Even with the Brexit causing uncertainty, the United Kingdom is quite a stable place to invest in property. Especially in places like London, rent prices of flats and offices are on the rise and is great for property owners. Of course, there are many costs associated with owning property in this country.
Insurance
If you own property for the purpose of gaining rental income, landlord insurance is available to mitigate various risks associated with the business. While damages and lost rent are important to cover, having owners’ liability in case of injuries can save your hide.
Residential landlord insurance applies to rent out a home or apartment being used as a home. For tenants running a shop or office out of the property, commercial landlord insurance would be what you’re looking for.
Rent Guarantee Insurance assures that you will still receive your monthly income if tenants are no longer able to pay. This doesn’t apply if you are unable to rent out the building due to damages or other circumstances.
Taxes
Property tax is an unavoidable expense anywhere in the world (with few exceptions), so you must prepare for it in the UK. The Council Tax is due every year and varies based on the property’s municipality and other set factors. Stamp duty applies to the upfront purchase of a property and will vary based on several conditions.
Fortunately, if you are purchasing your first property and it is below £125,000, this at be at 0%. A large project over £1,500,000 will be taxed at a deft 12% for a first-time purchase or 15% if it’s a secondary property.
Management & Maintenance
Whether you staff your own employees or contract with a property management company, someone needs to be on top of things. They can deal with your tenants, collect rent, respond to complaints and is a necessity if you live far away from the property. Of course, management companies will want to take a cut out of your rental revenue. It can be upward of 10%, depending on their expertise and list of responsibilities you task them with. If the profit margin is big enough, it’s totally worth it.
You may also need to hire staff to handle tedious maintenance around the property unless you plan on doing them yourself. This may include landscaping, janitorial services, pest control, electrical wiring, plumbing, and HVAC servicing.
Utilities
Someone needs to pay for the services hooked up to the building, including water, electric, internet and other things that are necessary. If you choose to include this with rental prices, or you maintain common areas, you will need to be paying bills when they are due. If your tenants choose to have these in their name, then they will bear the responsibility. Of course, this needs to be detailed in the rental or lease agreement.
The idea is to buy something at a relatively low price in comparison to the rent with low upkeep so that you can make a hefty profit. While property ownership is costly with lots of responsibilities, the potential for future profit is too high to pass up.