If you're a landlord I need advice...

[DippySticky]

Our London flat has been on the market since just before lockdown and is not selling. We have lowered the price but my agent says they are having trouble shifting any first floor flats without gardens at the moment. Thanks to lockdown making people realise they want outdoor space I don't see this changing any time soon. We are pretty desperate to move. DH and I both in stable securely paid jobs with a good chunk of savings.

We are now looking at renting out our flat and renting our own place where we want to move to. We have got about 100k worth of equity so not loads (LTV is 70% so right on the edge of acceptable for a BTL mortgage). The plan would be to get an interest only BTL but overpay the mortgage. I am however aware of all the costs which mount up from being a landlord and I think that after all that has been taken into consideration we are probably looking at about £140 in "profit" every month (we'd get about £1300 in rent for it). The idea would be to let this place out for 3-4 years and either sell it at the end of that period if feasible or use the time to save up for another deposit on a long term home and keep the property as a rental (we have 40k already but that isn't quite enough for a deposit plus stamp duty and moving expenses on the kind of home we would want).

Essential costs I have considered include:
Mortgage (obviously)
Comprehensive Insurance (not buildings insurance because that's covered by our freeholder - it's a leasehold property)
Our ground rent and service charge
Paying lettings agent to find tenants and do background checks plus paying them on a monthly basis to manage the property
Gas safety cert
Electrical safety cert
Smoke alarms, carbon monoxide detector (already installed luckily)
Tax which would be about 3.5k a year
Boiler cover

We would also probably need to paint and put a new carpet in the living room before renting out. And also make sure we have a contingency fund for void periods or emergency repairs.

What have I missed? Any other tips? I would probably be open to renting to tenants with a pet (we have two cats) but would ask for an extra damage deposit in that case.

The only other thing I can think of is paying for repairs and /or replacements of things. For example we have had to replace broken light switches, oven and washing machine over the 4 years of renting out our house, so you need to be able to afford this, and you can’t make your tenant wait while you shop around or save up.

Your "profit" is wiped out by just 3 months of voids, you will be guaranteed a void at the end when you come to sell - you need the tenants out before the sale. I cannot see there being a profit just in your figures.

but would ask for an extra damage deposit in that case

How would that be legal? Or were you considering a lower than legal deposit in the first case?

The only thing I would add is to think about the long term tax considerations such as capital gains tax when you sell this property and higher rate stamp duty when you purchase your next home. The rules on stamp duty in particular are quite complicated.

My experience as a small landlord is that people renting are pretty tough on properties - I'm not the world's best housekeeper by any stretch of the imagination, but various tenants have damaged my property in ways I'd never imagine a normal family would do - out of carelessness, not deliberately, obviously, but they really don't take as much care as you as owners do. So you need to budget 10-20% of your annual rent income on maintenance. I put in new carpet every three-four years, and repaint & decorate between every tenancy. But I get a top rent for the area as it's a lovely family home.

Also, are you aware of the tax changes - to try to stop BTL landlord business, you can now only claim 25% of your mortgage interest. It's ridiculous - it's not going to stop BTL businesses, and it's attacking a legitimate cost. But just be aware, that an interest only mortgage is not tax efficient any more. And your bank will likely want proof of your ability to repay the capital at the end of the mortgage term.

I'm not bothered about profit as long as we can pay the mortgage.

I thought it was pretty standard to ask for an additional couple of hundred quid as a deposit if renting with pets. That's what we did when we rented with our cats a few years ago.

I'm aware of the tax changes and have budgeted for that in my calculations. We'd also intend to overpay.

@DippySticky

I'm not bothered about profit as long as we can pay the mortgage.

I thought it was pretty standard to ask for an additional couple of hundred quid as a deposit if renting with pets. That's what we did when we rented with our cats a few years ago.

The law changed in 2019. You can only ask for a maximum of 5 weeks rent as a deposit.

Well that's fine, we just won't ask for any extra deposit then.

We are planning on doing the same. Awaiting completion of another property, and going to rent out our London flat. A few things we hadnt considered were:

• EPC
• Landlord licence. This might be council dependent, but where we are its about £500, and even more if it will be rented as an HMO
• Steam cleaning of carpets and professional cleaning elsewhere prior to renting. I'm thinking of hiring a rug Dr wet/vac machine, because only the bedrooms are carpetted.

Despite the stamp duty reduction recently, we wont get the full amount as its not our 1st property.

Have you spoken to any brokers yet? We found fantastic lady and gave us many more options than banks could offer.

forking out 9k to cover periods when a tenant is in the property not paying rent and then to cover legal costs and doing the place up once they have moved out. I speak from experience

Professional inventory? Otherwise, take a lot of dated pictures yourself.

A landlord licence isn’t required in some areas.

Will you be using an agent who will deal with repairs, or organising this yourself? If you use an agent, check out a few and haggle their percentages. You can use an agent to source and credit check tenants but not to manage the property if you want to do this yourself. Cheaper, obviously, but expect calls for minor stuff all the time. Be strict and remind tenants to call before 9pm or so unless it’s an emergency.

forking out 9k to cover periods when a tenant is in the property not paying rent and then to cover legal costs and doing the place up once they have moved out. I speak from experience

God, that sounds awful!

There are landlord insurance policies that cover periods of tenants not paying rent.

forking out 9k to cover periods when a tenant is in the property not paying rent and then to cover legal costs and doing the place up once they have moved out. I speak from experience

The insurance policies I've got quotes for seem to cover legal costs and tenants defaulting on rent?

Will you be using an agent who will deal with repairs, or organising this yourself?

Definitely an agent and I know one who comes highly recommended by neighbours.

check the insurance policies. I dont think the ones i looked at would have covered us as the tenant was unemployed...but i could be wrong. there seems to be lots of loopholes. She was employed when we took her on, with a partner we could do an attachment of earnings order with. Alas he moved out.