How Can Tenancy Be Costly to Landlords?

Renting out a property can be a lucrative business. However, it can also prove to be a lot more costly than you first anticipated.

Landlords face a lot of risks when letting out a property. Unless you prepare for the potential financial losses you might face along the way, you could find yourself out of pocket by thousands of pounds.

Here, we’ll look at some of the key financial challenges landlords face. You’ll also discover how to plan ahead to ensure your tenancy agreements don’t leave you high and dry.

What financial challenges could you face?

There are a lot of financial challenges you could face as a landlord. Some of the main ones include:

• Tenants losing their jobs
• New fee laws
• Eviction fees
• Cost of repairs

The recent coronavirus pandemic has seen an unprecedented number of people lose their jobs. In early April 2020, it was revealed that 2 million Brits had been made unemployed due to the pandemic. Many of these are renters, leaving landlords in a difficult position.

The government introduced new legislation which prevented landlords from evicting tenants for three months during the crisis. To prevent landlords from suffering as a result, mortgage payment holidays were also introduced. However, it has highlighted the dangers landlords face if their tenants lose their jobs.

New fee laws also threaten your livelihood. In 2019, new legislation was implemented to prevent landlords from charging excess tenancy and letting fees. This means they can no longer charge for credit checks, viewings, or the drafting of the tenancy agreement. This means you now face more fees as a landlord when it comes to bringing in new tenants.

If you end up with bad tenants, the average cost of evicting them is now more than £1000. Then there are repair costs to consider if something goes wrong with the property.

These are some of the main financial risks landlords face right now when letting out their property.

How can you protect yourself against financial loss?

As the coronavirus is expected to cost landlords up to £15 billion between March and June 2020, it has highlighted the need for income protection. There are 5.2 million people renting privately in the UK and many are now unable to afford their rent. While mortgage holidays have provided some protection, the money still needs to be paid back.

If you want to protect your income as a landlord, there are numerous measures you can take. Making sure you have adequate HomeLet rent guarantee insurance is one step you can take. Commonly known as rent protection insurance, it protects you in case your tenants cannot pay their rent.

To cover the cost of getting new tenants in when needed, you can also save some of the rent money you receive throughout the tenancy. This can then be used to cover the fees you will need to cover yourself.

Overall, landlords do need to ensure they are adequately protected in case anything does go wrong during the tenancy. Preparing yourself for potential financial losses will ensure your livelihood is protected, even during a pandemic.