Increased mortgage costs
If you have a personal mortgage on a property you want to rent out you will need to inform your mortgage lender of your properties change of occupancy status.
Most mortgage providers will increase your mortgage interest rate by 1.5% if you want to rent your property out.
This can add a sizeable amount to your monthly mortgage payments, so consider this extra cost when deciding on how much to charge for rent.
This rate increase will set your mortgage to align with buy-to-let mortgage rates. If you are not fixed into a deal with your mortgage provider at this stage you can shop around to find a better rate before renting your property.
Rental mortgage charges
You need to inform your mortgage provider you intend to rent your property out.
They will ask you to complete a letting application.
At this stage you will be expected to pay between £30-£50.
You will have the option of paying this fee up front as a one-off fee via direct debit or you can add the amount to your mortgage.
If you add the letting application fee to your mortgage you will be paying interest on this amount for the term of your mortgage.
Whether you have a mortgage or not, it is important to amend the type of insurance you hold on your property. This is especially important for 2 reasons:
Home buildings and contents insurance on your property or possessions will not be covered in a rented property, therefore you could become severely out of pocket if you need to claim.
Landlord insurance is the only insurance that will cover your rented property and tenants if renting your property out.
Finding boiler cover
As a landlord you are responsible for servicing your properties boiler every 12 months. Failure to do so could result in the deterioration of the boiler and the expense of replacing or repairing it.
You can find ways to reduce this cost by comparing and taking out landlord boiler cover.
Not dealing with tenants deposits correctly
When you receive your tenants' deposits you must move the funds into a tenant deposit protection (TDP) scheme. If you fail to do this immediately and are caught, you will have to do one of the following:
Repay the money
Pay it into a tenancy deposit protection scheme within 14 days
Failing to follow one of these two options may lead to you being taking to court by your tenants, where you could be ordered to pay up to 3 times the deposit amount back within 14 days.
For more information on the Tenant Deposit Scheme visit the GOV.UK website.
Paying tax on rental income
Any profit you make from renting your property that exceeds £2,500 a year will be liable for tax deductions.
The amount of tax charged is dependent on whether you are a normal or higher tax payer.
If you decide to charge more rent based on your area or personal circumstance, consider the impact any rental income may have when it comes to your overall tax status.
For further details on paying tax on rental income just visit the GOV.UK website.
Agreeing long-term contracts
Having great tenants is very important, but with the cost of living increasing constantly you will soon find keeping your rent amount the same will eat into your profits.
You will also find that as time goes on your mortgage interest rate may increase leading to higher monthly payments.
If you are still only charging the same amount for rent while your outgoings increase your profits will gradually diminish.
To explore the ways you can increase rent just visit the GOV.UK website.
If you provide an unacceptable quality of repairs or don't attempt to do any repairs in your rented property, your tenants can claim against you in the small claims court for repairs under £5,000.
If you want to avoid this happening you may want to consider hiring professional tradesman to conduct any repairs in your rented property.
This will ensure that the work is done quickly and efficiently and without defect.
If you have to provide major repairs on the property but have existing tenants in your property, you may be liable to pay for alternative accommodation should the work force the tenants to relocate temporarily. This cost should be covered under your landlord insurance.
If you failed to take out landlords insurance then you will need to find a way to afford to repair your property and pay for your tenants to live elsewhere until the work is completed.
For guidance on making household repairs as a landlord you can visit the GOV.UK website.
Without knowing your rights you could lose £1000's from missed rental payments and repairs on your property.
If you have difficult tenants it's important to understand what rights you have.
If you have a dispute with your tenants, whether it's with the cleanliness of your property or missed rental payments, there is a set process you need to follow.
Details of how to settle disputes can be found on the GOV.UK website.
Understanding your rights will ensure that you don't lose money from unwilling tenants.
Estate agent fees
If you use an estate agent to advertise your rented property they will charge you a set fee. They will also take a percentage of the rental income if you continue to use them to manage your property.
If you rely on an estate agent to rent your property, you will either need to:
Reduce the monthly income you receive from the rented property to compensate the cost of using the estate agent
Increase the tenants' rental amount to leave room for the estate agent fees and for you to make a profit
Almost every estate agent charges different amounts for their fees.
If you compare prices from several estate agents you will allow yourself the strongest chance of getting the best deal.
If you successfully negotiate with the estate agents you can potentially earn a little bit more income, but equally you could make less if the estate agent decides they want a bigger percentage to pay for the exposure they will provide your property.
Finding a way to avoid unexpected landlord expenses can save you a small fortune, so prepare yourself as best you can and expect to have a successful venture as a landlord.