What Are The Costs Of Becoming A Landlord?
Buying a property and renting it out can be a great long term investment.
You should be aware though, there are big risks and big costs involved. Not to mention the time a landlord has to invest in their property.
Becoming a landlord is still increasing in popularity though. So, don’t be put off by the workload and costs. Because if you get it right, your costs will be more than covered, and you should make a tidy profit. Below you’ll find some of the major costs landlords face.
Big Insurance Costs
If you want to rent out your property, you’ll need a specific type of insurance. You can’t just rent the property out. Landlord insurance will cover you for losses connected to the property and its contents. This kind of insurance is more expensive than ordinary home insurance. Sometimes a tenant can help with this expense but they won’t always.
All insurance policies are different so make sure you shop around and always check the small print. You should be especially careful to make sure you’re covered for malicious damage to the property.
Your letting agent isn’t going to do their job for free. This is why it might be worth considering going ahead without one. It is more than possible to seek a tenant without a letting agent nowadays. The internet makes things much simpler; there are plenty of respectable websites on which to post adverts.
Some will still prefer a professional letting agent though. And this is sometimes the right call. Although it’s more expensive, you will get a diligent and experienced individual on the job for you.
All properties need to be maintained and repaired when things go wrong, whether you’re living in it or renting it to someone else. These costs can spiral quickly, and a lot of landlords can forget that. Make sure you have the money set aside to deal with such occurrences.
You’ll also be obliged to clean it regularly, be respectful and fair to your tenants and hopefully they’ll do the same in return.
If you have more than one property (or even dozens), you probably won’t have the time or resources to do the cleaning yourself, so be clever and make use of a residential cleaning services provider like Ideal Cleaning.
Getting a buy to let mortgage isn’t the same as getting a personal one. And, yes, you guessed it, it’s more expensive. You’ll probably need to put down a bigger deposit, and your interest will usually be higher. Therefore, it’s definitely worth looking around for the very best deal you can find.
Don’t forget, you have to pay tax on any money you make on your property, the same as with any other job. You’ll only pay tax on your profits though, so it’s vital to keep good, accurate accounts. If you don’t, you’ll regret it at the end of the tax year.
Remember to deduct any expenses from your income and then you’ll have your income tax. It’s not too complicated as long as you know how much you have going out and how much you have coming in. Your tax will be calculated in the same way as everyone else, so just check the current tax rates to find out what you have to pay.
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