Can you afford to become a landlord?
The costs include:
- Switching from a residential to a buy-to-let mortgage - you are obliged to inform your lender if you intend to become a landlord or your buildings insurance may be invalidated. Some lenders will charge you a fee and may review your interest rate.
- Tax on any profits - the rate you pay depends largely on your other income.
- The cost of registering and protecting a tenant's deposit - around £100 (although one scheme, the Deposit Protection Service, is free.)
- Gas safety certificate - this depends on the number of gas appliances you have. British Gas currently charges £65 for a boiler-only gas safety check.
- Energy performance certificate - budget for between £50 and £100
- Landlord insurance - prices are highly variable depending on the area of the property and the type of tenants that occupy it
- Repairs and maintenance - responsibility for these usually lies with the landlord, although this may not be the case if you lease the property to a council or housing association
- Letting agency fees - look at the headline fees as well as the small print in case of unexpected extra charges such as a fee if you decide to sell up.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.
This type of insurance covers the structure and fabric of your property – the bricks and mortar, not the contents (for which you need contents or home insurance). If you have a mortgage, the lender will insist you have a suitable buildings insurance policy in place. Many lenders offer their own building insurance policies, but you don’t have to buy it from your own lender but you have the option of shopping around. The insurance covers you for the rebuilding costs, not the market value of the property.