Being an Accidental Landlord – Around half of the UK’s landlords only own one property. Many of them probably didn’t buy it with the intention of renting it out to others, but bought it as their own home. Perhaps they then found that they couldn’t sell a the price they needed, but wanted to move, and so ended up renting out one home in order to be able to rent out another. Others may be couples who want to live together, but each have a home and are unwilling to lose their financial independence, so rent out one while living in the other.
The perfect solution?
This seems to make perfect sense, and it can work well. But for both tenants and landlords, there can be pitfalls. For tenants, renting from accidental landlords often means that they don’t get to spend much time in their property, as eventually the landlord wants to sell or move back in. They can also find that they are dealing with someone who has a full time job and perhaps a family, and therefore little time to deal with day-to-day problems. Sometimes, though, it can be a great way for tenants to develop a good personal relationship with their landlord, who is often more invested in the property emotionally than a professional would be, and they can also often avoid paying agency fees.
The hidden costs
For accidental landlords, letting out a property can be a great short-term solution to a pretty big housing problem. It allows people who would otherwise be stuck in a property they have outgrown the freedom to move when and where they want. However, many find that there are hidden costs of being a landlord that they don’t think about. If you’re thinking of letting your home check you’ve thought about all these costs first:
– Letting agents fees. If you have a full time job, you’re unlikely to be able to manage your property yourself, so set aside 10-15% of the rent for agency fees.
– Insurance. Standard home insurance won’t cover you if you’ve let your property. You need landlord insurance.
– Maintenance. Just because you’ve moved out, doesn’t mean you don’t need to get the boiler serviced every year, and change the carpets when they get worn, and redecorate every few years. These things can cost money.
– Void periods. Even in today’s buoyant rental market, properties can lie empty for a time. Do you have a contingency fund in case you need to cover a couple of months rent?
– Buy-to-let mortgage fees. Some mortgage companies will let you rent out your property short-term on a standard mortgage, but longer than that and you will need to switch to buy-to-let, and usually pay higher interest.
– Arrears. Arrears are rising as the poor economy damages incomes. You could need to spend several thousand pounds to evict a non-payer.