Costs of renting out property

[StMary]

We might be moving abroad and currently looking into renting our house out. Mortgage is £1000 per month, agents reckon we could get £1500 in rental. Their fees are approx £100 pm.

What other costs do I need to factor in? We'd like to use any excess from the rental income to overpay on the mortgage if we can.

Maintenance, annual safety checks for gas and boiler, redecorating between tenants, landlord insurance, any additional costs on your mortgage to switch to BTL

Their fees look very cheap so I would double check that first. There may be lots of "one-off" cost not mentioned.

You should also factor in the cost of insurance, maintainence, any one-off fees such as inventory, mortgage, utilities and council tax for any voids.

Most importantly you should consider the tax changes coming in which mean you will be taxed on the whole rent and you cannot deduct the mortgage cost as an expense. This won't affect you this year but will in the future.

Your mortgage provider may not give permission to let which could mean lots of costs and charges for moving to a new provider and if your current one does give permission there will be a charge in my experience.

Presumably as you are moving abroad you will be getting someone else to maintain and manage the property locally on your behalf? That will have a cost.

Yes forgot annual gas appliance check and certificate.

You will also need an EPC which has a cost.

Is the £100 inclusive of all tenant finder and management services , 10-15% is more typical for this. You will pay tax on the net profit plus need to have an annual gas certificate, ll insurance and a slush fund for repairs and void periods so your £500 could easily disappear.

If you are overseas, you may want to use managing agents to oversee any maintenance/repairs etc and this will be an extra charge. There are also usually upfront costs payable by the landlord such as cost of preparing tenancy agreement, professional clean and inventory check in.

Maintenance repair boiler cover etc . Insurance. If eg One month with no tenants...how will you pay ?
Assume you will just about break even and it may even cost more over a year ie you could make a "loss" .
Keep back any gains to cover maintenance and repair costs. Gardening maintenance.

Info from the agent:

^Our fee for a Let only (tenant introduction) service is normally 1/2 a months rent + VAT but I would reduce this to £495 + VAT for you if we also manage the property. This fee covers our service between now and when the tenancy begins, including;

· Details prepared of the property including professional photographs

· Marketing both locally and internet based, including rightmove.co.uk and onthemarket.com

· Accompanying all viewings with prospective tenants (we can organise for you to also meet the tenants, should you wish)

· Negotiating an agreeable tenancy term and rent with the tenants

· Undertaking full referencing via national referencing agency, including employment, landlord, bank, and credit references (where applicable)

· Preparation of all required legal documents including Assured Short hold Tenancy Agreement

· Collection of first months rent and tenancy deposit from the tenant

· Setting up a standing order for all future payments of rent

Management Service

Should you decide for us to manage the property, The monthly fee for Full management would be 7.5% of the agreed tenancy rental

In addition to the above letting service, we can take care of all aspects of the tenancy meaning that you will not need to liaise directly with your tenant or deal with any issues that may arise during the tenancy, including;

· Registration of Deposit with Government Approved Deposit Scheme

· Preparation of Full Inventory & Schedule of Condition, including meter readings prior to the tenancy commencing

· Collection of all rental payments and chasing these payments if not paid on time

· Regular inspections of the property (normally 3 monthly) to ensure it is being maintained to a good standard

· Organising any required maintenance or repairs (on your instructions)

· Carrying out a full Check Out of the property at the end of the tenancy and liaising with the Deposit Scheme to organise the return of the deposit, along with making any deductions and organising repairs, should this be necessary

Please note all fees are subject to VAT^

KP86 has it right. As well as a gas safety check every year, I get the gas man to service the boiler while he's there: a bit more expensive, but worth it imo.

You may not need to switch to a buy to let mortgage if you are renting out your main home and are not buying a second home (eg, renting abroad). You will need to check with your mortgage company if they allow you to rent out your home. Some charge a "consent to letting" fee. I pay £95/year, but you can add this to the mortgage if you like.

Factor in vacant periods (time between tenants). Just have enough saved to cover the mortgage for a few months if it's empty.

Tax on profit. You will probably need to fill in a self assessment every year. I would check your tax liabilities if you are earning abroad and where this money is taxed.

With landlords insurance, you will need to insure the building and probably limited contents (I believe this covers stuff like curtains). You have an option to insure for things like rent guarantee and legal cover. I would say legal cover is a must and the rest is down to a personal decision. You can talk insurance options with a broker if you like. I use Simply Business, but there are now many others in the marketplace.

How much is the gas/boiler safety check? Any idea on landlord insurance costs??

My gasman charges about £100 for both. He charges £65 for the certificate (this is basic call out fee), plus £35 for the service while he's there. If he did the service separate, it would be £65.

My landlords insurance is about same as my ordinary insurance was. You can get no obligation quotes, probably online.

The worst expense for us isn't a regular general expense paid to the property management company- it's having to pay for unexpected things.

New washing machine, fire door had to be replaced, boiler packed in and needed a whole new one to name but a few.... we never expected to have to do any of these as everything was new and good quality in our rented property. But getting a bill for a new boiler 3 weeks before Xmas made it very difficult for us to juggle our finances.

Make sure your legal cover and rent guarantee are watertight. It takes months to evict and costs lots.

Also ensure you have malicious damage cover.

I pay about 25% of the rental income in insurance and fees. But then my rental income is 1/3 yours.

Oh, and you will need to do a tax return and will pay tax - the income arises in the uk.

Your belongings will all need to be stored. That is expensive.

We reacted out our house when we were abroad. It all went quite well really all things considered but we didn't make any money above the rent. Our strategy was to keep our tenants in and to make them feel like they were on to a good thing. We put our rent £20 a week under similar properties.

Thanks all - good tips!

Tax returns and storage all sorted.

Looks like we won't be making much in the way of overpayments, but I guess every little helps!