The latest market trends suggest that now is a good time to be a landlord. Research from Rightmove reveals that the average asking rent outside London has climbed to £1,126 per month – 11.8% higher than at the same stage one year previously.
The average yield ranges from 4.8% in the capital to as much as 8.1% in the North East, so the opportunities are clear – especially for those who have built up a portfolio of multiple properties.
But there are other factors to take into consideration – not least the various landlord fees that can eat into your profit margin. It’s important that you understand what these are and how much they might cost, in order for you to shape your property investment strategy accordingly.
Here, we’ll run through the typical costs that you can expect, including fees for letting agents, which can vary depending on the level of service that you require. We have lettings experts located across the country so, if you’d like to know more about how we can help to manage your portfolio and find you the perfect tenants, please feel free to get in touch.
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Landlord fees: The buying stage
There are costs involved at every stage of being a landlord – starting with making the initial purchase. Below, we outline what some of these are likely to be.
Unless you’re in a strong enough financial position to make a cash purchase, you’ll need to take out a buy-to-let mortgage. This involves putting down a deposit, which is usually for around 25% of the property’s value but can be for as much as 40%.
Then you’ll have the monthly mortgage payments themselves. These will vary widely depending on a number of factors, such as the property type, its location and the size of the deposit you put down.
This will be built into your mortgage payments, and the rate is likely to be higher than on other types of mortgages, typically in the 2-3% range. It also means that, over the course of your mortgage term, you will end up repaying more than you borrowed in the first place.
This particular landlord fee may not apply to all purchases – it depends on your mortgage provider. If applicable, it will be charged either as a flat rate or a proportion of your mortgage (usually 1-2%). It can also be built into your mortgage payments, rather than charged as a separate cost.
Your lender will want to make sure that the property is worth the asking price and that you’ll be able to charge enough in rent to make it viable. To do this, they’ll carry out a valuation and charge you for the service – typically in the region of £150.
Because you are buying a property which is additional to your main residence, you will be charged a higher rate of stamp duty – another 3% on top of the standard rate. As an example, for a £250,000 home, you would be required to pay £10,000 in stamp duty.
You’ll need to enlist a conveyancing solicitor to look after the legal elements involved with purchasing a property. These costs can run to anything from £750 to double that amount.
Landlord fees: Before you let
Before you rent out your property to tenants, there are several admin and legislative issues of which you need to take care. And these will all add to your costs.
Landlord’s insurance can cover a range of things, including protection for your buildings and contents, accidental damage and loss of rent. You are not legally required to take out a policy, but standard home insurance won’t cover you. Additionally, your mortgage provider may require you to take out a policy.
Deposit protection scheme
You need to put your tenant’s deposit into a protection scheme within 30 days of receiving it. There are a few different schemes that you can use, each of which may charge a different fee for the service. For example, there is no charge for using a custodial scheme but there will be a fee to pay for an insured scheme. The costs may also vary depending on the size of the deposit.
Plans have recently been announced to introduce a landlord registration scheme in England. It has not yet been confirmed how much this will cost, although similar schemes that already exist across the rest of the UK charge in the region of £80.
As a landlord, you will have to register with the Information Commissioner’s Office (ICO). You will be handling your tenants’ personal information, which means that you qualify as a data controller under the Data Protection Act. To register with the ICO will cost £40, or £35 if you pay by direct debit.
Energy Performance Certificate
Getting an Energy Performance Certificate (EPC) can cost from £60, but the actual price will depend on the nature of your property. You need to renew your EPC every 10 years.
Gas Safety Certificate
If you have any gas-powered appliances, they will need a Gas Safety Certificate from a Gas Safe-registered engineer. You’ll need to do this on an annual basis and it usually costs from around £60 depending on the number of appliances that require checking and testing.
If your property needs some work to bring it up to shape, this will incur another cost, which can vary hugely depending on the nature of the project. For example, repairs to a leaky roof or rotten window frames will set you back a lot more than a simple redecoration job. You may also have to pay for maintenance work once your tenants have moved in. Having a safe property is of the utmost importance though and a good investment in the long term.
You’ll need to carry out credit checks on your tenants, to provide reassurance that they will be able to pay their rent in full every month. This is something that might be included within the letting management fees you pay your agency. Which brings us onto…
Landlord fees for letting agents
Of course, you could do everything by yourself and avoid paying any letting management fees. But the huge drawback of that approach is that you have to take on the responsibility of handling every stage of the process, from advertising your property right through to collecting rent and dealing with any problems that your tenants may have. And then there are all the legislations and laws, of which there are more than 400, so it is almost impossible to get your head around everything.
It can become extremely time-consuming and stressful – especially if you have an extensive portfolio. That’s where letting agent fees, for landlords, can be worth every penny because they offer excellent value when compared against what you would otherwise need to commit in terms of time, money and risk. And most agents will offer a tiered service, so that you can select that which best suits your needs.
Tenant-find/let only letting management fees
These are the least expensive letting agent fees for landlords and you will still be expected to handle any day-to-day calls and queries as well as rent collection. Meanwhile, your agent will take care of things like listing and promoting your property, arranging viewings, checking tenant references, organising the letting agreement and collecting security deposits.
The charges for this will vary hugely depending on your location and there may be a set fee, while some agents may base their costs on a percentage of your rent.
Rent collection letting management fees
Your agent will provide all of the services mentioned above and also collect rent, including chasing up late payments on your behalf and providing advice on what action to take if a tenant is in arrears. Most agents will charge in the region of 5-10% of your rent for this service.
Full management letting fees
These are the highest letting agents fees for landlords because the service is comprehensive. When you pay full management letting fees, you can expect your agent to look after everything. This includes booking in maintenance and repair work, organising renewals, taking care of deposit releases, negotiations, statements of accounts and more. Prices will vary depending on your agent and your location.
You ought to research the various fees for letting agents, to make sure that you’re satisfied that you’re getting value for money. But it’s equally important to partner with an agent that you can trust. That means choosing one with the experience and knowledge to help you to manage your portfolio effectively. Hunters certainly has all of that and more.
Why should I choose Hunters?
We can offer competitive letting management fees – just one of the reasons to choose us. Here are some of the others:
· Our landlord fees are based on a wide scope of services, which range from finding tenants to the full management of your portfolio.
· We have fully trained lettings agents located across the country, all boasting a wealth of industry experience that enables them to offer invaluable support.
· Our landlord portal means that you can keep tabs on all of your lettings from one central hub.
· We have a customer service rating of 94.5%, based on more than 2,500 reviews.
· Our landlord resources include plenty of useful information such as tips and guides on tax, insurance and more.
If you’d like to know more about our typical agency fees for renting out your properties and how we can make your life as a landlord easier, please don’t hesitate to get in touch. We’d love to hear from you!