In this guide, you’ll find out the advantages of letting, understanding your buy-to-let investment and your legal requirements as a landlord.
The Advantages of Letting Property
If you’re considering becoming a landlord, now’s a good time. In the last few years the letting market has really picked up in Malta and prices have reached the highest point ever seen before due to increased demand and not enough supply. This increase in demand has come mainly from foreign workers and retired pensioners moving to Malta, but also from locals who would prefer to rent than buy.
Even if the market is strong, it’s still important that you make the right decisions to maximize on your buy-to-let. Things you want to consider are:
- You buy a property that is in a good location for rental and appeals to tenants.
- You’re careful picking your tenants so they pay the rent on time and look after your property.
- You understand regulations and laws about renting.
- If you can manage the property yourself.
- Not getting too emotionally attached to the property as it’s not your home. This is a long term investment and you will be very lucky to not have any problems at some stage.
It is always a good idea to speak to one of our member agents before buying-to-let to see where the current biggest demand is.
Understanding your Buy-to-Let Investment
When becoming a landlord, it’s important to understand all aspects of your investment, you will make money on capital growth and rental income. Capital growth is how much the value of the property increases since bought whilst Rental Income is what is paid to you by your tenant. Over time both of these figures should be going up, but in some rare cases may go down for example if the country is going through a recession and property prices start to fall.
To keep your property well maintained, it is recommended to put about 20% of your rental income aside for maintenance, repairs and running costs. This will include:
- Insurance premiums – it is always highly recommended to have building and contents insurance.
- Replacing fixtures and fittings – this could be as a high as 10% of your income, but if you want to keep your property in tip top condition it’s a must.
- Maintenance – things tend to break down after time, always have a budget put aside for this type of repairs.
- Ground rent and communal fees – it will still be your responsibility to settle and ground rents owed annually if there are any and communal fees should the property be in a committee.
- Void periods – this refers to when the property is not in use because it’s in between tenancies.
- Letting agent’s fee – it’s true you could do it yourself, but with the expertise of an agent he can guide you accordingly on getting the best price for your property and most likely has a list of potential tenants ready to move in immediately saving you money in the long run.
Most banks will only allow a buy-to-let home loan for up to 70% of the value of the property which means you will still have to make a significant investment.
Legal Requirements as a Landlord
As a landlord, you will have some legal requirements that you will have to comply with and it’s important to have a good understanding of them.
You will be legally obliged to maintain the property and carry out any major repairs such as structural damage, leaks, electrical and hot water. As for minor repairs (under €50) such as light bulbs, you can put a clause in the contract so they will be at the expense of the tenant.
You will also have to pay a flat rate of 15% tax at the end of the year when you declare your annual income tax return.