The latest research has shown that a large portion of landlords fail to gain a full understanding of the costs associated with leasing property. This can then lead to unexpected expenses which can make a serious dent in bank accounts.
According to the latest research from specialist buy-to-let business Platinum Property Partners, landlords underestimate the real cost of leasing property by £8,359. In fact, almost one out of every eight landlords fails to factor in these additional costs when calculating the profit potential of their portfolios. This includes a variety of expenses including letting agent fees, maintenance, repairs, marketing fees and mortgage interest.
So what areas do landlords fail to incorporate into their budgets? Over 50% overlook the need for repair costs which are estimated at £376 a year. Considering the fact that 90% of landlords incur repair costs at some point over a 12 month period this is an alarmingly high figure. Maintenance fees were another major expense, incurred by 67% of landlords. Yet despite their prevalence 81% of landlords neglected to factor in maintenance expenses which average £506 a year.
Another major outlay is exterior maintenance which includes gardening, window cleaning and other outdoor work. 72% of landlords incur these sorts of costs yet 80% don’t include them when drawing up budgets. This leaves them with an average unexpected bill of £259.
For landlords that rely on rent to pay off a mortgage or fund other living expenses ‘void’ periods can be a serious concern. An estimated 60% of face periods of vacancy at some point throughout the year however just 12% take lost income into account.
Steve Bolton, founder of Platinum Property Partners explains that “becoming a landlord isn’t a walk in the park, and running a successful portfolio takes continued investments of time and money on top of your initial lump sum investment. Many landlords appear to be burying their heads in the sands and are seriously in the dark about the ‘true’ value of the returns.”
While unexpected costs such as maintenance and void periods can’t always be avoided, property owners can protect themselves by taking out a comprehensive landlords insurance policy. As well as covering unexpected repairs and damage certain policies will also offer cover for loss of rental income. At the end of the day it’s a guaranteed way for landlords to reduce the sting of unexpected expenses, no matter how large or small their property portfolio.