How To Compile a Property Rental Inventory

admin    Landlords     letting agreement inventory, letting rental inventory, property inventory checklist, property rental inventory, property rentals

A detailed letting inventory is an extremely important document that will benefit both Landlord and Tenant; however it is more likely to be an aid to the landlord. Taking an inventory of property both at the beginning and the end of a tenancy would show the exact condition of the property rental should there ever be a dispute between the tenant and landlord. Although having an accurate and detailed property inventory is vital, it does not have to be burdensome.

Take a walk through your rental property and/or rental properties, and write down a detailed description of everything you come across, both interior and exterior, from fixtures, flooring, appliances, furniture (if applicable), the walls, windows and everything in between.  Once you’ve put together a complete comprehensive list, this list will act as your Property Inventory checklist that can be used with each tenant and at each rental property.

Now you have a tool that will enable you to report a before and after snapshot for each tenancy agreement.

At the beginning of the tenancy agreement you’ll do a walk through with your tenant taking precise notes of each item and condition of all letting inventory on your checklist.  Let the tenant make notes and point out obvious marks or flaws on the doorways, scrapes on the walls or missing fixtures.  This document, compared to the one you’ll also make as the tenant exits the tenancy will be helpful should there be a dispute at the end of tenancy.

At the conclusion of the tenancy agreement is when you as Landlord will want to take notes of any damage, missing items and obvious misuse of the unit.   The property rental Inventory will serve as a comparison for the general overall cleanliness, state of repair and condition of the rental property prior to and at the end of tenancy agreement.  You will also be able to use this tool for making note of utility meter readings (if applicable) should you require payment for used utilities.

For long term rental agreements you might also want to include an interim report.  As with any item, there’s a wear and tear element that must be considered and should not be construed as negligent.  All things will eventually wear out, break down or just generally need to be updated.  If you look at all aspects of the condition of the building, and the way in which your tenant has kept up with the normal every day maintenance, you will no doubt get a true feel for what has been misused and what has just come to the end of its usefulness.

Keeping your property inventory accurate and up to date will save you a great deal of time and headaches in the long run.

Both parties will have to agree with the reports and once everyone is in agreement, the document should be signed.  As this signed property rental inventory has now become a legal document, it can be used when deciding if a security deposit is eligible for return or could be entered as evidence in a court proceeding if it ever became necessary.

Calculating Tax Owed On Rental Income

admin    Landlords     calculating tax on property rentals, property rental, property rental tax, tax on property rentals

As with any sort of income producing venture, there is always the expectation that you will be required to claim this income in order to pay taxes on the rental property.  A residential letting is considered to be running your own business, whether you have one rental property or several, they are all considered to be a single business.

Property rentals can be calculated in two ways, according to the HM Revenue & Customs. If you are only renting out a furnished part of your own home to a lodger, you could be eligible under the “Rent a Room” Scheme, in which £4,250 per year or below (£2,125 if you are renting together) of your total receipts is considered the tax-free portion.  You would then pay tax on the amount over £4,250.  The down side to this particular scheme is that you may not claim expenses for this rental income.

The second more popular way of calculating tax owed on rental properties is the “Residential Lettings” version which is basically taking the total of your income, subtracting the total of your eligible expenses to come up with your Net Profit.  One of the advantages to this scheme is the fact that if you have several rental properties, you can offset a loss from one property against the profit of other rental properties.  Not to mention that being able to claim expenses will usually bring your taxable income down considerably.

How much tax you will pay is dependent on the total amount of taxable income from all sources.  Therefore, if you also have a job outside of the property rentals, you will be required to add the incomes together.

It will however be up to you as to which scheme works best for your situation.
This is just a basic guide to figuring out how to calculate the tax, but as with any tax matters, there are many exceptions, allowances and changes to the taxation rules, so it is always advisable to check out the rulings with HM Revenue & Customs in order for you to make an informed decision with no surprises down the road.

No matter how you decide to run your property rental business, remember that as a business owner you are responsible for keeping accurate and detailed records for each of your property rentals.  HM Revenue & Customs can ask to see your records along with any supporting documentation at any time, and for up to six years.

The information you will need to keep record of is:

–         All of the rental income you received along with dates you rented the property

–         All income received for services provided to tenants

–         All business expenses

–         Bank statements and any invoices, receipts or rent books

Having a rental income property can be a very rewarding and enjoyable experience – you just need to be prepared and do your research ahead of time.

IMPORTANT INFORMATION

Figures in this article were correct on the date of publishing – these figures are subject to change so they should not wholly be relied upon. Accurate and up to date information relating to tax calculation can be found by visiting the official HMRC website.

Tenancy Deposit Schemes – Basic Guidelines

admin    Landlords, Tenants     landlord responsibilities, letting agreement, Rental deposits, Tenancy deposit, Tenancy Deposit Scheme

Ever since the Government introduced The Housing Act 2004 to protect the tenancy deposits under the Tenancy Deposit Protection Scheme, there have been 3 companies awarded the rights to run two types of Tenancy Deposit Protection Schemes.  Both of these schemes apply to residential property being rented in England or Wales, no matter whether the landlord and/or managing agent operates overseas.  Theses schemes do not apply to commercial property, when rent would be greater than £25,000 or if the landlord is also a resident of the property.

Both types of Tenancy Deposit Protection Schemes are generally supported by some sort of call centre and some would have a way of performing on-line registration or paying for the deposit.  A deposit has been set out as any amount of money paid in addition to rent as security and would include fees for cleaning and amount added to the rent monthly as long as the tenancy deposit is not used for making repairs or paying expenses.

The Custodial Tenancy Deposit Scheme is a deposit held by the scheme in a separate account where the fees were funded by the accruing interest of the Tenancy Deposit or by the government if the interest rate was too low to generate enough interest.   Within this scheme there are two ways in which the deposit is handled.
Several tenants could each give a deposit and it would be designated as Room A, Room B, etc, or there can be one deposit representing all of the tenants.  A main tenant would be chosen for correspondence purposes, however if tenants chose to vacate at separate intervals, this plan would be extremely difficult to control as the deposit must be repaid in full.

The Insurance Based Tenancy Deposit Scheme is differentiated by the deposit being held by the landlord and/or managing agent and is secured by the landlord paying fees and an insurance premium to a Scheme administrator.  It would be the administrator’s duty to ensure enough insurance was in place in order to assure full repayment of the Tenancy Deposit.  Within this type of schemes there are two approved – one being “The Tenancy Deposit Scheme” which can be used by all landlords, however, since April 6, 2009 this scheme can only be used by regulated agents.  The second scheme is the “MyDeposits” (previously known as Tenancy Deposit
Solutions Ltd.) and is aimed more for the landlords.  It consists of a onetime fee plus additional fee for each tenancy deposit, as well as an annual renewal fee.

The penalties can be quite severe for landlords who don’t comply with the Housing Act, so understanding the necessary information is vital to all parties.   At the end of the tenancy agreement both parties will need to come to an agreement as to the amount of the tenancy deposit due as a return to the
tenant.  If both parties are in agreement, the tenancy deposit is required to be returned within 10 days.

If however there is a disagreement over the amount, the desired course
of action would be to go through the Alternative Dispute Resolution (ADR), rather than having to resort to the courts.

The Tenancy Deposit Schemes have been put into place to protect all parties, and it is the responsibility of both parties to understand what is required of them prior to entering into any sort of tenancy agreement.    As with any legal document you should always try to obtain legal advice prior to making a decision on which Tenancy Deposit Scheme you wish to venture into, as well as the tenancy agreement.