How much does it cost to be a landlord?
There's no simple way to estimate how much it costs to be a landlord, but you are guaranteed to pay certain expenses.
The costs of being a landlord include fixed costs – like health and safety certificates – and variable expenditure, like unexpected repair bills or letting agent costs. As a landlord you can earn a good income from your property investment, but the unpredictable nature of many landlord costs means you should always make contingencies to cover any emergencies.
|Gas Safety Certificate||For an annual landlord cost of about £80, you must ensure a Gas Safe registered engineer inspects all your gas appliances in order to receive a renewed gas safety certificate each year.|
|EPC (Energy Performance Certificate)||With costs starting from around £35, you’re required by law to have an EPC as a condition of being a landlord. Your certificate is valid for 10 years and is required to prove how energy efficient your property is. You must have an EPC minimum rating of E before a new tenancy can begin.|
|Landlords Insurance||Although it’s not mandatory, Landlords Insurance is one of the most essential costs of being a landlord. Your Landlords Insurance quote will depend on the level of cover you take out. Your Landlords Insurance cover can include Buildings Insurance, Contents Insurance and add-ons like Accidental Damage Cover. Many mortgage lenders won’t allow you to borrow without Landlords Insurance.|
|Letting agent fees||High street letting agent costs can be prohibitive for landlords. You can expect to pay between 8% and 14% of your rental income on letting agent management fees, with an annual tenancy renewal fee of approximately £120. You can reduce your costs with online letting agents which are an increasingly popular option.|
|Mortgage interest||One of the most obvious landlord costs is mortgage interest payments. You will need either a specific buy-to-let mortgage – usually with higher interest – or a ‘consent to let’ from your residential mortgage lender, which will increase your interest rate by 1% or 2% or come with an administration charge if your terms are kept the same.|
|Fire safety||A pair of battery-powered smoke alarms which you install will set you back about £25 – one of the cheaper costs of being a landlord. However, two wired smoke alarms powered from the mains will cost at least £125 for the installation. You’re obliged by law to install at least one smoke alarm per floor, and a carbon monoxide alarm in any rooms that contain a solid fuel burning appliance.|
|Home repairs||Repairs and maintenance are one of the unavoidable costs of being a landlord, and you never know when you might have an unexpected bill for a broken boiler, cooker or electrics. You should have a contingency fund and Insurance policy to meet any landlord costs that may arise from damage in your home.|
|Capital gains tax||Unless you sell your property within 3 years of buying it, you’ll need to pay Capital Gains Tax if you make a profit when the property is sold. You have an annual exemption allowance which increases the longer you own the property.|
|Finding tenants||Letting agent costs include finding tenants – an average of 8% - 14% of your annual rental income – whereas online letting agents cost as little as £50. Of course, if you know someone who wishes to rent your home, these landlord costs are essentially zero.|
|Furnishing a property||A furnished property comes with higher landlord costs as you’ll need to repair and replace items subject to reasonable wear and tear. You can offset this by charging higher rent compared to an unfurnished property.|
|Void periods||The period between tenancies can represent some of the biggest costs of being a landlord, given the prospect of no rent and the need to decorate a property and undertake repairs. Having funds in reserve means you can pay for ongoing landlord costs while you wait for a new tenancy to begin.|
|Utility bills||If you offer tenants an all-inclusive deal with a higher rent, your landlord costs will include water, gas and electricity bills.|
|Redecorating a home||You'll need to redecorate your home every few years – usually between tenancies. Laying new carpets and painting the walls comes at a cost, but will help you achieve a higher rental income.|
|Landlord licence||Depending on where you live, you may need to obtain a landlord licence. There are 70 councils in England that operate a licensing scheme, so it’s worth doing your research as the licence can be one of those unexpected costs of being a landlord. All private landlords in Scotland, Wales and Northern Ireland must register for a landlord licence.|
|ICO registration||For a fee of £40 per year, landlords are obliged under the Data Protection Act to register with the ICO. This is applicable to individuals and organisations that process personal information, such as landlords who store, use or delete tenants’ personal information on electronic devices.|
|Potential legal fees||While most tenants are law-abiding, responsible citizens, if your tenant breaches their tenancy agreement through excessive noise, damage or other disturbances and refuses to leave, you may need to serve an eviction notice and pursue legal action at your own expense.|
How much does Landlords Insurance cost?
The costs of being a landlord in insurance terms depends on which cover plan you choose. A standalone Buildings Insurance policy is available at a cheaper price point, but will only cover the structure of the building and its fixtures and fittings, as well as garages and outbuildings. Buildings and Contents Insurance as a combined policy will bring higher landlord costs, but protection when it comes to household goods, furniture and furnishings owned by you. Additional insurance cover options like Accidental and Malicious Damage can add to your landlord costs.
Find out more about our Landlord Insurance