Finbri > Buy To Let Mortgages > 8 Top Tips For Managing Your Buy-To-Let Investment

The complete guide to self-managing your buy-to-let property

Monday 18th December 2023 | 12 minute read

Thinking of self-managing your buy-to-let property? But not sure exactly what it entails and whether you’re up to it?

Don't worry, in this guide to managing your buy-to-let property, we’re dishing out 8 top tips for self-managing landlords. 

With interest rates on the rise, and inflation making everything more expensive, managing your buy-to-let investment might look like a great way to pull back on expenses and increase your rental profitability.

High-street letting agents charge anywhere between 5% and 25%+ of your monthly rental income to provide full management services. With the average rent in the UK currently sitting at £1,199pm, that makes average annual management fees anywhere up to £3,957!

No wonder so many private landlords are looking to move to self-managing their buy-to-let properties.

---

What are your aims?

We ask this question because it’s important you manage your expectations with self-management before you begin to explore the option.

If you don't want to be hands-on with your tenants, self-managing isn't for you.

If you don't want the hassle of searching for your own new tenants, self-managing isn’t for you.

But if you think taking that on is a small price to pay to pull back expenses and make more on your buy-to-let, self-managing may be for you.

There’s a lot more to self-managing your buy-to-let than just communicating with your tenants and finding new tenants. And that’s exactly what we’re going to look at here in this article.

In this buy-to-let self-management guide you’ll learn:

• How to understand your buy-to-let taxes
• How to calculate your buy-to-let profitability
• The importance of a maintenance schedule
• Why you should stay up to date with new legislation
• Tenancy contracts and deposit schemes
• Why you should have Landlord Insurance
• How to get Landlord Licensing and permission
• The importance of checking your property value regularly
• How to end the contract with your letting agent

---

Check out our 8 top tips for managing your buy-to-let yourself…

1. Understand your buy-to-let taxes

Taxes are confusing at the best of times. As your buy-to-let income is probably a second income, tax and your buy-to-let can become even muddier. This tip applies regardless of whether you use a letting agent to manage your property or self-managing. You should always understand your buy-to-let taxes.

Income Tax on Rental Income

As your rental income is a revenue stream created by your business, if the property isn’t owned by a company but by you as an individual, you have to pay income tax on your rental earnings. The amount of tax you pay will depend on how much you’re earning in total. 

Here’s an example of how rental income can affect your income tax:

If you’re currently earning £35,000pa in your main job, you’ll fall into the basic rate tax band (20% income tax). But if your rental income generates more than £15,271pa, your total income is £50,271pa and anything over this amount falls into the higher income tax band (40% income tax). There are a couple of other nasty surprises when you earn even more too, such as doing away with your personal allowance when you earn over £100,000. And of course, for those who earn above £150,000, there’s the additional rate tax of 45%.

You can minimise the impact of your rental income by familiarising yourself with the allowable deductibles from your taxable rental income.

Inheritance Tax

Inheritance tax planning is a very complex topic. So we’ll go over just the basics here. If you feel inheritance tax could negatively impact you, you should discuss inheritance planning for your buy-to-let with an expert, such as an independent financial advisor, planner or wealth manager.

Here’s how inheritance tax on your buy-to-let works:

If you’re the sole owner of the buy-to-let property it will be subject to inheritance tax if the value of the property minus the sum owed on an outstanding mortgage exceeds £325,000.

If you part own the property with your spouse or civil partner, this figure increases to £650,000 (£325,000 each).

Any value above these figures is taxable at 40%.

Capital Gains Tax

This tax applies if and when you sell your buy-to-let property. But you should familiarise yourself with the tax law for when the time comes as it may change your understanding of the benefits of property investment.

If you sell your buy-to-let property for more than you paid for it it’s possible you will have to pay capital gains tax. Capital gain tax is applied to profit when selling property. You gain capital if you sell it for more than you paid for it minus stamp duty, estate agent fees and solicitor fees. 

But there’s good news. Every individual gets an annual allowance to set against capital gain. The current allowance is £6,000. 

Here’s how to work out if a buy-to-let property you sell is going to be subject to capital gains tax:

First, calculate the value of your property minus the fees and property costs

Amount you paid for the property - (sum of stamp duty, estate agent fees, solicitor fees, and property costs including repairs, maintenance and improvements + £6,000)

If you are left with a positive number, you will have to pay a tax rate of either 18% or 28% on that sum, depending on your total income for the year and the total amount of capital gains.

2. Know what you’re earning

Another one that you should know regardless of whether you self-manage or not is your rental yield. If you’re not sure how to calculate rental yield, follow this simple formula:

How to calculate your rental yield

Rental yield is like a Return On Investment (ROI) calculation that gives landlords an indication of how much money they should make from their rental property.

Here’s how to calculate rental yield. Take the amount of rent earned in a year and divide it by the amount you paid for the property. You then divide this number by 100 to get the rental yield percentage.

Here’s an example based on current buy-to-let averages:

Annual Rental income = £17,200

Property value = £294,000

£17,200 ÷ £294,000 = 0.0581

0.0581 x 100 = 5.81%

In this example, the rental yield is 5.81%.

The gross rental yield only shows the gross yield the property could achieve. So it’s mainly used by mortgage lenders to calculate mortgage rates and lending amounts.

3. Make a Maintenance Schedule

There are lots of areas you need to maintain on your buy-to-let investment. And keeping it properly and regularly maintained will help it hold its value, reduce unexpected expenses in the years to come and keep you compliant with your legal obligations as a landlord.

So we recommend you create a maintenance schedule based on the maintenance requirements of your buy-to-let property. To create your schedule you should make a list of everything that needs to be regularly maintained in a spreadsheet. Then decide how regularly maintenance should be completed. Use this data to create a schedule for maintenance of each area of your buy-to-let.

To help you start creating your buy-to-let maintenance schedule here is a list of ideas to include:

Appliance safety

Keep a note of each appliance’s safety certificate renewal dates. Any appliance you include in the tenancy agreement will need to have a valid safety certificate. Appliances can include washing machines, ovens, fridges, freezers, and boilers.

Gas safety certificate

If there is gas in your rental property you’ll need to ensure you have a valid gas safety certificate or CP12 for every gas appliance. These certificates for gas appliances and flues need to be renewed annually. The average cost of a gas safety certificate is between £60 – £90.

Electrical safety certificate

You’ll need to make sure that your rental property has a valid electrical safety certificate too. The average cost of an electrical safety certificate is around £230 and will need to be renewed every 5 years.

Fire Safety

It is your responsibility as a landlord to provide a smoke alarm on each storey of the buy-to-let property. You must also have a carbon monoxide alarm in any room with a solid fuel-burning appliance.

You must also ensure the property and its furnishings (the ones you provide) are fire safe too. So your tenants need to have access to escape routes at all times during their tenancy. And all furniture and furnishings you supply must be fires safe too.

Breaches of these regulations under the Smoke and Carbon Monoxide Alarm (England) Regulations 2015, can result in a fine of up to £5,000.

Gardening

If your buy-to-let property has gardens, it’s a good idea to ensure they are being maintained by either you or your tenant. Out-of-control foliage and poor landscaping can create problems for your property. 

Some foliage can actually cause damage to your property which can allow pests or leaks in. And foliage that grows up external walls can create dampness inside the walls which can lead to mould and mildew. 

The cost of fixing these issues is much higher than paying a gardener to keep the gardens in good order. 

---

What are a landlord's garden responsibilities?

It’s also important to note that anything that falls under potential health and safety risks in the garden is your responsibility as a landlord. This is anything that a tenant cannot reasonably be expected to do including:

• Pruning trees and cutting large hedges
• Repairing or replacing damaged boundary fences and walls
• Repairing or replacing damaged hard landscape areas such as decks and patios

---

What are a tenant’s garden responsibilities? 

You can include garden clauses in the tenancy agreement such as “The tenant must cut grass with an appropriate gardening tool to ensure the lawn remains neat and tidy at all times.” In general, tenants are usually responsible for:

• Cutting the grass and hedges
• Pruning large bushes and perennials
• Weeding

---

Drain and Gutter Cleaning

It is the legal responsibility of landlords to arrange gutter cleaning. Gutters on your buy-to-let property should be cleaned a minimum of once per year. You’re also responsible for cleaning blocked gutters reported by the tenant throughout the year too. The average cost of gutter cleaning services is around £65.

Roof Care/Maintenance

Landlords are also responsible for keeping the structure and exterior of the rental property in good repair at all times. Examples of structural and exterior maintenance include roofs and walls.

It’s a legal requirement to ensure the property is in a good habitable condition. So we recommend you inspect the property externals like roofs, walls and foundations once a year.

Plumbing

It is the landlord's responsibility to ensure the property has running warm water at all times. And although it isn't a legal requirement to inspect pipes and plumbing, it’s best to include this in your annual inspection to identify any potential problems that will cost a lot more to fix if pipes burst or leak.

Windows and External Doors

Windows and external doors also fall under a landlord's responsibilities. It’s important to check for functionality and damage such as leaking. This is an easy external inspection you'll most likely be able to complete yourself for windows at ground level. For 1st-floor windows and above, you may need to use a company that is safe working at height. Be warned, falls from ladders account for 40% of all falls from height, and 20% of all falls from height result in fatalities.It's also the tenant's responsibility to inform you of any damages to any parts of the property. 

Boiler Care

The boiler care would likely be covered under the gas safety certificate (CP12). There are many packages that will include boiler care as a part of the annual checks. We recommend you do both together to avoid extra call-out charges. Boiler care packages combined with annual certification start at around £15 per month. 

External Decorating

Decorating the external parts of your property is not a legal requirement of landlords. But doing it will help keep your property in good general repair and maintain its rental value. A property that looks in disrepair because of external decorating is likely to put tenants off and could force you to reduce rental prices to get tenants in.

4. Stay up to date with law changes and new landlord legislation

The easiest way to stay updated on law changes and new landlord/tenant legislation is to join a national or local landlord association. They will make sure to inform you of any changes and often include training or workshops on the changes free of charge.

You can also keep your eye on the .GOV website to stay informed of legislation you must follow. Some of this information isn’t easy to understand. But if you’re a member of a landlord association, you’ll be able to get free advice from them. This way you ensure you're well-informed before making any decisions or changes to your buy-to-let property.

5. Tenancy contracts and deposit schemes

You’ll need to make sure you have good tenancy contracts that cover all aspects of the rental agreement with your tenant. A lawyer will be able to help you create or check tenancy agreement documents based on your specific requirements for your tenants.

If you join a landlord association they will likely have tenancy contract templates you can download and use for free.

It’s also important that you follow the legal deposit protection schemes when taking your tenant's deposit. There is a small deposit protection fee to pay with each deposit you put into the protection scheme. This fee will vary depending on the scheme you choose to use.

6. Landlord Insurance

There are 2 types of insurance for buy-to-let properties:

1. Building only insurance
2. Landlord insurance

You are required to hold a minimum of buildings insurance on your buy-to-let. Building insurance will cover damage to the property from floods, fires, storms and accidents amongst other areas depending on your policy. 

The average buildings-only policy costs £113 per year.

But specialist landlord insurance offers you a higher level of insurance. It goes beyond basic buildings-only insurance by providing higher protection for landlord-related issues. The typical landlord insurance policy will cover you for

• Buildings and contents cover
• Property owner’s liability cover
• Protection against loss of rent due to property damage

Having this level of cover can offer security to landlords during turbulent times and ensure a steady flow of rental income even when a property is left uninhabitable due to damage. Contents insurance is worthwhile considering if you are letting a furnished property.

The average landlord insurance policy costs £150 per year.

7. Licensing and permission

All landlords renting private property in Northern Ireland, Scotland and Wales need to be registered with the local authorities. You’ll also need to make sure you have a valid licence to rent out a property before you have tenants living in your buy-to-let property. This is not relevant for properties rented in England.

If you fail to have a valid licence you could receive a fine from the local authority. And you may also be ordered to refund up to 12 months' rent to the current tenants occupying the property.

You’ll agree this is not something you want to have to deal with. So make sure you check your local authorities' rules and regulations on selective licensing and registration for landlords.

Your selective licence will need to be renewed every 5 years. Each local authority can set its own pricing for the licence. But the cost is usually between £300 and £1,000 for the 5-year licence.

8. Check your property value

You should check the value of your property every year (even if it’s just an estimation). This is so you can calculate your net rental yield accurately. It’s a great way to check if you are charging the correct rental price for your property based on its value.

Although there are other variables to consider when setting your rental prices, the property value should be the largest factor.

Knowing the property value when increasing your rental prices can also help protect you from accusations that your prices are unfair or unjustified. This is especially important if the case goes to court.

---

How to end the contract with your letting agent

Okay. After reading our top tips for Managing Your Buy-To-Let Investment, are you ready to become a self-managed landlord? 

If you’ve been renting your property through a managed letting agent you’ll need to get out of the contract you have with them. And this isn't always as easy as it sounds.

Most letting agents will have a simple cancellation notice period. This is usually around 2 months.

But some letting agents have terms that stipulate how much you have to pay before you can leave the contract. And breaking these terms can cost up to 2 months of rental income to close the contract.

So it’s important you check the cancellation terms in your contract with the letting agent. You should always approach the cancellation in a friendly way as this can help with cancellation negotiations so that everything goes smoothly as you transition into becoming a fully self-managed landlord.

And that covers everything our top tips for managing your buy-to-let investment. Now you have the knowledge you need to become a self-managed landlord.

---

Explore related articles

Buy-To-Let Guide For New Landlords - How To Get Started

How to Remortgage your buy-to-let property the right way

Pros and cons of a buy-to-let mortgage. Are BTL mortgages a good idea?