The true cost of being a landlord

A new report has found that private residential UK landlords are losing £1.2               
billion a year because of unexpected costs.
More people are renting than ever before and this is only set to rise: 2013 will
be the first time in half a century where more people are living in private rented
accommodation than in social housing. Forecasts from the Joseph Rowntree
Foundation indicate that an extra 1.5 million 18 to 30 year olds will be renting by
2020.
This presents many possibilities for established and would-be landlords and can
provide a lucrative source of income. However, landlords have been given a bad press
lately. Often presented in the media as greedy and money-grabbing, this ignores the
fact that many landlords are ‘accidental’ and they rent their properties out of necessity
(for reasons including needing to relocate, not able to sell their homes etc).
So while there is money to be made, many would-be landlords are heading into the
property market with rose-tinted glasses….
If you are considering letting a property, here are some points to consider:
The hidden costs…
Whether you have one property or several, it is always important to remember
that leasing a property is a commercial transaction and with any business there are
associated costs. These ‘hidden costs’ can include tenant arrears, the impact of having
a vacant property and unexpected maintenance charges. If you’re unaware of or
unprepared for these costs they can mount up and make a (sometimes significant) dent
in your rental income.
For example, the study shows that around 40% of landlords pay more than £1,000 a
year on unexpected costs, while one in seven says they have paid more than £1,500.
Around 70% of landlords have experienced vacant periods in the last three years. Less
than a third of these landlords were prepared for these costs.
But it’s not just financial costs…
Whilst there are clearly financial implications of being a landlord, there are also more
personal side-effects to be aware of. For example, 82% of landlords have experienced
inconveniences such as missing a personal event or having to cut back on social
activities due to being a landlord. One in five landlords say they have been called out
to their property four to five times a year with 20% saying they have taken a hit on
income from their day job to tend to matters.
Risk-proof your rental experience
Preparation, meticulous budgeting and foresight are therefore key when you are or
are considering becoming a landlord. Naturally there are some issues that will be out
of your control but others you can safeguard against.
Keep a forecast of projected costs and a detailed budget throughout. Think about
all the costs which may be involved, including maintenance costs, natural wear and
tear of furniture, carpets etc which will mean they need replacing over time, potential
increases in buy-to-let mortgage rates. Keep a contingency fund in case of unforeseen
repair work.
Consider using a letting agent to manage your property. Agents can handle a
range of letting-related jobs, charging commissions based on the level of workload
that they take on: from simply finding a tenant through to fully managing the
property. Therefore the right choice of letting option for any landlord depends on the
level of responsibility, time, energy & risk that they personally are prepared to take on
compared to paying for a letting agent to do it for them.
We at Harringtons Lettings offer one of the lowest arrears rate within the Brighton
and Hove area. We only take on tenants with UK Home Owner Guarantors so that
your income is more secure. We also have a separate Management department who
are solely there to look after your property and can tailor our service to meet your
needs. To find out more about our landlord services feel free to contact us on 01273
749169.