Overheads of being a Landlord
Many people think of a landlord as a rich individual who has properties all over the place, and it is true that this does apply to some landlords, but by no means all. Most landlords have mortgages, and this means that they have mortgage interest to pay, so the rent that they get is by no means all pure profit.
In fact, landlords have quite a number of overheads, and in many cases, they are running their properties as a business, so they incur a number of different costs which would never occur to the person in the street.
One of the overheads of many landlords is that of letting agents’ management fees. There are differing views on this, with some landlords preferring to handle all the work themselves and save on the fees. These can vary of course, but on a property being rented for, say, £800 a month, a typical fee would be almost £1,500 a year, so is a fair old chunk. However, other landlords prefer to pay the fees on the basis that it saves them a lot of hassle. “You pays your money and you takes your choice” as the saying goes.
Some landlords require a licence while others don’t. It depends on your local council. Typically, this may be £1,100 a year for a standard HMO (House of Multiple Occupancy) and can go up to as much as £6,000 a year for a large HMO.
Then you need insurance for your property. It is not mandatory, but it would be ill advised not to have it. Costs can vary, but typically could be around £220 for a two-bedroom home. Then there is an EICR – Electrical Installation Condition Report. Since July last year it has been a requirement that landlords have one of these in order to show that the property meets national electrical safety standards. It has to be renewed every five years at a typical cost of £200. An Energy Performance Certificate is now also mandatory. This has to be obtained before any viewings are undertaken, and costs £65 every ten years.
If the property has gas, then a gas safety certificate is another requirement. A gas safety check must be carried out annually and undertaken by a Gas Safe engineer. Cost – typically around £45 a year, but can be as much as £150. There is also a need for smoke, carbon monoxide, and heat alarms. These don’t cost too much if battery operated, but it is best to have wired-in alarms.
Of course, there is the small matter of income tax. This can vary according to whether you are a basic rate taxpayer or pay at a higher rate. The higher rate is 40% of the profits that you make.
Then there are the inevitable periods when your property is empty. You have no income but running costs such as mortgage interest and insurance still have to be paid. If you are running your property yourself, there is also the cost of tenant acquisition. You may also need to pay for certain repairs or redecoration while the property is empty. There is also the cost of ongoing maintenance when things go wrong, such as new tap washers needed, or roofing tiles coming loose in a storm. If the property is furnished, the fridge or cooker may come to the end of its working life and need replacement.
There are also legislation driven checks to complete such as right to rent and for peace of mind you may want to do background checks on your prospective tenant.
On top of that, if you are a DIY landlord, you have the time that you spend carrying out things yourself. Finding tenants, and then showing them around your property. Carrying out an inventory report, and interim reports also take up quite a bit of time but are another necessity.
At Reports2Go, we can help you with the last one of these because we produce an app which can help save you a considerable amount of time when doing check-in, interim, and check-out reports. It takes the form of iOS/Android software which you can download to your mobile, and then you work through each room in the property. This is so much faster than writing everything down in a notebook. The software also prompts you as you go through each room, so that you don’t miss anything.
And yes, it is free software. When you have finished your inspection, you simply upload to your portal on our server, and then it will be ready to download in a few minutes.
Gary, 18 June 2021
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