Whilst we work with hundreds of landlords across the Gloucestershire region, we are very aware that not everyone is cut out to be a landlord and in fact, for some, the potential pitfalls often do deter many prospective landlords from ever fulfilling their Buy To Let dream.
Of course, if everything is running well, being a landlord can be pretty good fun and require very little work, especially if you use the services of a property management company or letting agents to take care of the day to day, month to month running of the property. But when things go wrong or the unforeseen suddenly becomes the now, this is when it can really start to look like a decision you could end up regretting.
Here are the pros and cons of being a landlord, based on our experience and some feedback when we asked our current landlords their opinion on this subject.
The Good Bits
Owning one or more rental properties of course provides a monthly income, and where this monthly income is more than the costs (including mortgage fees, letting fees etc) then you will be making a profit based on this income. Therefore, if your rental income is more than your rental costs, you should gain a regular income from your rental properties, which is always a pretty good reason to do or invest in something.
An Asset That Increases In Value
Generally, property prices will rise, and whilst over the course of history there have been ups and downs, property is now worth far more today than it was compared to 30 years ago. There are many factors to this, including location, demand and property type, but there are very few investments that will gain the same kind of value growth as property, especially when you purchase in an area that has high demand for homes.
A Strong Market
As we mention above, the demand for homes is currently at a huge peak, with more and more people needing a place to live and yet such a shortage of property to live in, especially when it comes to renting. Therefore, when you are investing in a market that is strong, not only are the rewards good, but you can also be assured that these rewards will continue to be for some time, as the population is not going to decrease and the amount of homes being built will not catch up to the required demand for many years, if at all.
And The Bad Bits
When your property is empty, then it is not earning you money, and on top of that, it is going to be costing you money, as you still need to pay council tax, utilities bills and of course insurance, which can sometimes rise should the property be unoccupied for longer periods of time. Even though you can get empty property insurance, having the hassle of an empty property and then needing to find tenants again is never a good thing, and from time to time can seem quite stressful.
Damage And Costs
Not everyone loves your property as much as you do, so do expect the odd bit of damage and the costs that go with fixing this. Whilst this should generally be covered when you work out your finances, things like a broken boiler or smashed window can cost a few hundred to fix, which is once again something to consider before you become a landlord. Try to make sure you do have a contingency budget just in case things do need a bit of TLC or something goes really wrong.
Potential Tax Implications
And finally, any income made from a property must be declared, which if it is making a profit after expenses then you will be liable to pay tax, as it is an income and will be treated as taxable in most cases. If in doubt, speak to a decent accountant before you purchase the property, or to a letting agent, as they can advise you about this and the kind of costs you could be looking at.