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Why are a record number of Landlords selling their properties?

why are a record number of landlords selling their properties

Its a worrying trend to see so many tenants losing their homes, due to a record number of residential landlords selling their properties.

Many of these properties are then being purchased by second home owners, or FHL investors (Furnished Holiday Lets – AKA Airbnb).

Is it wise to sell a residential rental property?

Aside from how awful this is for these tenants, I also question whether this is a wise long-term decision for the landlord too.

That said, I totally understand the motivation. Residential landlords have been squeezed hard by the tax man over the past few years. Their investment isn’t as tax efficient as it once was. In addition, there’s been wave after wave of new legislation and it’s certainly not a risk-free investment option.

Its therefore no surprise why many long-term landlords have become disillusioned with this sector. Especially considering the eye watering house price increases seen in West Cornwall over the past year.

But once sold, what happens with the profit Residential landlords make from selling their properties?

How can you protect your investment and still achieve the same return on investment?

Obviously, everyone’s circumstances are different. So for simplicity, I’m working on the assumption you’re a 65-year-old landlord, you could make around £200,000 net profit from the sale and that your property its currently giving you around £9k salary p.a. How can you be sure to match that income and keep up with inflation each year?

Option 1 – Live off the profit

You decide to put the £200,000 in the bank and draw a ‘salary’ of £9k p.a. This is still the safest place for your money. However, its not a good place to put it, if you want to grow your investment pot. You’d also have to have to increase your ‘salary’ in line with inflation each year, just to maintain the same standard of living.
So based on the UK inflation average of 2.5%, after 10 years you’d have drawn over £89k from your pot. This would leave you with just over half your profit remaining. It’s, therefore, not hard to see how quickly you could run out of funds.

Option 2 – Investing in the stock market

This can give you a healthy return on investment, with historic returns on average of above 5% p.a. This means you could potentially continue to draw an annual salary of around £9k, whilst leaving the bulk of your original investment intact. Although again, if you want to maintain your same standard of living, you’ll have the same issue as you would have had with putting your money in the bank, in that you’ll need to increase the amount you take as a salary each year in line with inflation. This could erode your investment pot, leaving you with a shortfall in future years.

If you decide on this option, you need to remember that investing in the stock market is one of the highest risk investment options and that your investment pot can just as easily go down as well as up. So it’s not something to jump into without doing your due diligence and speaking with experts in this field.

Option 3 – Investing in an annuity

200,000 would potentially give you around £7,500 p.a. So slightly less than the other two options but a lower risk and normally guaranteed for life. However, if you want to index link your annuity, your salary will drop to around £4k p.a. With an annuity, you also need to remember that your money would be locked in. You’d have no access or control over your investment, once you’ve purchased your annuity.

How does keeping your residential rental property stack up against all these other options?

If you decide not to sell your property, firstly you’d continue to receive your monthly ‘salary’ worth £9k per annum. You could also future proof your investment by increasing your rent annually in line with inflation. Secondly, property prices rarely decrease in value. This past year has been an exception, at over 13% but even a conservative year, the growth is around 5%.

Based on this very conservative growth projection your house value would have increased to around £370k in 15 years. In addition, you’d have received income of at least £135k in that time. Giving you a total profit of more than £300k. As you can see that, on paper at least, being a residential landlord still provides an excellent return on investment.

For simplicity, I’ve stripped out all the ifs buts and maybes but there’s still a lot to consider. You shouldn’t be lured by a quick profit now, only to regret it a few years down the line.

So, If you’re a long term landlord and are thinking of cashing in, please think long and hard before you do. Also remember to get property tax and wealth planning advice. For some it will still be the best option, but not for all. Once you’re out of the property market, with the way house prices rise, it will be hard if not impossible to get back in later should you wish.

If you’re worried about all the legislation, please contact us. We can help you to navigate it all. That said, if you do decide to continue to manage your property independently, then you should consider joining the CRLA (Cornwall Residential Landlords Association). This will help you keep your property compliant and your tenants safe.

I’d also love to hear why you think so many residential landlords are leaving this sector. Are you a residential landlord who’s considering selling your property? If so, what’s you reason? If you’re considering turning a residential rental property into an holiday let, then you might also want to read the article I wrote comparing the two. Here’s the link: Compare Residential with Holiday Let Incomes in Hayle

If you have an opinion, please either drop me an email or comment below.

I’m not an investment expert. my notes here and in all my blogs are just my observations (some might say ramblings!). So please don’t read this as advice. Before making any investment decision, please speak with an investment specialist.

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Top 10 Tips for Furnishing a Residential Let

top 10 tips for furnishing a residential let

As a landlord, its often hard to think about what furnishings and décor you should and should not include in your rental property.  So here’s my quick top 10 tips for furnishing a residential let. The Do’s, The Don’ts and The Maybe’s!

Do’s

Carbis Bay apartment - kitchen
Keep it neutral

1. Make sure walls are painted white or magnolia at the start of the tenancy.

2. Provide good quality underlay for carpets. Its amazing how much longer even a cheaper carpet will last with decent underlay. Carpets should also be clean, neutral and hard wearing.

3. Provide lightshades, window blinds (preferably roller) and working, low energy bulbs.

4. Install low maintenance, hard flooring in kitchens and bathrooms.

5. Provide good quality heating.  Not just from a regulation point of view but if you want tenants to stay long term, good, affordable heating is a necessity.

Don’ts

Who ever decided carpet in a bathroom was a good idea?

6. Put carpet in kitchens or bathrooms….. my pet hate!

7. Personalise any walls with your favourite colours. Please keep it neutral.

8. Leave any personal effects at the property.  You might be going travelling for a couple of years and think that leaving things in a locked cupboard is a good idea but for a whole host of reasons this is a bad idea.  Pay for separate storage if you have to.

Maybe’s

Be careful when choosing soft furnishings. These were new and compliant. You also need to allow for wear and tear

9. Soft furnishings – sofas, beds etc… these can be provided but we’d advise against them. If you do provide them, be sure they are compliant to the extremely strict fire safety regulations.  

10. Provide white goods – you have a few options here and this is very much down to personal choice, the type of property you have and tenant you’re looking for.

Finally

Whilst not quite furnishings, you might want to consider garden tools.  If you want your tenants to keep on top of your garden, then providing them with the tools to do so would be a nice touch.

Have I missed anything from my 10 top tips for furnishing a residential let?

As a tenant what furnishings would you have liked, or wished your landlord hadn’t left at the start of your tenancy?

As a landlord, have you got other suggestions that have worked for you and your tenants?

Please get in touch either by commenting below or by contacting us directly.

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How to decorate and furnish your residential rental property

practical kitchen

In this article, we’ll look at how to decorate and furnish your residential rental property.

The basics

Is it Practical and Durable?

‘Will it save me time and money in the long run’? and ‘is it practical and durable’? These should be your main considerations when planning how to decorate and furnish your residential rental property.

Always use professional, qualified trades. This will most importantly ensure everything you do is legally compliant, safe, and carried out to a high standard. It might mean higher costs initially but will almost certainly save you time and money in the long run.

Cutting corners now, will cost you further down the line and may also attract the sort of tenants that are less inclined to take care of your property.

Bathrooms

Think sturdy and practical. Good quality taps will last longer, a solid bath is less likely to get damaged and plenty of tiling will better protect your walls. Flooring is important here too. If the bathroom is on a first floor then be mindful that with a tiled floor, the boards underneath may move over time, so maybe consider lino with a good seal around the edges as a cheaper and lower maintenance alternative. Avoid anything that has the potential to rot or warp if not maintained, especially carpet – an absolute no for bathrooms under any circumstances.

If you decide to tile onto a bathroom floor and it has floorboards or chipboard, get a professional in. If you do decide to lay the floors yourself, make sure you do the basics well. As a minimum, use 20mm thick ply and screw it down with lots of screws to minimise movement. This will be your base to tile onto.

Practical bathroom for a rental property

Making sure your bathroom has a bath is a necessity if you’re considering letting out to families. If you have the space for both a bath and a shower, then that will be perfect. If you only have room for a bath or a shower, then go for a bath with a shower over. Also make sure it has good pressure.

Kitchens

Practical kitchen for a residential rental property

Sturdy, practical and neutral need to be your main considerations for a kitchen in a rental property. Ideally buy heat and scratch resistant worktops. These will withstand tenants potentially chopping and putting pans directly onto the work surface.

Stainless steel or ceramic sinks are better than any plastic-based ones, as they are easier to keep clean and are more durable. Also make sure your kitchen has an extractor hood and decent ventilation to minimise the risk of condensation related issues.

Finally, choose flooring that will cope with heavy usage and is low maintenance. No carpet or real wood and be sure that if you use laminate flooring, its one specifically designed for kitchen use, is sealed correctly and has a long guarantee.

Electric sockets

Provide plenty of electric sockets throughout the house, possibly with USB charging ports built in. Otherwise, you are at risk of tenants using lots of extension cables, which in turn could become fire hazards.

Storage

If you have the space to build in some storage, this will prove popular with your tenants. It will also help them to feel like it is a long-term home if you make it easier for them to keep it tidy and clutter free.

Décor and Furnishings

Walls

Smooth walls and ceilings and white or magnolia paint every time. Do not ever be tempted to personalise the property. Its going to be somebody else’s home and you will limit your market in doing so. The bonus of keeping everything neutral is that when tenants move out, painting over white or magnolia is quick and far cheaper than if you have gone for fashionable colours or a wallpapered featured wall.

You might want to think about mould resistant paint for the high moisture areas, such as kitchens and bathrooms and go for good quality branded paint such as Dulux but not anything too grand. Keep your Farrow and Ball for your own home!

Flooring

Explain to your local flooring company that your property will be a residential let and then go for the most durable and neutral flooring they recommend. Ideally, hard floors in hallways, kitchens and bathrooms and then carpets in the bedrooms. The living area can be either.

Where you have carpet fitted, invest in a good quality underlay. This will extend the life of the carpet and provide better heat and sound insulation. Also, you will not need to replace the underlay every time you need to replace the carpet.

Budget to replace your carpets, at least in the higher traffic areas every 5-7 years. Any replacements prior to this would most likely be down to tenants not looking after it properly. If this is the case then this should be covered by their deposit. After 5 years, it is the decent thing as a landlord to replace it yourself.

Furniture

My advice would be that you do not furnish your residential let property. Letting a property with furniture that does not legally comply could lead to a hefty fine, or even prison for the landlord if something goes wrong. So, it’s just not worth the risk.

The only potential exceptions to this would be for you to provide a fridge/freezer, oven, hob and/or washing machine. However, all electrical items provided will need to be PAT tested yearly to be sure they are safe and legally compliant. You will also be obliged to replace them should they break.

Curtains

It is a nice touch to provide window coverings to at least the main living area. This can be curtains or blinds but at the very least it wise to provide all the main rooms with curtain poles. From a practical perspective, do you really want tenants with little to no DIY skills drilling holes in your newly decorated walls?!

Lighting

All the lighting sockets should have new, low energy bulbs at the start of the tenancy and possibly provide stylish but neutral light shades. The shades are cosmetic, but they look better than bare bulbs when you are marketing the property. This will also save your tenants having to splash out on bulbs the day they move in.

Garden

Set the garden up to be as low maintenance as possible. Check that fences will stand the test of time and that each tenancy starts with a tidy, weed-free garden. You might also want to consider removing any high maintenance plants or accept they may not survive a tenancy.

If you’re particularly fond of your garden plants or pristine lawn, then consider building into the rent the cost of a gardener. Another option would be to try to find a tenant that’s a keen gardener . Then provide them with the right tools to keep on top of it. Do not expect a non-green fingered tenant to do much more than mow the lawn and weed occasionally.

Practical garden for a residential rental property

Providing a garden shed or garage space for your tenants where possible is also a good idea

Other considerations

Heating and boilers

Its best to get a well-known and established boiler brand, with a minimum of 3 but preferably a 5-7-year warranty. This is a larger initial cost but will save you money and time in the long run. It will be easier to get parts and local trades will have a better idea of how to fix any problems. Additionally, you’ll have peace of mind that should anything go wrong in the first few years, you won’t have a large bill to pay.

Extractors and ventilation

If you’re concerned about condensation in your property, then consider an air extractor or heated PIV (positive input ventilation) unit. This will cut down the potential for condensation and ultimately mould. This will make for a nice living environment for your tenants and lower long-term maintenance for you.

Windows, Soffits and Facias

Check these and repair or replace with UPVC as its lower maintenance than wood. If you must have wood, budget for these to be checked and maintained every 2-3 years. Where you can, replace windows with UPVC double glazing. This will add value to your property, be lower maintenance for you and reduce heating bills for your tenants.

Take an inventory

Take a full inventory with photos at the start of the tenancy. Then be sure that you and your tenants sign it. Be sure to give them time to make amendments to it in the first few days of their tenancy. This will reduce any potential disagreements at the end of the tenancy. The inventory should include any pre-existing issues, even slight cosmetic marks, or blemishes.


Please be mindful that you need to be reasonable with your expectations of your tenants. There will be some normal living wear and tear and you should allow for this.

Only deduct from the security deposit where there has been deliberate damage or negligence by your tenant. As an example, scuff marks, or slightly tired looking walls after a couple of years are to be expected. If, however, the house needs to be completely decorated after 6 months, then this would almost certainly be down to negligence by the tenant.


If your property is or is to be fully managed, you agent will take care of this for you.

And Finally

Do not forget to that your property must be legally compliant – see my previous blog; Making sure your rental property is safe and legally compliant Get the correct landlord insurance and consider legal and rent protection insurance.

I hope this has now given you some useful ideas about how to decorate and furnish your residential rental property. Did I miss anything? Please contact me, Deborah at CAM Properties in Hayle if you would like further information about these requirements, or residential lettings in general.

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Making sure your rental property is safe and legally compliant

safe and legally compliant

Please read on to find out what you need to do to be sure your rental property is safe and legally compliant:

EPC – Energy Performance Certificate:

If you’ve recently purchased your property, you’ll have an EPC, so this won’t be an additional cost. If you don’t have an EPC, then you’ll need to get an assessment carried out and your property must be a E rating or above. An EPC costs around £50 and last 10 years. However, its worth thinking about ways to move your rating up. This minimum rating will eventually move up to a C or higher. So, its worth thinking about cost effective ways to push the property rating up if possible.

EICR – Electrical Condition Report

An Electrical Condition Report is a new legislation requirement for 2020/21. All new rental properties on an AST or periodic must now have an EICR. By April 2021, existing rental properties will also be required to have one. These will last for 5 years and the cost is around £180.

LSR –Landlord Safety Report

An LSR is a gas safety certificate. If you have gas or oil central heating, or gas appliances, this inspection must be carried out every year by a certified gas or oil engineer.

Fire Safety

As a first step, make sure you have working and compliant smoke and carbon monoxide alarms. If the property was built later than 1992, the smoke detector needs to be mains fitted. You must then get written confirmation from the tenants that they’ve been shown these alarms are working correctly at the start of their tenancy.

Furnishings

Any furniture you provide must comply with the Fire Safety Regulations of 1988. These regulations apply to all upholstered furniture, even garden furniture. Any items that do not comply, or you’re unsure, must be removed before the start of the tenancy.

HHSRS – The Housing Health and Safety Rating System

The Housing Health and Safety Rating system is designed to be sure you’re providing a safe and healthy living environment for your tenants. The government has produced a list of 29 potential hazards in this 72-page document. Its quite heavy reading but most of the potential hazards are common sense and something most landlords would consider anyway.

Tenancy Deposit Protection

Your tenant’s security deposit must be protected by a government recognised tenancy deposit protection scheme. You’ll have the choice between custodial, or insurance-based schemes.

Disability Discrimination Act 2005

You are required to make reasonable adjustments for disabled people.

Legionella

You have a legal responsibility to carry out a Legionnaires risk assessment. This can be done by a professional or you can do it yourself, as long as you think you’re competent enough to do so. For new tenancies, especially where no-one has been living in your property for any period, we would strongly recommend a professional Legionella risk assessment be carried out. Here’s the link to the government Health and Safety Executive guide for more a detailed guidance on Legionnaires disease.

Insurance

You will need specific landlord insurance for your rental property that will provide you with liability cover and accidental damage from your tenants or their guests.

Useful information

Here is a link to the latest government ‘How To Rent‘ guide that’s come out this month (December 2020)

For further information about any aspect of property rental, or specifically if you want to be sure your rental property is safe and legally compliant, please get in touch, we’d be delighted to help.

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Finding Investment Opportunities in Hayle and Penzance

Investment opportunities in Hayle and Penzance

A landlord asked me recently if I knew of any good property investment opportunities in Hayle and Penzance, as they couldn’t find anything on Rightmove.


My first suggestion was ‘don’t rely on Rightmove to find those hidden gems’


For many years estate agents had no choice but to use them but now with so many other cheaper alternatives out there and the growth of social media, they don’t need to. Rightmove are eye wateringly expensive and most independent agents just can’t afford their fees anymore. Nor do they need them to sell houses fast, if not faster than some of the larger chains.


So how can you find good property investment opportunities in Hayle and Penzance?


Your first job is to find all the places estate agents advertise. You’ll be amazed at how many agents there are, that you may not have even heard of. A lot of the independent agents don’t have the budgets of the larger chains, so have to get creative with their marketing and advertising. Its these guys you really need to route out, they’ll often know the local market to a granular level and will be a font of useful information.


Where should I look to find all my local estate agents and where they’re advertising?


Google or go onto Yell.com and type in ‘estate agents in Hayle’, or ‘estate agents in Penzance’. Or google ‘properties for sale in Hayle’, or ‘properties for sale in Penzance’. Drive around the town and look for ‘for sale boards’. Check out the local newspapers, including the free ones but remember that print advertising is quite expensive, so not all agents advertise all their properties. Also and often, by the time a paper has gone to print, the property will have been sold anyway. Other places to look are Facebook marketplace, Gumtree, Zoopla and The House Shop.


Who, why and how you should register with estate agents

Once you’ve found all the estate agents in either Hayle or Penzance, register with them. But don’t just sign up to their mailing list on a faceless form. Call and have a proper chat and when this pandemic is over, go and see them. Explain what you’re looking for and be open about your circumstances and budget.


Often, like us letting agents, an estate agent will know of a property that’s coming up at least a couple of weeks before they’re in a position to start advertising it. The pro-active ones will use this time to call any potential buyers on their books. This is how the best properties go so quickly. And when I say ‘best’, I don’t mean the perfectly manicured show homes that are a good 5% over the market price because the owner thinks their purple feature wall will add £10k to the value. Your gold dust opportunities are the raggedy round the edges, reduced accordingly to sell quickly types. These, for a property investor are gold dust.


What else should you do before you start investing in the property market?


Whether you are considering buy to let or property development, you’ll almost certainly need good DIY skills or a team of tradesmen you can call on that can turn a property around quickly. Again, this is where getting to know your local estate agents will really help.

Finally make sure you understand all the latest legislation require and potential tax implications for the sort of investment you intend to make.


Here are a couple of investment opportunities in Hayle and Penzance to whet your appetite

investment opportunities in Hayle and Penzance - Malt House

This great little one bedroom flat in a popular area of Hayle, is on with Berwicks. They’re an Independent estate agent and if you’d only been looking on Rightmove, you’d have missed them and this property.

This flat would be a fabulous buy to let opportunity. It would rent out for around £550 pcm, giving you a rental yield of 5.6%.

This 2 bedroom Penzance terrace house has just gone under offer and is on with Whitlocks. Again, if you’d been relying on Rightmove, you’d have missed it!

investment opportunities in Hayle and Penzance - 2 bed terrace house in Penzance

This might make sense either as a development project, or buy to let and really comes down to how good you are at negotiation. Plus how quickly and cost effectively you could turn it around as an investment. Renovated 2 bedroom terrace houses similar to this one in Penzance are now around £165,000-£175,000.
From a buy to let perspective it would achieve around £750 pcm giving you a 6.4% yield. Although there would be additional costs to get it to a rental standard, so this would also need to be factored in.


If you want to investigate whether a buy to let option would work for you in Hayle or Penzance, then please contact us, we’ll be more than happy to have a chat with you.

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Is a 2 or 3 bedroom terrace house in Hayle a better investment?

which house is a better investment

One of our landlords asked if they should buy a 2 or a 3 bed terrace house in Hayle to rent out to tenants. The first question I asked them was what are they looking for from the investment – capital growth in the property or a great yield?

By answering this question will help you figure out which properties you should buy.

Terrace House Prices in Hayle

The average asking price of a 3 bedroom terrace house in Hayle is £214,000 today compared to £178,000 for a 2 bedroom terrace house.

Average Rental Income

The 3 bedroom property will achieve an average rental price of £825 per month, compared to £750 per month for a two bedroom property.

Rental Yield Comparison

This means that a 2 bedroom terrace house will give you a 5.06% yield. Whereas a 3 bedroom terrace house will give you a yield of 4.63%.  Both are tracking slightly above the national average.

Capital Growth Comparison

In 2017 the average 2 bedroom terrace house price was £164,000. In 2020 its now £178,000, which is a percentage increase of 8.27%.

In 2017 the average 3 bedroom terrace house price was £169,000. In 2020 its now £214,000 which is a percentage increase of 26.5%.

Another point to consider is that both property types current ‘for sale’ prices in November 2020 are considerably higher than the yearly average. Therefore, this may or may not be sustainable, as the stamp duty holiday comes to an end early in 2021.

So which is the better option for you?

Therefore if its purely rental yield that you’re looking at then a 2 bedroom terrace house in Hayle will be your best option. However, a 3 bedroom terrace property based on the past 3 years trend, will provide a far higher capital growth.

That said, whilst there is a high demand for both types of properties in Hayle, 2 bedroom property demand is far higher. This is primarily due to the lower than average wages in this area.

So there you have it. Consider whether rental yield or capital growth are your primary objectives. Then look at the demand for the type of property you’re considering buying.

If you would like to chat about rental investment opportunities in the area, please contact us or pop in to see us at our offices.  Because we’re a letting agency our opinions are purely from a rental opportunity perspective.

These figures are not provided to be relied on for property sale, purchase, mortgage investment or related purposes. We strongly recommend that you seek a professional valuation from a suitably qualified professional before making any decision whether to buy a property. You should also seek advice from a suitably qualified estate agent before determining the market sale price of any property you wish to sell.

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Set up costs of a holiday let compared with a residential let

set up costs

There’s been a lot of press articles lately about holiday lets being the a better investment than a residential let. This has led to a stampede of property investors to move away from the traditional, safe and relatively passive residential lettings to, on the surface at least, more lucrative holiday lettings market.

But is a holiday let really a better investment than a residential let in Hayle?

In this article I’ve looked at the first step of initial set up costs for both options. This is based on a 2 bedroom terrace house in Hayle with a purchase value of £170,000.

Residential Let – Set up costs

Furnishing: Minimum requirement: Fresh paint throughout, carpets suitable for heavy usage and easy to clean, curtains, blinds, light shades, Oven and hob, tidy garden – Assuming you employ a decorator and need to purchase new carpets then you’d need to allow around £3,000 initial costs.

EPC (Energy Performance Certificate): By law residential lets must be a minimum energy efficiency of E. You will already have an EPC from when you purchased the property, and this only needs to be renewed every 10 years. There will only be additional costs if you need to bring your property up to this minimum efficiency standard.

Gas safety certificate: yearly. Around £100

Electric safety certificate: from 2020 this will be every 5 years. Between £160 – £200
Total set up costs guide for a residential let property: £3,300

Holiday Let – Set Up Costs

Furnishing: Minimum requirement: decorate to a high standard, carpets, curtains, light shades, beds and bedroom furniture, 3 sets of every laundry item, towels, sofas, dining furniture, white goods, well equipped kitchen, TV, music system, wifi, gaden furniture, BBQ.

You would therefore need to allow around £10,000 initial costs.

EPC (Energy Performance Certificate): There is no energency efficiency minimum legal requirement for a holiday let. However, if you’re hoping to let out all year, its wise to still consider a property that’s E rating or above. It will be you who’ll foot the heating bill for the property and guests tend not to be the best at managing their heat consumption.

Gas safety certificate: yearly: Approx cost £100

Electric safety certificate: You should have an EICR carried out in line with residential let legislation once every 5 years. Its also advisable to have an annual PAT test carried out on all electrical appliances regularly. Neither are currently legal requirements. However, by not taking these steps, could not only invalidate your insurance but also mean that you could be personally liable for any claims should something go wrong.

EICR and PAT Tests – Approximately £300-£400

Total set up costs guide for a residential let property: £10,500

Is there anything I’ve missed? Do you disagree? I’d be interested in your views…..

In my next article I’ll look at the costs and true net income figures for running your property as both a holiday let and a residential let: Compare buy to let with holiday let rental income in Hayle.