The pros and cons of being a landlord

Fancy starting your own property empire? There are lots of advantages to being a landlord, but there are challenges too. Discover the benefits of owning rental property – and the pitfalls to watch out for.

Fancy starting your own property empire? There are lots of advantages to being a landlord, but there are challenges too. Discover the benefits of owning rental property – and the pitfalls to watch out for.

Chris King
From the Home team
4
minute read
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Posted 14 MAY 2021

Becoming a landlord – getting started 

By most estimates, there are between 1.5 and 2 million landlords in the UK, serving a growing number of renters. Around 20% of people – not counting those in social housing – live in private rented accommodation, so there’s a lot of opportunity for budding landlords. 

But it’s not just a matter of buying a property, finding some tenants and waiting for the cash to roll in. Becoming a landlord involves big responsibilities, and some uncertainty. So is it worth renting out a house? Here are some of the pros and cons of letting your property.

 

Pros of being a landlord 

  • Extra income: being a landlord can be a good source of extra money. If you own your rental property outright, the rent can give you a big boost; if you don’t, it can at least pay off your buy to let mortgage.
  • Independence: renting out a property is a business and, as with any business you own, you’re your own boss – great if setting your own hours and making all the decisions yourself appeals to you.
  • Investment: your property may go up in value over time, so you might make a profit when you come to sell.
  • Pension boost: if you’re thinking of using income from rent to replace or supplement a pension, you’re not alone. A third of landlords are retired, according to government figures, and 44% of landlords rent out property to contribute to their pension. And if you don’t want to give up work altogether, managing a property yourself will give you plenty to do.
  • Security: some people like the feeling of their money being invested in ‘bricks and mortar’. In other words, they feel it’s safer in a physical asset than in the stock market.
  • Tax: some (but not all) of the expenses that come with keeping a rental property are tax deductible, provided they’re incurred exclusively for the use of your property rental business. These include maintenance and repair costs, like fixing water or gas leaks, repainting and replacing bathrooms and kitchens.

Cons of being a landlord 

  • Responsibilities: not strictly a disadvantage, but responsibility comes with the territory of being a landlord. It’s not just a matter of buying a house or flat and letting your tenants get on with it. You have legal obligations to make sure the property is safe to live in and properly maintained. See our guide to landlord and tenant responsibilities. This involves time and money. For example, when repairs are needed you’ll either have to do them yourself or pay someone else to do them. And if there’s an emergency, like a broken oven or a burst pipe, you’ll need to sort it out fast.
  • Legal obligations: there’s a great deal of legislation around renting out a property. You’ll need to keep up to date with it all or you could find yourself on the wrong side of the law.
  • Time: managing a property is time-consuming work. The alternative is getting someone to do it for you, but there are pros and cons of rental property management agencies too – one of the disadvantages being that you have to pay for their services, meaning less rental income for you.
  • Empty periods: it’s unlikely that you’ll continually have tenants, so you won’t have a continuous income stream. You’ll need to budget for ‘void’ periods where the property is empty because you can’t find a tenant, or because you need to carry out maintenance.
  • Financial outlay: being a landlord costs money. You’ll have to pay for maintaining the property, and possibly furnishing it, as well as for maintenance and repairs.
  • Tax: you’ll need to pay tax on the rent you receive and capital gains tax when you sell the rental property. Plus, you’ll usually have to pay an additional 3% stamp duty when you buy a second residential property.
  • Your money is tied up: investing in a buy-to-let property is for the long term. You won’t have instant access to your money, as you’ll need to sell the property to release it.
  • Uncertainty: rents and property values go up and down – and the economy and things happening in the wider world can affect the rental market. For example, in response to the coronavirus pandemic, the Government extended the notice period landlords have to give to evict tenants.

Did you know…  

The rules around renting a room in your own house are very different to those for renting out a buy-to-let property. Find out more about renting a room to a lodger.

Insuring your rental property 

Make sure you’re covered financially if something goes wrong with your buy-to-let – find out about landlord insurance.

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