When you’re thinking about becoming a landlord, you need to know all the financial implications before you commit yourself to what could end up being a huge expense.
There are some costs that you have to bear as a landlord, by law.
Tax Implications
Any income that you make from renting out your property is subject to income tax and has to be declared. The only time that this might not apply is when you are only renting out part of your home, while you continue to live there, in which case there will be a tax free allowance under the ‘Rent a Room Scheme.’
The Tenancy Deposit Scheme
If you take a security deposit from a tenant, some schemes are free, but many of them charge the landlord for their services, and in some cases you could have to pay out £100.
Gas Safety Certificate
You must make sure that you have an annual inspection of any of the gas appliances in your property if you intend to let it out. The inspection must be carried out by a professional member of Council for Registered Gas Installers (CORGI). The costs can vary but are usually around the £80 - £100 mark.
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As the landlord, you are legally obliged to keep the property in habitable condition. Although you’re not expected to cover the cost of damage that might have been caused by the tenants, you are liable for is maintaining and repairing the structure and exterior of the property as well as any baths, sinks showers and sanitary items, plus the heating and hot water installations in the property.
The Energy Efficiency Certificate
All properties now have to have an Energy Efficiency Certificate that can be shown to prospective tenants. The inspection and certificate will cost you around £60 but only has to be renewed every ten years. Since April 2018, by law there is a requirement for any priavtely rented properties to have a minimum energy performance rating of E.
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Insurance
It’s essential for a landlord to make sure that there is adequate buildings insurance covering the property. Contents insurance is advisable, and you can take out a limited contents insurance policy that covers essential fixtures and fittings if the property is let unfurnished – or a policy that will cover the actual furnishings you provide if you let furnished. Obviously, the tenant must make their own arrangements to cover their possessions.
Utility Bills
This one is totally up to the individual landlord, but in a competitive rental market, some landlords offer to pay some of the utility bills for a property – this could include any or all of them, and cover council tax, electricity, gas and water.
Letting and Property Management Agents
This is another optional expense, but if you think you are likely to be too busy to manage the everyday letting out of your property, you might choose to use the services of a letting agent instead. This doesn’t come cheap – they can charge around 10% of your annual rental income for just getting you a tenant – and after that if you opt for a full property management programme the costs could rise to 15% of your annual rental income.
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