A First-Time Landlord: Essential Costs to Consider

Becoming a landlord can be a smart financial decision. In addition to enjoying a regular sum each week or month that can pay off your mortgage, you also could receive a higher return on your investment in the future should you decide to sell.

However, becoming a landlord in the UK can be a big responsibility, so you must make an informed choice to identify if it’s the best step for you. Read the following advice on the essential costs to consider before becoming a first-time landlord.

Understand the Buy-to-Let Mortgage Costs

It is likely your monthly mortgage repayments will be your biggest outgoing. To secure a better interest rate, you should pay a large deposit, if possible.

There are also different mortgage options available, which you must thoroughly review before you sign on the dotted line. For example, a variable rate could lead to your mortgage prices fluctuating throughout the years, while a fixed sum will ensure you pay the same figure each month.

To make the right decision for your needs, you should consult a buy to let conveyancing solicitor to understand the intricacies of the property investment and they can handle every aspect of the process on your behalf.

Save for Refurbishment Fees

To attract or retain tenants, you will likely need to refurbish and redecorate the property every few years. For this reason, you should set aside a fraction of a tenant’s rent payments each month to cover the cost of your various expenses.

Consider work you have completed on your own property for a rough estimate on how much money you’ll need to inject back into it. It is, however, worth bearing in mind that any renovations you make will be tax-deductible.

Secure Landlord Insurance

It is imperative to invest in landlord insurance with buildings and contents cover, which will ensure you are financially protected should the property experience damage or your items are stolen. The cost of insurance will be determined by your chosen area and the cover you require.

Void Periods

There will likely be times when there is no tenant living at a property, which will require the mortgage repayments to come out of your own pocket. Whenever you’re in between tenancies and want to fill the home at a faster rate, you should hire a letting agent to find a good tenant quickly. What’s more, they can also collect rent, deal with tenant problems, and organise maintenance and repairs on your behalf.

Pay Income Tax

Renting properties to tenants will be viewed as a business, so you will need to pay income tax for any profit you earn from your portfolio. The government will view profit as any surplus you receive from a rental income. There are, however, tax-deductible expenses that can reduce your tax bill, such as:

  • Landlord insurance
  • Letting agent fees
  • Repair and maintenance costs
  • Buy to let mortgage fees
  • Refurbishment fees

As you can see, there is more to becoming a landlord than purchasing a property and finding a tenant. It is essential to consider the above costs and services to make the right decision for your needs and finances.