I recently met a gentleman from Switzerland who owns a beautiful property in Notting Hill and he has been struggling to sell their property with an agent for the last year. Having reviewed the presentation, price and promotion on the property, we both came to the conclusion that it was the price and promotion that we needed to focus on as the presentation of their home was exceptional. It had all the modern facilities, presented well and was recently refurbished with a modern, minimalist look – the ideal scenario for this type of property.
After strategizing with the owner about their next step and the reasons why they were selling we listed the following main points. They were all about reducing outgoings and moving on with their lives to a warmer place. Their outgoings included:
- service charges
- mortgage payments
- Annual Tax on Enveloped Dwelling (ATED)
The property was no longer used by the family as often as in the past, and as the client was looking forward to move to Spain, they decided to sell off all their assets worldwide apart from the one in Marbella and Zurich where they were spending most of their time now.
They also understood due to market conditions, the price they wanted for their home was not attainable by looking at the competition. “Shall we rent it out instead” they asked?
Renting out always seems the sensible option on first thought as suddenly we see income coming in which we never had before. You need though to remember that there are advantages and disadvantages of renting your home out until the market recovers for yourself to exit.
One of the main advantages in this case is that the income generated by the property covers the outgoings and completely eliminates the ATED charge which was in this case £24,250 per annum. A great start for a great saving, pays for the mortgage and the service charges and still leaves some money on the property.
If you have never let a property before though, there are a few challenges to bear in mind:
Don’t expect to let the property for one year – depending on the duration of the shift market and the buyer’s market we are in, this could range from 3 to 7 years in London. In other words this is a long term commitment and not a short-term fix.
Your property must be presenting in an excellent condition. We have found a correlation between the initial presentation of the property and how the tenant maintains this standard throughout the tenancy. The better the property, the higher the likelihood that the tenant will look after it especially if regular inspections are carried out.
Make sure that your agent or yourself if you have the time, inspects the property frequently so that any maintenance issues or possible general up keeping of the property are addressed.
Your home must cater for the wider market – if your home is unique and ideal for a specific buyer, then you must make sure that the audience for tenants is as wide as possible to let it out as quickly as possible.
You will need to have in place a team of contractors to deal with any maintenance issues promptly to have a happy tenant which would result in a long term tenancy. Changing tenants every year adds to your costs due to void periods, repairs between tenancies and requests of new tenants. You should set a budget of 10% of your annual rental income for any maintenance events as a prevention and financial common sense. We would recommend to have in place a management contract with your letting agent so that all issues are taken care for you. If you do have preferred contractors for your home because you trust them and because they know the property well, do let your agent know about these.
If you plan to market your property for sale whilst being let out, you must let know the prospective tenant and come to an arrangement of dates and times for possible viewings.
As soon as your property is let, you will need to remember that you need to do annual tax returns declaring your income to the HMRC – forgetting about it is not an option as there are penalties involved.
There is lots to bear in mind. Before your reach and sign a tenancy agreement with your new tenant, think carefully. If you don’t really want to become a professional landlord for at least three years, you should maybe focus on getting your home sold instead.
If you would like to have a chat about whether you should rent out your home or what is preventing it from getting it sold, why don’t you send us an email to email@example.com or we can have a chat over the phone on 020 7048 0400. However you get in touch with us, we will be delighted to help you.