Landlord tips: 8 things that landlords need to budget for
As a landlord, a buy-to-let property is a business investment. Therefore, there is often no emotional element in the decision. However, many landlords often overlook various costs associated with buying a property and end up paying for the consequences later on down the line. Here, we take a look at the most important costs that buy-to-let landlords should remember to budget for.
1. Stamp Duty
As well as forgetting to factor in stamp duty to the overall cost, many landlords also forget about the 3% surcharge that has recently been introduced. This means that buy-to-let landlords could pay £10,000 on a property worth £250,000.
2. Maintenance
While these costs may vary from year to year and property to property, you need to have some spare cash for when things do go wrong. Plus, it’s important that the property is up to the standard of similar homes on the market. In addition to this, if you’re buying a leasehold property, you need to know the cost of service charges and ground rent as well as any likely increases. This information will be found in your leasehold agreement. After each tenancy, it’s also a good idea to freshen up the property, repaint the walls, hire professional cleaners and update any furniture. A recent study showed that landlords spend around £2000 on maintenance costs every year.
3. Insurance
If you need a mortgage for an investment property, proof of buildings insurance is generally needed. You may also want to consider contents insurance to protect you in the event of damage. Many landlords also seek landlord insurance. While it may cost upfront, not having the correct insurance could cost you when you later rely on it.
4. Empty periods
Whether you have a tenant or not, your mortgage and utility bills still need to be paid. Therefore, it’s crucial to budget for void periods. Your property could be empty for weeks, even months at a time so it’s important to have enough money aside to see you through.
5. Letting agent fees
If you use the services of a letting agent to find a tenant, carry out checks and manage the property, you need to consider the costs. Plus, any legal fees also need to be factored in. While it may seem expensive, many landlords prefer using a letting agent or property management company to relieve them of some of the responsibility.
6. Energy efficient
As of April 2018, rental properties now need to have an EPC rating of E or above. If a rental property is below this rating, appropriate work should be carried out. This will cost. It’s also important to remember that your property must pass all relevant gas safety checks and Electrical checks, which again can cost.
7. Landlord licenses
Currently, UK councils have the power to decide whether landlords must sign a code of practice. Whether you need a license varies from borough to borough as does the cost of applying for one. Get in touch with your local council to determine whether or not this affects you.
8. Cuts in mortgage interest tax relief
The rate of how much mortgage interest landlords can deduct from their tax bill has been changing yearly and will continue to drop until it reaches zero in 2020. If you have originally been relying on this for some extra money, you should think about looking elsewhere.
If you are a buy-to-let landlord and have any questions, why not get in touch today. Alternatively, if you’re looking for a buy-to-let property in and around the Leeds area, speak to one of our property experts today.