Useful Information

 

List of Validation Documents

It is prudent to have a document file proving who you are and your financial status. The file should include some, or all, of the following items.

Personal Identification:

  • Valid passport
  • Cheque guarantee card with photo
  • Marriage certificate
  • Full UK or EU driving licence
  • Employer’s ID card
  • National insurance number
  • Medical card


Credit Worthiness:

  • Council tax bill
  • Utility bills: electricity, gas, water
  • Telephone bill
  • Latest mortgage statement
  • Inland Revenue tax statement
  • Details of your accountant
  • Bank and credit card statements


Financial details evidence:

  • Bank account details
  • Last three payslips
  • Last three years accounts, if self employed
  • Last P60
  • Rent book, if applicable
  • Mortgage details
  • Monthly expenditure
  • Life insurance and pension details
  • Savings books
  • Investment plan and deposit account details

 

The Team

Successful property acquisition needs a strong and experienced professional team who can be relied on to deliver. Talk to other clients or listen to good word of mouth to find the right people to help you.

People you may need include:

  • Independent Financial Adviser
  • Letting agent
  • Estate agent
  • Solicitor
  • Accountant
  • Insurance agent
  • Valuer
  • Surveyor
  • General Builder
  • Electrician
  • Plumber
  • Gas fitter
  • Book keeper
  • Cleaner
  • Window Cleaner

 

Tax

Currently, mortgage interest on a Buy-to-let, and other expenses, can be offset against the rental income. There is no National Insurance to pay on this income.

If you sell and make a profit, you may have to pay Capital Gains Tax on the gain. Fortunately, you realise the gain first, and pay the tax later. Currently, there is a personal annual capital gains tax allowance of £7,900 which rises each year in line with the RPI. Most costs of purchase, improvement and sale can be set against your gain. In addition, Taper Relief applies to personal assets held for over three years: this reduces the liability. Taper Relief for Companies is more generous than that for individuals.

When property passes from husband to wife (or vice-versa) on death, no Inheritance Tax (IHT) is payable; when the survivor dies, the children will receive the estate after paying IHT at 40% on any value above £255,000 – the figure being inflation-proofed each year. Certain schemes and forms of Trust can be used to retain parental control of second and other properties while saving IHT.

 

Loans

Usually loans can be either ‘capital repayment’ or, ‘interest only’. The first pays off the loan over the period of the mortgage together with interest on the loan. The second simply pays the interest on the loan, leaving the loan itself to be repaid at the end of the term.

 

Variable rate mortgage.

When rates rise, so does your payments, when they fall, your repayments also fall.
A common method is to use a large proportion of cash initially, then refurbish, revalue and re-mortgage, to release capital for future purchases.

 

Tenant Due Diligence

Your landlord problems will be greatly reduced if you do a little screening at the outset of the tenant search process.

Danger signals to watch out for include:

  • Unwillingness, or refusal, to fill out a written application.
  • Inability to remember current or former landlord’s names, or phone numbers, or refusal to supply that information.
  • Lack of landlord references, or references who cannot be contacted.
  • Using parents or employers as references, but no landlords
  • No bank account
  • No job or claim to be self employed for the last few months only, with exceptionally high income
  • An attempt to negotiate for lower rent, or to barter a portion of the rent in exchange for services (a sign the applicant cannot afford the rent for the property)
  • A request to pay the security deposit in instalments
  • A family obviously too large for the place you are renting
  • Overly aggressive pressure to move in, earlier than you would like

 

Rental application Form Content

The rental application form should include the following features:

1. Proper Identification
Be suspicious if an applicant will not provide basic identification numbers and the name of a local bank branch where he or she has an account. If an applicant does not want to provide you with that much detail, you may want to look at other applicants.

2. Name and phone number
Always request home, work and mobile numbers, to enable you to reach your tenant, during the day, or evening.

3. Present home address
(Including length of time there and previous landlord’s name and phone number.) Always check current references to verify that the tenant is living there. Ask if rent has been paid on time and if the tenant keeps the property and grounds clean and is cooperative.

4. Previous home address
(Including length of time there and previous landlord’s name and phone number.) This previous information is more important then the current information. Make sure that you contact the previous landlord and ask the same questions. The previous landlord has no incentive to mislead you about the individual applying for your vacancy, his current landlord may.
Always ask:

  • Was the rent always paid on time? If late, how late and what were the reasons given?
  • Was the person tidy?
  • Was the vacated property left clean?
  • Would you recommend the individual? If not, why not?

5. Name and phone number of nearest relative and person to contact in case of emergency. If a tenant skips out on you it is useful to have a relative’s name. If a tenant breaks the law, or takes property from your rental when leaving, you can put the authorities in touch with relatives to track down your former tenant. In addition you might become wary of an applicant who is unable to supply you with names and phone numbers of relatives or friends.

6. Names and relationships of every person who will live at the address. If you later discover that there are more people living at the property than were listed on the application you can enforce your restriction on having too many people there.

7. Description of pets, if any.

8. Occupation. Find out if the tenant is employed and verify dates. Ensure you have work contact details.
If your potential tenant is self employed ask to see a business card or letterhead.
Ask for customer references and check them out.
Ask for identification of not only a personal bank account, but a business bank account as well

9. Signature. Insist that applicants sign the application form. The application form should be thought of as part of the rental agreement, since you will enter that agreement based on what is claimed on the application.

A letting agreement will be supplied by your letting agent. However, anticipating and avoiding problems is always better than having to solve them later, so all legally binding agreements should be approved by your own solicitor, or lawyer.