolios and then managing them that it is often all too easy to forget the paperwork or leave it “to another time”
However, keeping up to date with your records is essential.
Here are my tips.
At the start of a tenancy you will have the tenant’s application form and / or references combined with any background checks that you do on them. Keep these until the tenancy has run its course because this is gold dust if you need to trace a tenant.
Get into the habit of keeping a written record of when something happens on each of your properties. This might be as simple as a record of a phone conversation where you agreed to do (or not do something) or it could be a written record of a report of say, a physical inspection or a gas or electrical certificate or an estimate for a repair or a change to the inventory.
Landlords who don’t have a thorough and up to date inventory which lists the state and condition of the property and everything in it –right down to the colour, make and model number of each item – risk losing out when the tenancy comes to an end.
Another good idea when decorating is to keep a note of the paint colour used in each room in case you need to “touch it up” at a later date.
Right now I’m advising a landlord who let a property without doing an inventory and who has now fallen out with his tenant. In the worst case the tenant could take all the furnishings that were in the property when the tenancy agreement was entered into. If that were to happen the landlord would have a very difficult job to recover any losses to his inventory.
Keep records for the taxman too. This would include records of allowable costs incurred, rents charged, dates that the property was let out, bank statements, invoices and receipts.
HMRC INVESTIGATIONS
HMRC could, if they were doing an investigation, ask you about any payments made into your bank account so it is useful to make a note of what these are for as well.
These sorts of records should be kept for six years if you are self employed or running your rental property as a sideline to your main job or seven years if you have a limited company.
Some records should be kept for longer than six years for capital gains tax purposes. Where you sell a property you may be liable to CGT so you will need a record of the dates you bought and sold it and the prices paid until you sell.
Look out for me in the Daily Mail on Friday and Daily Telegraph on Saturday.
I’m David Lawrenson from property investment mentors lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title. buy the book
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying below market value. I’m an expert on the UK property market and a well known property investment blogger and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and run a landlords advice service.
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.You can read more of my blog & find details of my networking, advice, buy to let networking programme at my website.What’s unique about lettingfocus.com is that we offer independent property mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.
Labels: buy to let mortgage rates, buy to let mortgages, lifetime tracker mortgages, property mentor, record keeping
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