Are you thinking of setting up a rental property business? This can be a great way to make some money and build up your property portfolio. You must be aware of several important things, including legislation relating to rental properties and landlords’ responsibilities. In this blog, I will cover the essential information you need to set up your property business in 2025.
It’s important to think about what kind of property you want to invest in. You can choose from residential lets, commercial and business property, short-term and holiday lets, student accommodation and more. This decision should be based on your financial situation, goals and your areas of expertise. If you have experience in managing commercial property and are happy to wait for long-term investments to pay off, this could be a good area for you to get involved in. If you have a limited budget and are just beginning your investment journey, then buy-to-let residential property is a good place to start. Many investors diversify their portfolios and have different kinds of property – this could be a long-term plan. Doing thorough research into different types of rental property can help you clarify your goals.
There are benefits to owning property for your rental business through a limited company rather than in your own name. The tax benefits and reduced personal liability are obvious pros to a limited company, but there are drawbacks too such as higher mortgage rates. Basic rate taxpayers will also not benefit that much from having a limited company. It is possible to start off as a sole trader and then create a limited company as your business grows.
You can use your own money to start a rental property business, but not everyone has the liquid cash to do so. It can also be a smart move to use other sources of funding. Buy-to-let mortgages allow landlords to pay off the interest on their mortgage for a fixed term, allowing for more short-term profits. They can then pay off the principal of the mortgage later on when the property has appreciated in value. Other no-money-down investment strategies can allow you to start investing with as little of your own money as possible such as joint venture property investment, seller financing, rent-to-rent and others.
There are several important pieces of legislation that govern property rentals that landlords should know about including the Landlord and Tenant Act 1985 and others. These cover things like the minimum requirements for rental properties that keep tenants safe, fire safety standards, gas and electrical safety checks, energy efficiency standards and more. Different types of rental properties have specific legislation too, for example, houses in multiple occupancy and holiday lets require a fire risk assessment. There are other legal requirements that landlords must fulfil, such as providing residential tenants with the How to Rent guide, doing Right to Rent checks on potential tenants, providing tenants with contact information, and keeping tenants’ deposits in a government-approved deposit protection scheme. Landlords should also know how to legally evict tenants. Not complying with the above leaves you vulnerable to fines, sanctions and even criminal prosecution. You should also take the time to learn about any upcoming legislation that will affect property investors and landlords, such as the Renters (Reform) Bill.
Landlords and other property investors need to pay tax on their income, either as corporation tax through a limited company or income tax as a sole trader. Other taxes apply too such as Capital Gains Tax and Stamp Duty Land Tax. You can reduce the taxes you pay through your rental property business by applying as many exemptions and reliefs as possible, making sure you declare all applicable expenses, and transferring profits when you can to a partner or spouse. Using an accountant who specialises in investment property can help you reduce your tax burden while remaining compliant with all tax laws.
Once your rental property business is established and making a profit, you can think about ways to expand. Consider exploring different property types to diversify your portfolio as mentioned above, or reinvest profits into more rental properties in your chosen niche. You should set short-term and long-term investment goals to keep you on track, although it’s important to review these plans and adapt them based on changes in the market. Staying informed about the latest market trends is essential for any successful property investor, and will help ensure your business continues to grow. Consider an exit strategy too if your long-term plans involve selling the business for a nice profit in the future.
Starting a rental property business can be very rewarding, and will give you the chance to grow your wealth and achieve your financial and personal goals. It’s important to do your homework first, gathering information and learning everything you can about property investment. The links to our other blogs in the above sections are a great way to start. Staying updated and informed about market trends, new and upcoming legislation and the latest property news is important too. Bear in mind that you will probably make some mistakes along the way – treat them as the valuable learning experiences they are and move forward armed with that extra knowledge. With some careful planning, informed, research-based decisions and that all-important positive mental attitude, you can build a successful rental property business in 2025 and beyond.
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