How much would I make from £1100 rent?

[mymonkeymycircus]

Due to circumstances we have the opportunity to rent out a mortgage free property we own.

We'd do this through an agency.

Would charge about £1100 a month

How much realistically after agent fees, tax, other expenses would we actually get?

Is £800 unrealistic?

Any advice helpful

Agents fees will be about 12% plus VAT

There will be set up costs and void costs when it's empty.

Do you pay basic rate tax or higher rate tax?
No, you will not clear £800 after expenses and tax.

£800 is unrealistic in most circumstances.

You will have the entire rent of £13200 added to your income and taxed accordingly (some small allowances), will this mean you're paying 40% tax on it?

Retired so on private pension which is taxed at normal rate.

Would rent take you into higher tax bracket?

No. Well below still

Agents fees are 10% plus vat.

Other essential costs come to about £450 a year ( gas checks, buildings insurance etcetera)

I factor in 10% set aside for maintenance. I had to pay out for a boiler last year £2,500.

Then there's income tax on this if you've already used up your basic allowance for the tax year.

If you are a lower rate tax payer then yes, about £800 left.

One of my flats is at £1155 and I receive £1002pcm after deduction of management fees. However barely a month goes by without some contractor or another attending any of my properties to fix or replace something or other and this gets deducted by the agent before sending the balance to me so actual income can be variable . This doesn’t take into account other costs such as insurance, service charges and ground rent (leasehold property) and accountants fees for doing a complex tax return. These costs are however deductible for tax purposes.

I should add that further expenses are costs arising out of change of tenant which are a few hundred pounds

God, maybe I'd be better selling and investing in shares etc. Hardly seems worth the hassle!

Don't use an agent they are a total rip off. You can use Open Rent to advertise, do refs, take deposits, sort contract and do credit check..Costs about £90. They also tell you what checks you need to do before renting such as getting a gas and electrical certificate and an EPC. Once you have sorted the initial paperwork its easy.
Then all rent comes to you. I rent out a house for 1200 and I put 250 away each month for maintenance and tax. If you get more maintenance costs in a year then you make less profit, so you pay less tax. Its easy to find reliable tradesmen yourself. You only have to Google and call. You don't need an agent to do that and inflate the costs.
My tenant messages me if there is an issue and I send someone round. Easy to manage.
Landlord insurance is about £250 a year. It's not difficult to self manage.

Just to add that I also do my own self assessment. Just keep receipts and income recorded. I learnt how to fill in my self assessment from watching videos on YouTube by HMRC.

I think this is only a realistic option if you treat the management as a part time job (ie have the time) and have an address book full of reliable contractors. A friend of mine tells a story of receiving a call from a tenant about a broken boiler while sitting in a departure lounge before a long haul flight. Far from ideal! I’ve got 6 properties and don’t want to devote the time. I also prefer to be a “silent” landlord, so for me the management fee is worth every penny. My investment strategy is more about capital growth than income in any event

Given recent changes re tenant charges and tax rules you are probably right. I’m not sure I would start out in the BTL field now if I wasn’t in it already.

I would challenge the comment 'it's easy to find reliable tradesmen yourself' totally depends where you live - we've been trying to find a plumber for months, you can't leave a tenant in that sort of position.

We found agents more hassle than they were worth- slow to fix issues, not giving us a realistic picture of the condition of a property, missing pet damage when a tenant moved out (from a pet free lease)... and also still having to make a lot of decisions ourselves.

Self managing hasn't been much harder really- though it was difficult to find a handyman type to fix something that got broken.

Against our deposit/interest only mortgage its been a great rate of return, but the income we're left with wouldn't be a brilliant return figure if our investment level was the full value of the flat- we could probably earn more though shares.

We’re in the process of selling our BTL property, partly for this reason.

The government is making changes every year which have the result of making it more risky for landlords - for example, landlords now can’t take higher deposits from tenants who have pets, they’re looking to ban landlords saying no to tenants with pets, looking to ban section 21… The rules around relief on mortgage interest have changed (although this won’t affect the OP).

OP, we let a property for more than your £1,100 and I would say cleared around £800 a month after all costs (although we used an agent). We also had to spend £2k fixing damage left by our tenants when they moved out - we only got £700 of that back from their deposit.

It’s not an experience I’d repeat.

From the other side, I'd love a landlord like some of you!
2 professionals, non smokers, no kids or pets. Take care of small repairs ourselves.
Totally blanked whenever we approach the letting agents about things like water damage from upstairs, worn stair carpet, only 2 steps replaced in a different colour etc. The paint on the woodwork is like tree rings if you knock it because it's been painted over so many times rather than done properly.
We are staying for now because it's cheap, then leaving. Landlord may sell as its been neglected for so long that they haven't got a hope in hell of sorting the EPC without chucking serious money at it.
I wish there was something like a credit reference agency for good tenants.

If I were you right now I'd sell and invest in shares. Invest carefully and you can get a pre tax return of 5% will no hassle.
Also the rental law changes this year. Lots of changes ahead.

If you do rent out check for any property licensing fees in your area. Just had to apply last year for a landlords license even though I only have two (non-related) professional tenants (this makes it an HMO) and it was £350 ish.

I self-manage the property but rent it out significantly below market rates to people I know, if I decided to go the agents route I would be getting at least £1000 more per month in rent (but then I'd have fees to deduct). For now am going for the less profitable but more peace of mind approach of having people I trust in the house.

Friends of our let a property , the tenants were sourced vi a letting Agent, who filed to carry out condition of property checks for a managed let unfortunately the tenants ran a small cannabis growing operation the police raided and seized the equipment but the police also instructed the National grid to disconnect the electricity supply from the road. The electricity board dug up
the path put barriers in the road and would not connect the electric until the landlord paid the reconnection fee.
£10k plus to restore the house and reconnect the electric.
Who would choose to be a landlord at the moment.

@Canyousewcushions

What's your rate of return if you don't mind me asking

Always cheery surely the agents or criminal should have to pay @alwayscheery

@2023bebetter
Generally the criminals pay 6 months rent up front and then disappear overseas leaving a "caretaker" tending the plants.
Agents can probably prove they wrote to tenants regularly asking to check the house but failed to gain entry.
It is always the landlord who ends up with a very large bill.

I don't really want to give actual figures online, and to be honest it's probably not massively helpful because it'll depend so much on the decisions you make about your property.

But as a simplified example, if your investment in the property is a 50k deposit on a £200k property, and you clear £5kper year after tax, maintenance, mortgage interest etc, you'd get a 10% return on the £50k, plus any capital gain.

If you own the same £200k property outright, you wouldn't have the mortgage interest so could clear £7.5k per year in profit, but on the £200k, that's only 3.75% (plus any capital gains).

That's obviously not considering any other benefits around fully owning the property (or not)- i.e. mortgages place restrictions on who you can rent to- i.e. no family members. If we wanted to offer our property to our kids to live in when they are students we'd need to pay it off or look at other mortgage types.

There may be other considerations, the bigger financial picture, whether you'd earn more than the mortgage payments by investing equity elsewhere and possibly getting dividends/interest below the taxable allowance etc etc. Interest rates will also come into it- as these are now going up fast it would mean retun rates will be much lower for someone taking out a buy to let interest only mortgage today than it was 18 months ago.

Renting is not easy money. Either you let an agency deal with everything and you only get quite a small return or you deal with it yourself and get more money but a lot of hassle. You could do a 1 year lease and see what it makes you and if you feel its worth it.