There are many additional costs involved in renting out a property beyond just the mortgage payments. Landlords are responsible for council tax payments on empty properties and houses in multiple occupation, while tenants pay council tax for self-contained houses and flats. Insurance for buildings and contents is also required, as well as optional rent guarantee insurance. Legal and professional fees include letting agent fees, accountancy costs, and buying/selling fees. Tax planning is complex and requires expert advice regarding income tax, capital gains tax, inheritance tax, and stamp duty land tax. Property maintenance and improvements need to be budgeted for annually to cover repairs, inspections, and periodic upgrades.

1. Costs associated with
renting

2. Additional costs in letting a property
• There are many other costs involved in renting a property and landlords
should be mindful of these
• Be generous in predicting costs if calculating the overall profitability of a
property
• Provide an allowance for unforeseeable costs

3. Council tax liability
• Houses and self contained flats…. Tenant is responsible
• Houses occupied entirely by full time students are exempt although it is
the student that needs to apply for the exemption
• HMOs with rooms let on separate contracts….Landlord is responsible
for payment
• Empty properties will incur full council tax for the owner although some
councils give a grace period such as 2 weeks
• The rules around when a landlord becomes liable for council tax if the
tenant abandons the property vary depending on the type of tenancy
(i.e. fixed or periodic), landlords should seek independent advice

4. Insurance
• Buildings insurance – this is mandatory if relying on a mortgage
• Contents insurance – landlords should insure their contents. Tenant is
responsible for insuring their own contents
• Rent guarantee insurance – optional, will apply caveats to the type of
tenant you can accept, pays equivalent of rent and court costs in the
event of non-payment

5. Legal/professional fees
• Several fees should be allowed for when assessing profitability
• Buying and selling fees are usually offset against capital gains but
landlords should be mindful of this when looking at yield
• Letting agent fees – ongoing cost
• Accountancy fees – usually annual

6. Tax
This is a complex area and landlords should seek advice from a suitably
qualified expert in tax and financial planning. The following tax will require
planning:
• Income tax
• Capital gains tax
• Inheritance tax
• Stamp duty land tax

7. Property maintenance and improvements
• Ongoing maintenance is the most unpredictable cost for landlords
• Landlords should allow a contingency fund on an annual basis for
unseen repairs
• Some things can be planned for such as gas inspection, EPC, electrical
inspection
• Plan for periodic improvements to maintain quality such as decoratin,
flooring etc.

8. Property maintenance and improvements - leaseholders
• Leaseholders – those who pay ground rent and service charges to a
head freeholder, often the case in blocks of flats – should obtain
previous bills for works completed prior to purchase for an indication of
future costs as they are often expected to contribute to runnig costs of
the entire building