How To Put A Gastric Band On Your Property Investment!

30 April, 2014

Maximise The Potential Income Of Your Investment Property

It seems these days that almost everyone is looking to shed pounds particularly at this time of year, but is your property investment shedding pounds unnecessarily?

 

 

 

 

If it is, take a few simple steps to get it back to a healthier lifestyle. Many of us are guilty of concentrating on the next new thing.

So, if we have had a property for a few years and it is reasonably hassle free, we don’t pay it much attention, but instead concentrate on our day to day job or our search for other investments.

But by paying a small amount of attention to the investments that you already have, you’ll be able to maximise the potential income.

 

Visualise The Potential

I think that it is sometimes helpful to visualise a funnel (stay with me on this one!) not the type on the top of a ship but the type that you use to pour oil into a car for example.

Income is money being poured into the top of the funnel and the expenses are what leaks through to the bottom of the funnel.

If you made the top of the funnel wider, you will be more easily able to increase your income, but it is just as important to make the bottom of the funnel narrower to slow down the rate of which your hard earned money escapes.

This is especially true of property, which because it is such a large asset often has large expenses associated with it.
Here are just a few things that you can look at to narrow the gap at the bottom of our imaginary funnel:

 

Insurance

This is an essential item and not something you can just stop paying, but the insurance field is incredibly competitive. So, use this to your advantage. Don’t take the lazy option every year, but shop around for the best quote.

You can also take advice or refer back to your original survey when you bought the property to make sure that you are not over covered (or indeed under insured) in terms of rebuilding costs.

Remember, these costs have nothing to do with the property value so you will need to take a surveyor’s advice if you have not done so lately.

 

 Read Your Policy

There are many insurance policies available for landlords to cover buildings, contents, legal expenses or loss of rent. Read the policy clearly.

• Did you take your policy out years ago?
• Have you ever claimed?
• Have you read all of the exclusions and policy excesses?
• Is it really worth renewing that insurance?

Only you will know for sure, but make sure you have all of the facts in front of you to make an informed decision.

 

 Challenge Costs

If you use a letting agent or managing agent to collect rent, this may be fairly historic arrangement.

• Are you sure that they are doing a good job for you?
• Are their costs reasonable in today’s marketplace?

Be very careful before swapping agent as you don’t want to go from the frying pan to the fire just to save  a percent or two here and there.

Also, check carefully whether there are any bolt-on expenses for things such as lease renewals, property inspections, etc as often agents work out a low headline price for management and then charge for everything else on top. So, compare like with like.

 

 Repairs

 

A source of much annoyance to many a landlord, it seems that some properties just keep on needing  maintenance and repair whilst others take along quite nicely from year to year requiring very little.

Obviously, you should always shop around for quotations, but remember that for minor day to day running repairs, it is quite easy to find a non-VAT registered contractor. So, you should save 20% on any costs before you start.

 

 Tax

Remember that many expenses on the property can be offset against tax bill. So, keep all of your receipts and let your accountant have these in order to reclaim tax.

If you manage the property yourself, you can also speak to your accountant about allowances for things like mileage to and from the property, telephone expenses and even home office expenses that can sometimes be allowed for.

 

Renew Your Agreement

 

Many tenancies slip into a periodic basis, in other words, the initial 6 or 12 month term expires and then tenants hold over month by month.

Always try to get the tenant to commit to another 6 months term otherwise you may be given notice when you don’t want it – for example on the 15th of November which means your tenant will leave just before Christmas and almost inevitably leave you with a property unlet over the Christmas period.

Remember that the average property rents for around £20 per day. So if your property is empty you will lose £60 just for the three Christmas and New Year bank holidays!

That focuses the mind, doesn’t it?

Get on to these and any other expense sliming ideas that you can right away. You can then break any other New Year’s resolution knowing that at least your property finances will be lean – even if you’re not.