What are Landlord costs?
Not all landlords chose to have a buy to let property – some were thrown in at the deep-end with the financial crisis years ago. Others may have inherited property and fancy the idea of receiving a decent rental sum every month, provided they attend to repairs when required.
However, there’s far more involved in being a landlord than that – especially when it comes to the amount you have to spend to rent the property in the first place. Here is a quick list of some of the types of expenses you will encounter in your journey as a landlord:
- Registration. You will have to register to become a landlord. This is a legal requirement and in Scotland, the cost is currently £65 plus £15 for every additional property.
- EPC certificate. This outlines how energy efficient the flat is; a copy of which must be shown to the tenant. This costs from £50 to £100, depending on how large the property is. The good news is, it lasts for 10 years before having to be renewed.
- Gas and electric safety checks. Gas and PAT safety certificates are required annually and an Electrical Installation Condition Report (EICR) must be completed every five years. These must all pass/be satisfactory of course and be completed by regulated contractors. Copies of certificates must be given to tenants.
- Smoke and CO alarms. All privately rented flats must have the right combination of smoke, heat and CO alarms and this varies by property layout and appliance types.
- Landlord building insurance. It’s essential to ensure that your building insurance for the let property and any contents insurance is specifically for landlords. Some building insurance, including most policies arranged by factors for new developments, cover for the owner or a tenant occupying. Landlord’s building insurance will cover additional things like different public liability cover, rent cover and so on.
- Letting agent fees. Many landlords – especially accidental ones – work full-time in other professions. As a result, they don’t have the time (or inclination) to look after a rental property or two. This is where letting agents come in. They can manage the financial side, repairs and maintenance, finding tenants and organising gas checks etc. Naturally, it comes at a price – typically around 15 per cent of the monthly rental income including VAT.
- Repairs. These can be unexpected and costly and is the reason many landlords have a contingency fund. There is always a balance to consider between maintaining properties in dated condition or spending more upfront to improve a property but remember that improvements will attract better tenants.
- Redecorating. Painting the walls, replacing carpets and other furniture all have to be considered after a period of time. You can claim back replacements under the Domestic Renewals Scheme, but only at the end of the tax year. They will all have to pay upfront first.
- HMO licence. If the property is regarded as a House of Multiple Occupation (ie rented out by at least three unrelated individuals who share the kitchen and bathroom) then you’ll need a special licence. In Edinburgh, this can range from £540 (for three tenants) to £900 (for five tenants). The first licence lasts for one year but subsequent renewals last for three years.
- Income tax. However, if your total income is less than £12,500 (personal allowance threshold for tax year 2019/20) including your rental property after expenses have been deducted, then you won’t pay tax.
- Void periods. These can be particularly tough on landlords as it means no rental income, yet the mortgage still has to be paid. This means he or she will end up paying until other tenants can be found. Landlord insurance policies will sometimes protect against this for up to around three months.
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