Rental property can provide a good income but there are costs involved as well.

Letting agents

The basic service offered is to find you a tenant, including advertising, interviews and credit checks. Agents will also offer a full management service which includes finding a tenant plus managing the property and tenants for you, collecting rent and paying bills. The letting fees of a high street vs online agent require consideration.

High Street letting agents

Their basic service starts around 8% of the rental price and some offer a “no let no fee” policy. A full service can be an average of 15% of the monthly rent, also check out any additional costs.

Online letting agents

Often a set fee around £50 is charged for the initial let and then varying levels of service may be provided up to a full managed service after the property is let.

No agent

You can find your own tenants which will save money but is a time consuming process. There are free online services where you can advertise such as Gumtree or spareroom.co.uk and also social media is a good way to spread the word.

Once you have found tenants don’t forget to get credit check and references. Getting the right tenants in your property can save money in the longer term.

Landlord insurance

Standard household insurance doesn’t cover the same risks as a landlord insurance policy. Check out our residential landlord or commercial property insurance. You will also need to consider contents insurance if the property is furnished and you can also consider cover for loss of rent, providing alternative accommodation if required plus damage caused by tenants. Remember there may also be legal fees if a tenant has to be evicted or they take you to court.

Safety checks and maintenance

While your tenant may undertake some basic maintenance such as looking after the garden, a landlord is responsible for keeping the building safe and in good repair so regular checks are recommended. There is also a legal obligation to carry out an annual safety check on gas and electrical appliances plus provide fire extinguishers and smoke detectors.

Cleaning costs

If tenants have left your property in a poor state then you may be able to use some of the deposit for restoration but in many cases it is the landlord who pays of the cleaning and any redecoration.

Rent guarantees

It is often the case that your property is not rented out for all 12 months is a year so you need to ensure that funds are available to cover costs, including utility bills to cover void periods.

There is also an option of purchasing rent guarantee insurance if your tenant can’t pay their rent.

Buy to let mortgages

This type of mortgage has higher interest rates, fees and often a requirement for a larger deposit than a personal mortgage. If you let out your own home you need to advise your mortgage provider, it’s worth looking for financial advice and shop around for the best deal.

Legal fees and administrative charges

Small charges soon add up and can include:

• Tenancy agreements
• Registering with a deposit protection scheme
• Obtaining energy certificates
• Utilities
• Security measures
• Setting up a limited company if required

Income tax for landlords

Profit from rental properties is subject to tax. Permitted costs should be included in expenses – make sure you keep receipts. While you will have to pay for the service it may be worth working with an accountant as this may save you money overall.

Cost of your time

Managing a portfolio of properties takes time, even if you work with a letting agent there are occasions when you have to get involved. With careful planning however the investment of your time is worth the reward.

If you would like to review your residential landlord insurance or commercial property insurance please get in touch with the team at Lockyers or call 01924 278222.