Top 5 Things to Consider Before Becoming a UK Landlord

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Top 5 Things to Consider Before Becoming a UK Landlord


Are you an entrepreneur looking to make money in residential property? If so, you are in good company. Some of the wealthiest people in the world have made their money as landlords. They buy either commercial or residential properties, renovate them, and then rent them out. They enjoy residual income for as long as they own their properties.

This post will focus mainly on residential properties. If you have plans to become a landlord, understand that there is more to it than buying a couple of properties and looking for tenants. Between regulations, money issues, property maintenance and more, there is a lot to stay on top of. Fall behind even a little bit and your profits could suffer. Fall behind a lot and you could lose your shirt.

Below are the top five things to consider before becoming a landlord. If you are not thoroughly knowledgeable in any or all of them, take the time to learn. You will save yourself a lot of trouble that way.

1. The Tax Implications

The biggest concern of any new business enterprise is making sure the government gets its due. At the end of the day, the taxman always has to be satisfied. Take the time to learn the tax implications of being a landlord, as these differ depending on where you purchase properties.

Here in the UK, the government embarked on an effort a couple of years ago intended to make being a landlord more difficult. While it is not impossible to make money as a landlord, it is a lot more difficult now than it was a decade ago. Taxes are a big part of that. For example, UK landlords can no longer use mortgage interest as a business expense. Not only does that eat into profits, but it subjects more of a landlord's revenue to taxes.

Tax implications are important because they could determine how you structure your business. You may choose to buy property as an individual. On the other hand, you might choose to form a company that purchases the properties and then pays you as an investor or director.

2. Obligations to Tenants

As a landlord, you will have certain obligations to your tenants. Those obligations are vast and varied. As just one example, you will be required by law to ensure that your properties remain safe at all times. Safety regulations cover everything from structural integrity to the installation of smoke detectors and fire extinguishers.

With those obligations come costs. Fire extinguishers are a good example. Regardless of a fire extinguisher's price, UK rules require certain kinds of residential properties to be outfitted with an adequate number of the right kinds of fire extinguishers. You cannot simply neglect them because they might cost too much.

3. Property Management

The next consideration is one of property management. How do you plan to handle it? Some landlords make property investment their full-time jobs. As such, they manage their properties on their own. They handle maintenance and repairs, they take care of landscaping, they handle collecting the rent.

Other landlords hire property management to companies specialising in such things. Bringing on a property manager does eat into profits, but it is an investment well worth making when landlords have neither the time nor the knowledge to effectively manage their properties. As for you, whether or not you handle management yourself rests entirely in whether or not you have what it takes.

4. Finding Tenants

Finding tenants is always a concern for landlords. For starters, you want your properties filled 12 months of the year. But that's not all. You also want your tenants to be responsible people who pay their rent on time and don't trash your property. Unfortunately, good tenants are not so easy to find.

How would you handle this? If you intend to use a property management company to take care of maintenance and repairs, they can probably handle tenant screening as well. Another option is to work with an estate agent who specialises in rentals. If you do decide to find tenants yourself, be diligent about screening every applicant to the full extent of what is permissible by law.

5. Financing

It is impossible to talk about making money in property without also mentioning financing. Here in the UK, we have what are known as buy-to-let mortgages. These are mortgages offered by banks directly to landlords. They are similar to traditional mortgages in some ways, yet drastically different in others.

It is important to consider your financing options right from the start as these will dictate how much you pay for properties and how quickly you can grow your portfolio. Needless to say that buy-to-let mortgages are not the only way to go. There are lots of options, including peer-to-peer lending, bridge loans, etc.

Being a landlord isn't easy. However, it can be quite profitable. A good landlord who knows what he/she is doing can make a very comfortable living renting out residential properties.