As more and more households are building ADUs to earn a supplemental income, homeowners are now becoming investors and learning the responsibilities of becoming a landlord.
To the uninitiated, being a landlord might sound like a lucrative gig. Earning semi-passive income in rent sounds amazing, right?
However, if you’re considering getting into the property market and being a landlord, there are a lot of expenses to consider. Mortgage and repair costs are a given, but what else will you need to dip into your wallet for?
Here, we’ll discuss some of the lesser-known costs of being a landlord.
With 77% of homes still using gas for heating in 2021, most landlords will have a number of gas safety regulations to meet. You’re obligated to carry out an annual gas safety check on each property you’re responsible for, and this must be carried out by a Gas Safe engineer – so you can’t cut costs by doing it yourself.
Gas safety certificates can cost between £35–£90 for the service and certificate, and if you have a large property portfolio, these costs can quickly add up. Getting landlord boiler insurance can help you to cover the cost of your annual gas safety checks and boiler service.
Energy efficiency and electrical safety
Electrical safety is also a mandatory requirement for landlords in England and is one of the most recent pieces of legislation you’re required to abide by. This isn’t required as often as gas safety checks – you only need to carry out an electrical safety exercise every five years. This costs around £200.
All landlords must also provide energy efficiency ratings on their properties to tenants. These certificates must be renewed every 10 years, but landlords can proactively renew them if they make significant energy efficiency improvements to the property. Getting your property on the EPC register can cost between £60–£120. Energy efficiency can be really important to prospective tenants and must be available before you arrange any viewings, so it’s well worth looking into making your properties as energy efficient as possible.
Although this isn’t applicable to all landlords, some property owners will require a landlord licence. Because this only applies in certain situations, this can catch out a lot of new landlords or those expanding their portfolio.
Landlords who rent out houses in multiple occupation (HMOs) must acquire a licence to do so. Previously, only properties at three storeys or higher with over five tenants required a licence, but this has since been extended to all HMOs.
Selective licensing is the one that trips up a lot of inexperienced landlords. Currently, over 70 councils in England can apply selective licensing, which was brought in to improve the standards of landlords in certain areas. They allow councils to run a fit and proper persons test on landlords and generally cost around £400.
While this isn’t a mandatory cost, it’s one that may go under the radar for new landlords. But, instead of seeing it as a cost, think of it as a safety net. Landlord insurance can cover a number of expenses associated with renting out your properties and will save you money in the long run.
Whether you’re renting out properties that were previously furnished, or you’ve bought brand-new furniture, you’ll know it doesn’t come cheap. Most standard landlord insurance will cover the cost of damaged furniture, giving you some peace of mind.
Fire safety is a well-known requirement for landlords, but they can still happen even after you’ve put all the right measures in place. Landlord insurance will cover you if something like a fire damages your rental property.
On average, landlord insurance costs £217 a year – a drop in the ocean compared to the money it could save you and all the other costs associated with being a landlord!
Being a landlord can be rewarding, but it’s also a lot of hard work and doesn’t come cheap. For people looking to get into the rental property market, there are a lot of mandatory and recommended costs associated with being a landlord that you may not have been considered before, including energy safety checks and even licensing in certain areas. It’s always recommended to do your research before entering the property market.