Landlords' end of tax year health check

The end of the tax year provides landlords with an important opportunity to take stock.

The last twelve months have seen dramatic increases in both demand and rental yields, and many landlords are enjoying unprecedented success.

But there are still challenges to overcome. Long-term success requires forward planning, and the end of the financial year is the perfect opportunity for this.

We have compiled a series of top tips to help you conduct a year-end health check – and to plan for success.

1. Think ahead

Landlords have enjoyed a buoyant year so far, but the next twelve months will hold challenges. Although demand (and therefore yields) remains high, there is growing evidence to suggest that, in some parts of the country, rents may be about to find their peak. You should bear this in mind when negotiating with new and existing tenants – and, crucially, you should factor it into your financial projections.

2. Consider the key figures

Every landlord has a number of ‘vital statistics’ that will give an overview of their financial health. These are known as key performance indicators (KPIs). Try to identify your KPIs. They are likely to include rental yields, mortgage payments, tenant attrition (the speed at which your tenants change), and arrears. By identifying and monitoring these vital statistics you will be able to develop a comprehensive picture of your financial wellbeing.

3. Benchmark

It is important to consider your performance in relation to that of other landlords. Make sure that you do regular research into the state of the lettings market in your area. What sort of rents are similar properties achieving? Good research will help to keep you confident that you are pricing your properties appropriately.

4. Look for cost savings

Conducting a regular audit of your outgoings will help to ensure that you keep a handle on costs. In addition to your mortgage payments you are likely to have a range of incidental costs including maintenance expenses, agency fees, and travel. Make sure that you have a comprehensive budget setting out all of your expected costs, and that you set aside enough to cover unpredictable expenses like void periods. In addition, make sure that you shop around every few months to ensure you are getting the best possible deal from your agency and, where applicable, from your mortgage provider.

5. Do your return

It might seem premature, but there is a range of reasons why it makes sense to do your tax return straight away. By working out how much you owe now, you can ensure that you avoid a nasty surprise come January, and that you have enough time to get the cash together if you’ve not already set it aside. Just as importantly, the process of doing your tax return helps to focus your attention on your past financial performance. It will help you to identify your weaknesses, and make plans to mitigate them.

6. Keep monitoring

Finally, it is vitally important that you keep track of the KPIs identified earlier. A single snapshot of data, while useful, is not enough. In order to determine whether or not you are on the right track you need to keep monitoring those figures. By regularly tracking your KPIs you can help to ensure that you remain in good financial health.