Ways to Increase Buy-To-Let Profits

With the summer budget hindering buy-to-let property owners in the UK, landlords can be left looking for other ways to increase profit margins. Although first-time buyers will benefit from the announcement, existing home owners can only now claim tax relief on mortgage interest payments at 20%. This could be much lower than the previous marginal rate.

In this sense, squeezing as much money out of your incoming rent as possible has become more important for landlords. Here are a few ways to do so.

Tax Relief

tax relief

Photo Credit: 401(K) 2012 via Flickr

Many landlords don’t realise they can offset various costs for tax purposes. The potential savings can be substantial, particularly through mortgage fees and interest. Although, as previously mentioned, the interest rate will be set at 20% from April 2017. Likewise, broker and arrangement fees can also be claimed back when the mortgage is taken out.

Further tax breaks can be made on letting agent fees, insurance premiums, general maintenance and utility bills, amongst others, which landlords should include on their self-assessment returns. If an accountant does this on your behalf then their fees are tax deductible also.

Landlord Insurance

insurance policy

Creative Commons Photo Credit: source

Although there is no legal necessity for to take out landlord insurance in the UK, it is highly advisable and usually required by mortgage lenders. Home buildings and contents insurance will not cover rented-out properties so be aware of this.

Shopping around for the cheapest insurance deal will help increase your buy-to-let profits. A recommended approach is by using price comparison websites or seeking out specialist insurance brokers. In addition, landlords with multiple properties can combine their entire portfolio under one policy to save money.


student housing

Photo Credit: Incase via Flickr

The price of insurance may depend on the occupants in your property. For example, long-standing professionals will be looked on more favourably than DSS tenants or a group of students. Their previous history can also be a factor as those with previous evictions or a criminal record can push premiums up.

You also need to have a strong degree of trust with new tenants as, if regular maintenance is required, your profits will be severely affected. In addition, landlords will be charged if any repairs are left unresolved or inadequate. Your insurance premium can also rise if household pets are present so consider this as well.



Photo Credit: Adam Thomas via Flickr

One simple way to increase profits is by researching rental hotspots where rates are high or expected to rise in the upcoming months. Most prospective landlords will only invest in property close by for convenience, neglecting larger profits that can be made further afield.

The recommended approach is to use various online outlets or estate agents to gather information. For example, a recent report by HSBC suggests that properties in cities such as Manchester, Blackpool and Kingston-Upon-Hull are producing healthy rental yields of nearly 8%.

Landlords across the UK should consider all options available to them in order to cut down costs and maximise profit margins. Look into all the possible tax breaks whilst choosing your tenants and location wisely to boost rent income.

If you liked this blog post then perhaps you’d like to read “Buy-To-Let Market Buoyed By Low Rates And More“?