The Real Cost Of Becoming A Landlord
Becoming a landlord, whether you’ve inherited a property or invested in buy-to-let, isn’t just a case of sitting back and watching the rent roll in every month. Landlords have many legal obligations and responsibilities, and there are several expenses to consider before you can let a home and throughout the tenancy.
All landlords must apply to the Scottish government and pay a fee, broken down into the principal fee and the property fee. Applications made directly to the local authority are £67 per authority. Online applications benefit from a 50% discount for more than one local authority. The cost per rented property is £15, and late applications incur a £133 fee.
Keeping track of expenses and income from the rentals could be challenging, especially when there are multiple units. One way to ensure that registration fees and other costs are listed correctly is by using software like Rentec Direct.
Not only does the software assist with the financial aspect, but landlords could see an improvement in other areas of management they struggle to keep up with daily.
Energy Performance Certificate
All properties require an Energy Performance Certificate (EPC) that lasts for 10 years and outlines the energy efficiency of the house or flat. The cost of an assessment is based on the size of the property. The tenant must see the EPC.
If the property requires a new certificate, the landlord must contact a qualified electrician to assess the wiring and connections in the home. They will then be granted a document certifying that everything is fine.
For any repairs or potential issues, the electrician should provide the landlord with a quotation for the work and schedule a return date to address it.
Gas And Electricity Safety Checks
Safety checks must be carried out on gas and electrical appliances before a property can be let. An Electrical Installation Condition Report (EICR) must be completed by a qualified electrician, checking the wiring and any appliances.
A Gas Safe engineer must carry out an Annual Landlord Gas Safety Record check which must be arranged every year after a tenant moves in. Prices vary depending on the type of property and the number of appliances. Copies of all certificates must be given to tenants.
The landlord should schedule these checks after each tenant moves out, and the process differs from the energy performance certificate. The gas and electricity safety checks are there to prevent any issues for the protection of all occupants.
Contact a reputable, licensed professional to take care of the checks, or there may be liability fines coming to the landlord responsible for their tenants’ safety.
Smoke And Carbon Monoxide Alarms
All privately rented properties require a combination of smoke, heat and CO alarms depending on the property type, layout and appliances used. These should be installed and maintained by a professional. These alarms could save lives when disaster strikes, so landlords must have a professional inspect them regularly.
Landlord Building Insurance
Landlords must take out policies covering buildings and any contents specifically designed for landlords. These policies can include emergency call-out cover, rent protection and boiler breakdown insurance at extra cost.
Letting Agent Fees
Many landlords prefer to hand their property rental over to a professional letting agent, either just to source tenants or completely manage the whole process. An agent can take care of all the finances, manage repairs and maintenance, organise gas and electrical checks, carry out regular inspections and take care of all legal obligations. Fees vary but are typically around 15% of the monthly rental income, including VAT.
Rental properties must meet the Repairing Standard before being rented. Landlords also have a duty to repair and maintain the property from the tenancy start date and throughout the tenancy. Investing in renovations to bring the property up to a high standard will attract better tenants and higher rents. Luxury kitchens and bathrooms and good quality flooring are all worth considering.
House Of Multiple Occupation Licence
If you rent a property to three or more unrelated people who share a kitchen and bathroom, a House in Multiple Occupation (HMO) licence is required. The local authority sets fees, and failure to apply for a licence can lead to fines of up to £50,000.
In Edinburgh, fees range from £653 for three tenants to £1,367 for six. The first licence lasts for between six months and one year, but subsequent renewals can be for one to three years.
Landlords who earn an income from the property will need to pay income tax, and rental income net of allowable expenses is added to their income for the year.
Clan Gordon has been managing rental properties across Edinburgh since 2007. We are trusted by more than 500 landlords across the city. If you’re looking for advice from a qualified property management expert who can take the hassle out of letting for you, schedule a call today.
It is tough on any landlord when a property stays empty, especially if there is still a mortgage to be paid. This is why many landlords choose to let with agents who can quickly find new tenants when the existing ones move out.