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Starting up as a landlord is doubtless a lucrative business idea. Of course, you need a large amount of money to start a business of this nature. But if you happen to have savings property is a great investment. If you are considering buying flats or houses to let out then, you need to think about your decision for a long time. Yes, being a landlord will make you a large income, but at what cost?
Many people assume that the only money you need to spend when becoming a landlord is the money you spend on the house. That is not true. There are many other costs to being a landlord, which will cut into your profits. Before you make the tough decision to invest, you ought to know all the facts. Here are some of the hidden costs to becoming a landlord.
Rent To Buy Ratio
Not every city in the UK has a good ‘buy to rent’ ratio. For example, you might buy a property for more than you can make back on rent. Few people appreciate the difference in housing prices across the country. Some places have cheap property you can buy, for example in the midlands. Just look at estate agents in Nottingham, and you will see that you can get a lot of house for your money. You can ask a decent rent price for properties in the midlands, but you may find it hard to find permanent tenants. In the south, there will be more tenants for your property, but the initial cost of the investment will be greater. Make sure you look into all your options before you buy.
Getting landlord insurance to cover your property is vital. The insurance protects you from having to pay out for damages within your property. The point is that when people rent a property they are less careful with maintaining it. In rented accommodation, things break all the time and, as a landlord, it is your job to make sure that things get fixed. Of course, you can get a deposit from your tenants by way of security, but you will also need to pay for insurance. By paying for landlord insurance, you ensure that you can always afford to get things fixed within the property.
If you buy a house, you don’t have to worry about ground rent. If you buy a flat (or a few flats) though then, you may need to pay ground rent. It is quite hard to understand why you have to pay ground rent. When you buy a flat, you buy a single cell in the building, but you don’t own the ground that the block of flats stands on. You will need to pay a monthly subscription to whoever owns the ground. Usually a company or business owns the ground that your property stands on, and it is your job to find out who they are. The fee will not be too much, maybe in the region of £10 per month, but these small costs add up.
Again, if the property you have bought is a flat you may need to pay maintenance for the property. Maintenance costs can cover all manner of things. You can be paying for anything from the cleaning of the hallways in the block of flats to a receptionist at the front of the building. It is most likely that new flats will ask you to pay maintenance as they are more modern and kept in better condition. Maintenance costs can be anything from £50 to £300 a month, so make sure that you know how much it will cost before you buy the property.
As with any other income you will have to pay tax on any rent you receive from your tenants. You should take the tax into consideration before you set the rent price as you may end up losing out because of tax. In the same respect, it is your job to ensure that someone pays the council tax on the property. You can write into your tenants’ contracts that they need to pay the council tax, but if they fail to do so, the responsibility is yours.