Rick had two sons and three daughters, all moved out, and his top floor was empty. He decided to rent his place so he could earn some money from the space. He hung the “to let” board, and he had renters lining up on his door in no time.
After much thinking, they decided to rent the place to a newly married couple. In the beginning, everything seemed fine. But soon, his renters started coming to his door with every little problem.
Water is not coming, water is coming, but the pressure is too low, a clogged toilet jammed waste disposal and whatnot. It was taking too much of his time and effort.
When kids lived, these minor problems occurred, but they used to manage, but the renters wanted a perfect running home and were not ready to adjust. They needed immediate solutions to the issues.
Rick thought that renting his place would bring some easy money, but on the contrary, it was proving to be costly and time taking. He could not get rid of his renters as their rental agreement was valid for a year.
He never knew this could be so stressful. Landlords may have it easy from the outside, as they don’t have to do anything to make money. But there are many drawbacks that people are not aware of.
Buying real estate just to rent is a long-term commitment that needs hard effort and financial caution. They need a guaranteed loan approval no credit check direct lender to meet the rental needs.
Due to new regulations and certain unfavourable tax changes for landlords, it might not seem to be worthwhile in the UK. It is very difficult to keep the tenants happy and tax them. Several organisations are willing to assist the renters.
The British Landlords Organisation is the one and the only free association representing landlords in the UK, as per a few renters. Apparently, renting your house can be paying you negatively because of the taxes.
Renters often need to set aside funds for repairs and renovations. Refurbishment becomes necessary sometimes, for instance, when someone damages the property.
Then some people are unemployed and are renting your place. They often rely on rent loans for unemployed. They cannot make the payment in such cases, and the renter suffers the loss.
So, before deciding whether or not to acquire property to rent think about every aspect in detail. In this article today, we discuss a different aspect of renting with pros and cons so you can make an informed decision.
Let us discuss the pros of being a landlord first.
The prospect of a significant income is frequently cited as a primary reason people choose to be a landlord. Landlords with enough places to rent get sufficient rental income each month.
Clearly, the greater a landlord’s property portfolio is, the more money he or he will make overall. And, imagine if a landlord has paid off all of their mortgages on these properties, their earnings will be much greater.
Now, the success of any rental property is primarily dependent on having a trustworthy renter who pays their rent on time and does not damage your property.
Your rental amount must be sufficient to cover the basic costs of owning and maintaining a home, with enough money left over for personal expenses.
Landlords, as the name suggests, are real lords. They are their own bosses and do not have to answer to anybody. They have total control over their income.
This gives a sense of independence and allows them to establish their own life plans, make all financial decisions, and operate.
It is true that the UK government has imposed heavy taxes on rental income but there are some perks as well. The government provides some perks in the form of costs. Maintenance charges, electricity bills, agency fees, and insurance payments are all deemed ‘allowable’ expenses.
Owning a rental property makes sure that you have a dependable asset, making money for you for a very long time. It is deemed as a long-term investment and can be dependent on.
Prices and rents around housing are constantly growing in the UK. Hence, a new rental property will be more profitable over time. This is a kind of business that will never go out of trend. People always need places to rent.
It is a safe and secure method of investment.
Rental properties in the United Kingdom are taxable income. The Landlords must pay income tax on the earnings from renting properties. These taxes are very specific and very complex and are often revised.
The tax mostly depends on how much profit a landlord makes and what are their personal financial circumstances. Once a person starts generating money from a rental property, they should notify HMRC as per the law.
Depending on the amount of profit made by a landlord, they must file a tax return.
So, now we have learnt about the pros, let’s move on to the cons.
Renting your property may be an unexpected job since you are the landlord and responsible for keeping things perfect all the time. You are responsible for any emergency repairs needed to be made in your properties as they arise.
The emergencies do not have to be big, so that many small emergencies can be a reason behind your headache. Your renters might approach you or call you for reasons such as a broken dishwasher or a clogged sink.
It is not the responsibility of your tenant to spend money on repairs, no matter how little they appear to be. Some landlords keep an all-time handyman for the help, while others hire a contractor or an organisation.
Well, the problem is big or small. This is enough to give you anxiety, so it is necessary to be ready for any such event.
The total cost of purchasing and renting a property goes considerably beyond the mortgage and taxes. A landlord must account for upfront expenditures such as mortgage deposits, surveys and other fees. And of course, how can you ignore the cost of remodelling charges and money spent on new furniture and repairs if and when you buy a new property.
A successful landlord is always ready to pay for inventory, deposit protection, and other paperwork like gas safety certificates, energy efficiency certificates, etc. Whether you are dealing with tenants or not, you will have to pay the mortgage.
Of course, a landlord can take out emergency cash loans for unemployed to meet those expenses.
So, there we discussed all the pros and cons. Being a landlord is not for everyone. Make sure you are prepared to take the risk.
The British Landlords Organisation is still the only non-profit organisation in the UK representing landlords. It now costs money to have money in your bank account.
Each month, landlords get enough rental revenue to cover any outstanding mortgage payments on their residences. This means that the larger a landlord’s property portfolio is, the more money they make. Consistent profits are a plus. Typically, owning a rental property is seen as a safe long-term investment.
Landlords benefit from the fact that they are their own employers and do not have to answer to anybody. It is not for the faint of heart to rent out property since it requires a major investment of time and money and the maintenance of different work life.
Because house prices in the United Kingdom are predicted to rise in the next years, a new rental property will almost certainly become more profitable. Landlords in the United Kingdom are given tax benefits by the British government. When you rent out a property in the United Kingdom, you must pay income tax on your profits.
Landlords will also have to pay a higher rate of stamp duty than the average homeowner. When their properties require emergency repairs, most landlords are expected to be prepared for anything. This might be anything from a broken dishwasher to a blocked faucet, but no matter how minor the repairs appear to be, it is not the tenant’s obligation to pay for them.
When buying a new home, additional costs include:
Being a landlord is not for everyone, but for those willing to take the risk, it can be a lucrative endeavour with the correct financial prudence and awareness of all the factors at play.