Letting agent fees
Letting agents provide a variety of services that can make life easier for landlords. The degree of service a letting agent provides will command a different price, which is usually a percentage of the rent based on the term.
Letting agents can help market the property, introduce prospective tenants, collect rent (and chase it if it is not paid on time) and can also fully manage the property, including dealing with any emergency repairs. Income tax and capital gains tax
Income tax needs to be paid on the rental income and if the price of a property has increased when it comes to selling, the profit may be subject to capital gains tax.
Landlords are obliged to keep the property in a serviceable state, and this comes at an expense. Many of these costs are tax deductible. You should seek expert advice on this, as it can change from time to time
Landlord insurance comes in three different tiers. There is buildings insurance, which covers the structure and protects against fire and flood damage. Then there is contents insurance, which is relevant to landlords renting out a property even if it is unfurnished. Finally there is landlord liability insurance that covers landlords in the event of a tenant or visitor being injured in the property and the landlord is judged to be responsible. As well as these policies landlords can set up rent guarantee insurance to cover them against unpaid rent. Some policies also offer cover against potential legal expenses and home emergency cover to ensure core utilities, including gas and water, are quickly restored after an outage.
Tenants are advised to take out their own insurance for their personal belongings as the landlord’s insurance will probably not cover these.
Safety certificates and EPCs
Unless there is no gas supply to the property, landlords are required to give a valid gas safety record to each tenant before the tenancy starts to show that the properties meet the legal requirements and also within 28 days of any further legally required check taking place during the tenancy term. This also applies if heating or hot water is supplied by a boiler in another part of the building.
A landlord must ensure that the electric installation within the property is safe and provide a copy of a satisfactory Electrical Installation Condition Report (EICR) to each tenant before any new tenancy, renewal tenancy or statutory periodic tenancy starts. From 01st April 2021 all privately-rented properties will need to have a satisfactory EICR in place. An EICR is valid until the end date show on the certificate; this is usually 5 years, but can be shorter depending on the condition of the installation.
Energy Performance Certificates (EPCs) also need to be kept up-to-date. Each EPC is valid for ten years, and they cost £90. If the property is to be let under an assured shorthold tenancy then the efficiency rating for property must be between A-E, unless an exemption applies and the property is listed on the PRS Exemption Register.
Unpaid rent and voids
The risk of unpaid rent, during a tenancy, or no rent coming in due to the property being empty between tenancies, can be mitigated by only expecting to receive around 75% of the total potential rent throughout the course of a year. Many landlords will budget for this contingency, and may also purchase a rental protection policy. This type of policy may insure against rent arrears, or for the loss of potential rent due to damage caused by the last tenants which prevents immediate re-letting of the property.
Putting aside a little of each month’s rent means funds are available to cover any unforeseen expenses. It can also help make mortgage repayments during periods when no rent is being paid.