You might imagine that being a landlord would be an easy way to earn a passive income. After all, once you’ve forked out some cash to fund part or all of a property, then you just sit back and wait for the money to roll in. However, unless you’re a tycoon with a string of properties and a team to do the dirty work (and it can be very dirty), then being a landlord might make you tear your hair out, and can potentially empty your pockets.
If you’re thinking about becoming a landlord, read on to consider whether it is really worth all the hassle. What type of tenant might you get?
Every time a tenant’s name flashes up on your mobile phone, will your heart sink? Usually, when a tenant rings you, there’s a problem. They’re pretty unlikely to be phoning for a friendly chat. It might be about door handles coming loose, cupboard doors sticking, and 101 other little things that they might easily have sorted for themselves.
Furthermore, it’s not the tenant’s property and they know it. As much as you might get a happy tenant who loves your property, they may not necessarily treat it like their own and take their shoes off when they come into the house.
Rental time equals wear and tear. Money will need to be spent on general maintenance – and that’s in a best-case scenario. If you’re unlucky enough to get a tenant who couldn’t care less about the property, your house could end up being trashed.
Not everyone has the same standards of cleanliness either. A house may look clean and tidy at first glance, but did you notice the mould around the window seals, blinds filled with dust and all the marks on the paintwork?
Then there are the regular expenses. Even if you don’t have a mortgage on your rental property, there are regular costs to take into account that will eat into your profit. You’ll need to pay insurance to protect yourself in case your property is ruined through fire, water or vandalism, and if you’re renting out a property through an agent, there will be management fees to pay.
Now consider unexpected expenses. There will be times when something horrible happens, such as when the heating breaks down or there’s a water leak. This usually means massive bills.
The laws governing lettings change frequently, and keeping on top of new legislation, working out how it might affect you, is hard work. Falling foul of the rules could result in fines and even convictions.
You also need to make sure you understand all your and your tenant’s legal rights and responsibilities, as outlined in general lettings law and the contract between you and your tenant. This contract is usually an Assured Shorthold Tenancy agreement (AST). If you fail to carry out your responsibilities, don’t fully understand your tenant’s rights and don’t explain their responsibilities properly when they sign, there could be potential problems down the line.
Furthermore, the law sides with the tenant: the landlord doesn’t have many rights when it comes to evicting them. There is a court process that needs to be followed, which can take up to two months and costs money. If a tenant doesn’t pay rent and are in breach of contract but won’t leave, the landlord can apply for a possession order and for the bailiffs to remove them. But this all takes time, and if no rent is being paid along with court fees, the situation could turn into a financial disaster.
Imagine if such tenants decided to trash the place before leaving too? This hardly bears thinking about. Unfortunately, this happens far too often.