As I have pointed out in other blogs recently, more and more people are deciding to let out property because they are struggling to sell it or in some cases are not prepared to sell at heavily discounted prices.
Amidst this changing trend, more experienced landlords and investors are calling on these novice landlords to take a good look at the financial implications and landlord obligations before they become a landlord overnight.
For instance not many new landlords know that if the property is still has a residential mortgage, then they will find that under the terms of this agreement they are not allowed to rent the property out.
Even if they do go ahead with renting it out, then the maximum period it can be let out for is one year. Those who are interested in becoming a long term landlord should arrange to have the mortgage switched to a buy-to-let mortgage. However this type of mortgage comes with its own terms and conditions and the interest rate charged is likely to be higher than those charged on residential mortgages.
If you are a new landlord, you should take into account how much of your rental income will be consumed by letting agent fees, maintenance activities and utility bills.
Generally landlords on average will spend upto 25% of the monthly rent on these expenses.
But hold on, that does not mean that the remaining 75% is your net profit and that you can start spending it. A big chunk of your rental income will go towards paying your mortgage interest and then you will also have a tax liability if you have made any profit from your rental income.
If you have taken the plunge to become a landlord then our property management software will help you keep a track of your rental income and cashflow, thus saving you time, money and effort in managing your property business.
