On the face of things, becoming a landlord – whether as your primary job or as a side project – seems like a pretty good deal. With the property market booming in the wake of the pandemic, the rental market is enjoying a similarly prosperous period. As such, right now might seem like the perfect time to put on your landlord hat – but is it all sunshine and lollipops? Let’s see everything you need to know about becoming a landlord.
The reality of life as a landlord is that the role takes a huge amount of time, commitment and patience to yield the rewards you want to see, but there’s no doubting it’s a lucrative line of work when carried out properly.
Essentially, there are notable pros and cons to becoming a landlord, so what better way to summarise than with a pros and cons list?
- Income: This is the most obvious reason anyone would become a landlord. You’ll be receiving monthly sums of money from your tenant(s), which can often be used to pay off a buy-to-let mortgage if you have one. Build up a property portfolio and you’ll be enjoying a steady and rather lucrative flow of income.
- Tax deductions: There are many tax-deductible expenses available to landlords, including building repairs, buildings and contents insurance, and various professional services. All rental income is taxable, and there’s no tax relief available on mortgage interest anymore, but the remaining tax-deductible expenses can add up nicely.
- Long-term stability: As long as you have tenants in a property, you have a fixed monthly income arriving consistently.
- Self-employed flexibility: You are effectively managing your own business, so you make the decisions on costs, contracts and terms. You can also choose when to sell a property if you’d like.
- Taxes: Your rental income is subject to tax, and you’ll need to ensure you keep up with the accompanying paperwork and regulations. If you own more than one property, you’ll be subject to higher stamp duty rates too. The taxation demands of landlord work carry with them a lot of financial and administrative strain – something you must be prepared for.
- Financial demands: Landlords incur many expenses, from various forms of insurance through to the costs of maintenance, repairs and fitting out properties. That means your initial time as a landlord should carry a significant financial demand with it, and you can expect several costs to continue throughout your tenure managing properties.
- Unpredictability: Emergencies happen – burst pipes, broken boilers, other damages – and you’re on the hook for paying up and dealing with the problems no matter when and where they happen. To prepare for such situations, many landlords budget for a contingency fund. You’re also never guaranteed a smooth ride when it comes to tenants. If you have nightmare ones, it can end up being a hugely stressful and time-consuming tenure.
- Time commitment: Speaking of time-consuming, the role of landlord is not one in which you can simply sit on the sidelines and relax, unless you want to hand over your responsibilities to a letting agent (which will cost you a lot in profitability terms). Full-time landlord work is not a 9-5, Monday-Friday job. To get the most out of it, you’ll need to take a more immersive, almost 24/7 approach to it.
In conclusion, if you’re prepared to afford the time, energy, and initial investment to being a landlord, you stand to enjoy solid, secure income from your property management efforts. If, however, you think being a landlord is a walk down easy street, you’ll almost certainly be unpleasantly surprised.