In 2020, owning your own property and renting it out to others can be extremely profitable. If you live in a big city like London, for example, you’ll find that rental prices are very high and so there is a lot of money to be made. Of course, when you want to rent out a property in an expensive area, you need to be willing to pay the initial price to secure it for yourself.
While there are many benefits to becoming a landlord and it can bring in a lot of cash, there are also additional costs. If this is a business that you are considering starting, read on to hear what you need to know.
The Cost of The Property
It goes without saying that the first cost that you will encounter when becoming a landlord is the cost of the property. You will need to cover these costs and even if you secure a second mortgage, you will need to afford the deposit and the monthly payments if you don’t have a tenant to cover them. Property prices can fluctuate relatively easily and so you need to know when the best time to buy is. Remember that some areas will be more expensive than others even if they don’t offer a higher return.
Often, the more profitable properties are those that have multiple residents. For example, if you invest in a 5 bedroom property in London, you can have five people paying rent each month at very high prices just for a single room. However, if you do decide to rent out to multiple people at once, you might find that you need to pay for an HMO license. This will depend on where you live in the UK and it can be quite expensive.
When looking at HMO licensing, you might also want to think about HMO insurance. There are plenty of policies that will cover this kind of rental agreement and can put your mortgage provider at ease. Take a look at quotezone.co.uk for some affordable quotes for your HMO insurance.
In 2020, many landlords start this kind of business as a side hustle that doesn’t require much work on their end. While renting out a property can provide you with a lot of cash, there are obviously going to be both work and costs involved. Someone needs to look after tenants, make sure that the property is functioning properly and ensure that rent is delivered on time.
If you don’t want to have to deal with these things each month, it might be better to hire a property management company. However, you need to be aware that this can be costly and can eat into your profit each month. If you decide to go it alone, you’ll need to be willing to put in the work.
Even if you do decide to become a private landlord, you are going to have to pay for some advertising costs if you want to get the right tenants in your property. There are some websites that you can use to advertise your property, but they might require a membership fee or a one-off cost to get your property listed.
If you want a letting agent to advertise your property for you, you will need to be willing to pay the costs each month. This can amount to a lot and can be hard to manage. You might find that you need to spend a lot of money on this before you even get tenants through the door.
Finally, you will need to make sure that you are able to afford the expenses when something goes wrong in the property. For example, if the washing machine reaches the end of its life or you need to fix a leaking roof, this is going to come out of your pocket.
If you are using a property management company, they will charge you for this and will likely add their own cut for organising it on top of the cost. A landlord who doesn’t deal with these kinds of problems is one that isn’t going to be appreciated by tenants. You need to be willing to approach these issues quickly and ensure the safety of your tenants.
Is It Worth the Cost?
If you are looking for a new business venture and want to make a lot of profit, this could be the right route to take. As long as you are able to front the money for the property and look after your tenants, you could make a lot of money being a landlord in the UK. Just remember that you will have all of these additional costs to deal with along with the cost of legal assistance.