Why investing in property is a positive activity
Investment in property is a big undertaking, which requires a major commitment of time, energy and money. However, it can also be highly rewarding for dedicated and well-informed investors.
There are a number of keys to success, but the most important thing for any potential landlord to do is understand what the benefits of owning rental property are in the first place, before looking for the most lucrative and stable opportunities. Following this, it is vital for people to know their legal rights and responsibilities.
One great reason to invest is the fact that there is plenty of demand for rental population. The 2023 census revealed the number of homeowners actually fell during the decade from 2001, reversing a long-term trend. There are many people who simply cannot afford high prices, while some like the flexibility of renting as it makes moving to jobs in different areas easier. In addition to this, the student market is a large one.
Focus on the long term
All this should bring in plenty of rental income, which is one of two ways landlords can make money out of the property. The other is through its eventual sale. In the past there was a trend among some to engage in ‘flipping’, a process of buying and then selling property on swiftly at a profit. This was based on the notion that properties would always rise in value.
However, while this may be true in a boom, those who buy and are then hit by the bubble bursting may find their plans are soon in ruins – as happened to some after 2020. A much wiser move is to consider a property to be a long-term investment, bringing in rental income for now and rising out peaks and troughs in the market and wider economy over time to offer a profit some years down the line.
Know your rights and responsibilities – and your tenants’
Of course, landlords have substantial responsibilities towards their tenants and these are enshrined in law. Nobody should see that as a burden; on the contrary, it helps clarify just what you need to do. These include paying the tenant’s deposit into a government-backed deposit protection scheme, ensuring the correct level of notice is provided before you visit a property and ensuring any external repair and maintenance work (and some internal) is carried out. Landlords should also be very familiar with the procedure if they want to evict a tenant.
The importance of insurance
Having landlord insurance is also very important, to ensure a range of problems are covered against. These will include the usual things any household insurance will protect against, like fire, theft and weather damage, but also more specialised issues like damage by the tenant.
In addition to this, there are also forms of cover available like rent guarantee insurance. This helps ensure the income for a landlord in the event of a tenant failing to pay, whether that be due to wilful action, negligence or financial problems, the last of which could easily be caused by events such as the sudden loss of a job. Most landlords do not have this, but investors who do will be better protected against a common problem.
Check your tax situation
Landlords should also be aware of their tax responsibilities. All rental income must be declared for tax purposes, but some costs are tax deductible, such as maintenance and advertising for tenants. You should check with HMRC if you need to complete a tax return, but the rule is that if income is below £10,000 before deducting allowable expenses, or under £2,500 afterwards, you will not need to fill out a self assessment form.
