What Does It Cost to Become a Landlord

Having a buy to let property means you benefit from monthly rental payments and long-term capital accrual. But you do have to spend quite a bit upfront, as well as fork out for ongoing costs. It’s always worth considering these before you splash out on a rental because you like the sound of being a landlord and the potential monetary advantages it brings. Here’s a quick Property Loop guide to the typical extra costs involved in having your own rental property: 

Buy-To-Let Mortgage 

Unless you can afford to pay for your buy to let property in cash, you’ll probably end up getting a buy to let mortgage. The interest will be slightly higher than a residential mortgage (because there is more risk). But, the advantage to the landlord is that because such mortgages are interest-only, it means the monthly mortgage payment will be less. 

Service Charges and Ground Rent

The majority of buy-to-let purchases are smart city centre apartments in London, Manchester, Leeds, Sheffield etc. This means there will be ground rent to pay to the freeholder. There will also be service charges for the upkeep of the communal stairs, landscaping etc. Ground charges could work out at around £300 a year and service charges £160 a month. 

Letting Agent Fees 

You can advertise and find tenants for your property yourself, you can do so via an online property agent (like ourselves here at Property Loop) or you could bite the bullet and head to a high street letting agency. If you are opting for the DIY version then you’ll have to fork out for a Tenant Reference Agency. Sign up to an online letting agent and there’ll be marketing costs. A high street letting agent will be the most expensive (around 10 to 15% of your ongoing rental income). 

Property Checks 

Gas and electricity checks must be carried out before your tenant moves in. Gas tests (costing around £35) are an annual provision. You will also have to make sure your Energy Performance Certificate has at least and ‘E’ rating. This is carried out every 10 years or at the start of a new tenancy. You are also obliged to get a legionnaires test on the property (at a cost of around £80).  

Insurance

Insurance is essential (certainly, you may not be approved for a buy to let mortgage if you don’t have buildings insurance). It can protect you against damage to your property from the likes of flooding and fire. Landlords insurance is the best type to get since it covers both the structure of the building and the inside fixtures and fittings. 

Rent guarantee insurance means you will still receive a monthly rental income in the event the tenant defaults or you are experiencing a void period. Home emergency cover can be good in the event of flooding etc.  You can expect to pay anything up to £300 a year for insurance cover. 

Wear and Tear  

What exactly is wear and tear? The very act of living in a property and using furniture, carpets, appliances etc means that fabric will fade over time and the toaster or kettle etc wear out. As a landlord you will be expected to replace these – at no cost to the tenant.  

And Now the Good News

Yes, the costs mentioned above do add up. But the good news is that you can deduct most of them from your tax bill. Simply include them in your self-assessment return. See, there’s always a light at the end of the tunnel.

Looking for an online property agent you can trust? Then get in touch with the team here at propertyloop.co.uk. 

Built by experienced property investors and landlords, the website connects renters and owners directly. Why not sign-up to see it in action?  

It’s a free platform that only charges a small fee once you get your rent money in. Your property is featured on all major search and comparison portals as well as advertised by PropertyLoop everywhere else on the Internet.  

You don’t have to worry about finding good renters since that’s the job for the platform. Receive offers straight to your mailbox and select the renters that are right for your property.  

Need access to the busy London property market? No problem at all! PropertyLoop is the London market specialist with years of experience and unique knowledge. Whatever your needs are, you can always speak to our friendly support staff. Renting property is made as simple as one, two, three… 

Share article