1. Extra mortgage costs
While anyone who owns a property runs the risk of not being able to pay their mortgage, the risks for landlords can be higher. Lenders are aware of this and most tailor their buy-to-let products to cover this, which may mean they ask for a larger deposit - up to 20 per cent rather than the 5 or 10 per cent required for a residential buyer.
Lenders might also set their rates higher for buy-to-let customers and ask for higher fees when they buy the property – including up to two per cent of the value of your mortgage for arrangement fees.
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2. Set up costs
Before a tenant moves in, there are some basics you need in place - these are the costs of being a landlord you may not expect. Letting agencies may pick up the tab for some of these, but they will no doubt add costs to a landlord’s bill.
- Tenant checks: Tenant references and credit checks, will cost around £400. Landlords also need to register for the Deposit Protection Scheme, which holds on to a tenant’s deposit for the duration of their tenure. Most providers charge a fee that’s a percentage of the deposit – often around 5 per cent.
- Energy Performance Certificate (EPC): Landlords must be aware of the fast-approaching 2025 governmental rule changes surrounding EPC ratings, taking the minimum rating from an E to a C. This will apply to new tenancies from that date and all tenancies in 2028. It is important to start making some improvements now to spread the cost over the next couple of years, especially as fines for not doing this will increase to up to £30,000.
- Gas safety checks: Gas appliances and heating need to be checked by a Gas Safe-registered engineer at least once a year, which costs at least £80 each time.
- Landlord registration: Depending on where the property is, landlords might have to register with their local council. A one-time registration costs between £30 and £80.
- Data Protection registration: As landlords handle their tenant’s personal data, they’re classed as a data controller under the Data Protection Act. By law, this means they need to register the Information to the Commissioner’s Office to process and manage tenants’ data responsibly. Registration costs £40, and this must be renewed yearly.
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3. Letting agents
If you have more properties, or don’t want to be the first port of call every time there’s a problem, you might want to consider a letting agent.
Letting agents offer a range of services and you can imagine, the end-to-end approach can be pricey – between 10 and 20 per cent of the rental price, which can add a significant amount to the costs of being a landlord - so it’s worth considering which parts of the process you’re happy to manage yourself and where you need help.
4. Maintenance costs
Like any home, a rental property needs regular upkeep and unexpected repairs throughout the course of a tenancy.
There are also some legal requirements for landlords to make sure a property is safe for tenants, including annual gas, fire and electrical safety checks. If your property is furnished, you’ll need to make sure furniture and electrical equipment meets current safety standards.
While a tenant is responsible for tasks like cleaning and general upkeep, the landlord needs to ensure the structure and exterior of the building, is up to standard and any common areas are maintained to a sufficient standard.
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5. Paying tax
You’ve already paid stamp duty, but don’t forget that any profit you make on renting out your property is subject to income tax. You’ll need to make sure you’ve got money put aside at the end of every financial year to cover your tax bill, which will vary depending on how much money you make.
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* Tanya Elmaz is Director of Intermediary Sales at Together, and has been a buy to let investor for 30 years *
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Pleased I don't have to pay £80 each for Gas Safety Certs.
Get mine done in the same afternoon, with me attending these.
Nor 10-20% agent fees.
Also pleased to be mortgage free (apart from fully Offset one on my own home). At last I'm seeing benefits of my cautious approach - compared to what I was advised in the past about doing lots of new BTLs.
I'm old enough to remember negative equity, and viewing flats trashed by their owners that they had to leave due to it (when I was first looking to buy my first home).
Unless of course someone sees something I've missed.
.. and there's still bear traps out there to catch you!
Void periods are also a hidden cost.
Whilst this comes under maintenance, the true evaluation of any damage can only be assessed when the tenant has vacated. Not all checking out inventories pick up the hidden repair costs, tenant's fail to report.
Then you have the Section 8 evictions, non payment of rents, the section 21 evictions, which includes separate court fees, separate bailiff fees etc.
Stamp duty hikes for LL's and Tenant’s fee ban costs etc.
When a LL has to wait more than 6 months for a possession order, gets no support from the government and then the same tenant's get rewarded with the "Renter's reform bill. "
💯 Correct…
And payment of full council tax during void periods.
And CGT when/ if you sell.
And HMRC charge tax in January and July.
Yes I think a few more than 5 as well as the annual gas check you’ll need to annual Service + monoxide detector
The 5 year DEICR, annual Fire Alarm system Cert’ the Emergency Lighting annual Cert’ oh I forgot maybe you haven’t got them so you’ll have to pay to install, you probably won’t have fire doors already either so they will cost you a few hundred quid each door by the time you have them fitted with frames upgrades , stops and seals a load of expensive ironmongery, hinges special security locks but openable from side without a key / thumb screw in case of fire, so probably times 5 to 6 doors for your standard Terrace House if your a landlord you can paint them yourself because your time is considered nothing.
This will be required if you need a HMO license which is becoming mandatory all over the place spreading like wild fire.
Oh how could I forget there will be a Licence Application fee for anything up to £1’650.00. per Application non transferable.
So a few more than 5.
Just 5!!!! I can think of several more!
Only a 20% deposit? It's highly unlikely anything would clear stress tests with such a small deposit. 40% or 50% deposit is more likely.
Only 2% product fee? To get a half decent interest rate several lenders are charging 5% or even 7% product fee. 3% or below is good going at the moment and tends to reflect in a higher interest rate.
£400 tenancy set up fee seems excessive. Most referencing is automated these days. A credit check costs about £10. Companies such as Open Rent, Vouch or the NRLA tenant check service all do pretty good referencing. Tenancy agreements are all online so what exactly is the £400 supposed to cover?
No such luxury in Scotland, can’t charge any tenant fees!
Rent and deposit only!
Responsible Landlord - we can't charge any fees to tenants. They're referring to the fees they charge landlords. Obviously they all get rolled up as part of our overall costs and get passed onto tenants as higher rent.
As a self managing landlord it costs me very little for tenant referencing and a tenancy agreement takes less than 15 minutes to churn out.
Jo. It’s not 15 minutes for me it takes hours even nights a huge cost, inconvenience, disruption damage to the Business.
We had none of this crap for decades before
Computerisation.
Its not helping Landlords or Tenants often bars them from getting the property especially with all this referencing and share codes.
Say 5 Sharers come from some part of the World and all don’t have Share codes or some not valid because they only last 30 days and have to go through the nightmare again, probably loose the property.
There is no such thing as a holding Deposit / equivalent only to a weeks Rent allowed by law, why would anyone compromise their property for a ridiculous rule and I gave up taking Deposits anyway courtesy of Shelter in 2007, that’s as big a black one, as Khan’s one about ULEZ plastered on the back of 245 Double Decker Bus saying 9 out of 10 cars in outer London are Compliant when you can plainly see it’s not true, he wouldn’t make much money if 90% are Compliant ?.
Anyway it’s ok for you Jo with your academic skills for want of a better word, none of this boloney is helping us provide better quality affordable housing but one obstacle after another. I would like to see how those digital academics would preform with the real material aspects housing. So sorry for ever been a landlord and another £45k gone to revenue yesterday despite the big lump other half they got in January to keep the doss, come on now step up how much did yee pay.
Michael Foley
What a man !
Referencing, thats a laugh. Referencing agencies go on financial backgrounds, mainly. Crooks have lots of money, and know how to evade checks. I could write a book on deceit practised by prospects. In reality you can't find out a fat lot about them. Micheal, computers are your friend, I've had problems with professional fraudsters and spent hours and hours inthe library checking them out. I was able to extricate myself from a land fraud and guide my solicitors,but never got any compensation from the land registry,who were complicit.
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