If you are considering the possibility of becoming a landlord, you will need to calculate a budget so that you know whether it will be a profitable investment for you. Although you will gain rental income, there are a number of expenses which you will face.
If you need a buy-to-let mortgage, you may want to speak to a mortgage adviser. Your mortgage repayments will be the largest expense you have, and the lender will have to conduct an affordability test. This will require you to be able to ensure that rental income covers 125% of the mortgage repayment. This will prove to the lender that you can afford the repayments if interest rates increase. The CeMAP training course taken by an adviser ensures that they are aware of all the factors.
As with any property, you will be expected to maintain it in good condition, which will require a little investment over the year. It may be a good idea to check the property on a regular basis, rather than have to pay a larger bill once or twice a year.
If you rely on the services of a letting agent, you will be expected to pay around 15% of your annual rental income for that property. Landlord insurance is another requirement, to cover buildings and contents if you have furnished the property. You may also have to allow for any periods when the property isn’t rented out. The new tax changes are due to come into force next year, and this may have an impact on your income, so you may want to speak to a professional.