A new report has found that private residential UK landlords are losing £2.1billion a year because of unexpected costs. Northwood MD Nick Cooper takes a look at these hidden costs and advises on how to safeguard against them
“More people are renting than ever before and this is only set to rise:
2013 will be the first time in half a century where more people are living in private rented accommodation than in social housing. Forecasts from the Joseph Rowntree Foundation indicate that an extra 1.5 million 18 to 30 year olds will be renting by 2020.
This presents many possibilities for established and would-be landlords and can provide a lucrative source of income. However, landlords have been given a bad press lately. Often presented in the media as greedy and money-grabbing, this ignores the fact that many landlords are ‘accidental’ and they rent their properties out of necessity (for reasons including needing to relocate, not able to sell their homes etc).
So while there is money to be made, many would-be landlords are heading into the property market with rose-tinted glasses….
If you are considering letting a property, here are some points to consider:
The hidden costs…
Whether you have one property or several, it is always important to remember that leasing a property is a commercial transaction and with any business there are associated costs. These ‘hidden costs’ can include tenant arrears, the impact of having a vacant property and unexpected maintenance charges. If you’re unaware of or unprepared for these costs they can mount up and make a (sometimes significant) dent in your rental income.
For example, the study shows that around 40% of landlords pay more than £1,000 a year on unexpected costs, while one in seven say they have paid more than £1,500. Around 70% of landlords have experienced vacant periods in the last three years. Less than a third of these landlords were prepared for these costs.
But it’s not just financial costs…
Whilst there are clearly financial implications of being a landlord, there are also more personal side-effects to be aware of. For example, 82% of landlords have experienced inconveniences such as missing a personal event or having to cut back on social activities due to being a landlord. One in five landlords say they have been called out to their property four to five times a year with 20% saying they have taken a hit on income from their day job to tend to matters.
Risk-proof your rental experience
Preparation, meticulous budgeting and foresight are therefore key when you are or are considering becoming a landlord. Naturally there are some issues that will be out of your control but others you can safeguard against.
Keep a forecast of projected costs and a detailed budget throughout. Think about all the costs which may be involved, including maintenance costs, natural wear and tear of furniture, carpets etc which will mean they need replacing over time, potential increases in buy-to-let mortgage rates. Keep a contingency fund in case of unforeseen repair work.
Consider using a letting agent to manage your property. Agents can handle a range of letting-related jobs, charging commissions based on the level of workload that they take on: from simply finding a tenant through to fully managing the property. Therefore the right choice of letting option for any landlord depends on the level of responsibility, time, energy & risk that they personally are prepared to take on compared to paying for a letting agent to do it for them.
Northwood’s Guaranteed Rent service removes the risk of both rental arrears and the loss of revenue due to the property being vacant as Northwood effectively becomes the tenant. You are therefore guaranteed rental income each month, regardless of whether the tenant pays the rent or whether the property is occupied. Northwood is dedicated to making the rental process as easy of possible for you, so if your time is precious and you cannot dedicate yourself to landlord duties this could be the solution.
If you’re thinking about letting your property, speak to your local Northwood office for more details of their services.”
You can read more about The True Cost of Being a Landlord here http://www.northwooduk.com/new-release and watch Nick Cooper and finance expert Emma Lunn share their advice for accidental landlords here: WebTV Show: Advice for accidental landlords