If you are thinking of becoming a landlord then there are a few things that you need to know first. It sounds great using a home that you earn to earn a regular income but just like any other business there are snags that need to be overcome.
What Are The Advantages Of Being A Landlord?
The major advantage is the income that you will receive from tenants on a regular basis. You will collect rents from your tenants each month that will more than cover any mortgage payments that you have and provide an operating profit for you.
While you are collecting these profits each month, it is very likely that the value of your property is appreciating (if you bought a property in the right area) so when you are ready you can sell your property for a profit as well.
Although you will have to pay tax on your rental income, there are a few tax deductions that you can take advantage of as a landlord. You can claim the following expenses against your tax bill:
- Professional services
- Accounting services
- Wear and tear depreciation
- The cost of buildings and contents insurance
- Cleaning the property and gardening
- The replacement of damaged water pipes and disposal ducts
- The replacement of damaged furniture
- Repainting the property
It Is Your Own Business
Being a landlord means that you are running your own business and this means that you will be making decisions about the operational costs, drawing up rental contracts and agreements and if and when you sell your property. This can be very stimulating and rewarding.
With the income that you receive from renting you can save this for a pension fund or other purpose. If you find yourself without a home for some reason you can move into the property as long as there is space of course.
Disadvantages Of Being A Landlord
Your Money Is Tied Up
Some landlords are concerned that their money is tied up and they won’t see a return for a long time. It is better to go for the long term view if you want to be a landlord. Should you decide to sell your property then this will take time too.
There are a number of costs that you will incur as a landlord. You will need things such as landlord insurance, maintenance of the building, the supply of furniture and fittings, a gas safety certificate and an energy efficiency certificate. Then there are the costs of finding tenants such as advertising or using letting agents.
It Can Be Time Consuming
Landlords can often find themselves at the beck and call of the tenants. Dripping taps, boilers that are not working and other minor problems need to be sorted out quickly. It can be a time consuming activity even with one property let alone if you are contemplating a portfolio of properties.
You Need To Understand The Legal Position
You will need to spend time understanding the legal issues of being a landlord. For example where do you stand if the rent is late and how do you handle deposits and evictions. The smart landlord is always aware of these things.
In our view the advantages of being a landlord far outweigh the disadvantages. You can hire a letting agent to do a lot of the maintenance work or hire a local trade’s person. The income potential is very exciting and there is so much demand for good quality rentals at the moment.