Is anyone here a landlord?

SideWinder · 7 Aug 2011 at 14:03

I want to learn more about the number side of being a landlord - extra costs, setting up fees, bills etc.

I understand there would be the actual cost of the property, the mortgage but the rest would be paid for by the people renting off me. So that would be council tax, electric, gas and any other little bills.

What else would there be? Would there be 'setting up fees' as i mentioned above? Can anyone be a landlord? Are there specific conditions or rules?

MrMoonX · 7 Aug 2011 at 14:17

repairs, insurance, decorating, agent fees, advertising, referencing etc. to name a few landlord costs, its not all profit you know!

Kemik · 7 Aug 2011 at 14:22

MrMoonX said:
repairs, insurance, decorating, agent fees, advertising, referencing etc. to name a few landlord costs, its not all profit you know!

All tax deductible too

Are you going to be renting it out fully furnished? There's an additional 10% wear and tear allowance available too if so.

So you'll need to consider tax. It's calculated as:

Rental income
Less: Mortgage interest (not capital!), agent fees, referencing fees, repairs (not improvements), etc.

Multiply your profit by your marginal tax rate to get tax due.

thedoc46 · 7 Aug 2011 at 14:23

SideWinder said:
I want to learn more about the number side of being a landlord - extra costs, setting up fees, bills etc.

I understand there would be the actual cost of the property, the mortgage but the rest would be paid for by the people renting off me. So that would be council tax, electric, gas and any other little bills.

What else would there be? Would there be 'setting up fees' as i mentioned above? Can anyone be a landlord? Are there specific conditions or rules?

Edit: Ahhh can someone move this...

Yes, I am. You also have to be on hand to repair any problems. If you are an existing home owner, you should know how much maintenance a home takes. Unless you are willing to pay through the nose for someone else, which will immediately eat into all your profits, you better get your boiler suit on !

mattyfez · 7 Aug 2011 at 14:28

Not really, your mortgage company will need to know it's a rental (they will probably sting you for it over a regular deal).

You will need buildings insurance, tennant is responsible for contents, not sure if they need to know its a rental or not.

You need a gas safety check done yearly (about £100)

The deposit from the tennant must be kept in a DPS scheme and the tennant given details.

Doing an iventory with pictures/digital video and a list of ant issues is critical in terms of deposit disputes, needs to be signed and dated before a tennant moves in, again you can use a generic template for this.

Going though an agency may not be the best idea but it depends on your circumstances, you dont get much service for your money, (they will charge for all the above) and you can download/buy generic tennancy contracts.

Obviously you need to be available to deal with emergencies such as broken windows, water leaks etc.

Capital gains tax may apply to the rental income depending on your finacial situation.

If the house is empty you are liable for council tax (at a refuced vacant occupancy rate).

Thats all I can think of.

SideWinder · 7 Aug 2011 at 14:31

Kemik said:
All tax deductible too

Are you going to be renting it out fully furnished? There's an additional 10% wear and tear allowance available too if so.

So you'll need to consider tax. It's calculated as:

Rental income
Less: Mortgage interest (not capital!), agent fees, referencing fees, repairs (not improvements), etc.

Multiply your profit by your marginal tax rate to get tax due.

It would be fully furnished.

Could you point me in the right direction/provide a few figures for referencing fees and agent fees?

Also with mortgage interest, does that only apply if the mortgage cost is the lowest per month and therefore not actually paying it off but just paying the interest...? If that makes sense.

So as a rough example...

Mortgage could be £1000 a month,
3 tenants £500 each so £1500 a month,

That is £500 excluding the above to cover repairs and any extra fees? I assume the majority of the fees would occur at the start of each renting contract?

mattyfez · 7 Aug 2011 at 14:32

thedoc46 said:
Yes, I am. You also have to be on hand to repair any problems. If you are an existing home owner, you should know how much maintenance a home takes. Unless you are willing to pay through the nose for someone else, which will immediately eat into all your profits, you better get your boiler suit on !

You cant do some repairs yourself like you can if its your own house, gas maintenance for example needs to be done by certified gas engineers.

Attu90 · 7 Aug 2011 at 14:34

Income tax on your net profit, if the net profit is less than £2.5 k then it can be collected through your PAYE, if its over than you have to do a Self Assessment tax return.
If your new to it all get an agency to sort it all out for you.
Also, if you taking a bond (4 to 8 weeks worth of rent) remember this isnt your money to spend but you can earn any interest off of it so its worth opening up a separate bank account just for this money .... but dont spend it.

mattyfez · 7 Aug 2011 at 14:39

Attu90 said:
Also, if you taking a bond (4 to 8 weeks worth of rent) remember this isnt your money to spend but you can earn any interest off of it so its worth opening up a separate bank account just for this money .... but dont spend it.

Thats actually unlawfull, the bond must be placed into a deposit protection scheme.

VeNT · 7 Aug 2011 at 14:50

I'd point out that 2 of the last 3 landlords didn't do decorating (we had to)
also we had to pay for references and half of the agency fees
tbh I think landlords have it quite sweet.

SideWinder · 9 Aug 2011 at 20:58

SideWinder said:
It would be fully furnished.

Could you point me in the right direction/provide a few figures for referencing fees and agent fees?

Also with mortgage interest, does that only apply if the mortgage cost is the lowest per month and therefore not actually paying it off but just paying the interest...? If that makes sense.

So as a rough example...

Mortgage could be £1000 a month,
3 tenants £500 each so £1500 a month,

That is £500 excluding the above to cover repairs and any extra fees? I assume the majority of the fees would occur at the start of each renting contract?

Any more comments on the above or landlord advice?

Kemik · 13 Aug 2011 at 00:04

SideWinder said:
It would be fully furnished.

Could you point me in the right direction/provide a few figures for referencing fees and agent fees?

Also with mortgage interest, does that only apply if the mortgage cost is the lowest per month and therefore not actually paying it off but just paying the interest...? If that makes sense.

So as a rough example...

Mortgage could be £1000 a month,
3 tenants £500 each so £1500 a month,

That is £500 excluding the above to cover repairs and any extra fees? I assume the majority of the fees would occur at the start of each renting contract?

Sorry SideWinder, only just seen your reply.

I have no idea how much the costs are. I just know how to treat them for tax purposes.

E.g. mortgage payments (£500 interest £200 capital)
repairs (£100)
agents fees (£120)
income (£1,500)

You'd be taxed on £1,500 - 500 - 100 - 120 - (1,500 x 0.1 wear and tear allowance) = £630 a month.

Your estate agent will withhold 20% at a basic tax rate as required by HMRC. You'll still have to complete your own tax return (at least it is advisable, it's not difficult, honest!) to ensure you pay the correct amount of tax.

The biggest problem you'll have with tax is if repairs are capital or revenue in nature. Only revenue expenses are deductible. HMRC have a few good articles on their site to tell you which is which.