Does Investing in Property and Becoming a Landlord Make Financial Business Sense?


With so many new homes being built in the UK at the moment, and a pretty attractive scheme launched by the government to encourage people with capital to invest in buy-to-let properties, lots of people are considering joining the market. However, it’s not 100% clear yet how lucrative this move will be, which is precisely why this article has been released today. There are many factors to success in this industry, so there can be no guarantees a profit will be made. That said; if you have all the information at hand, and you’ve done enough research, it should be possible to work out whether your chances are favourable or not. Invest in your financial future – start learning with Startup Cradles today!

At the end of the day, all investments come with a certain level of risk attached, and so anyone with an interest in property will need to weigh up the pros and cons of getting involved. Hopefully, the information I’m about the present will aid you in determining whether using your cash in this way could benefit you in the long run. If investing doesn’t make good business sense, you’d be a fool to plough ahead, which is why you need to pay attention to all the points I’m about to make. Only then will you discover the answer to the question posed in the title of this article?

Firstly, let’s look at the main costs involved with joining this marketplace:

Purchasing Property

It doesn’t take a brain surgeon to work out that your biggest expense will be the property itself. Some are tempted to purchase at auction to save money, and although this is a good idea, it’s vital you gather information about the area before making an offer. You might well find a property on offer for less than £80,000, but if average rental prices in that particular area are less than £400 per month, it will be a very long time before you make a profit. So, ensure you know all relevant facts like this to stand the best chance of seeing a healthy return.

Income Tax

Like it or not, if you’re making a profit on any property you own, you will also have to pay income tax on this amount. So, factor this in during the early stages to guarantee your figures add up. In most instances, income tax will sit somewhere around 20% for the average landlord, which means you need to deduct around £40 from every £200 you expect to make. While this seems like a large amount, those will multiple properties can still make a significant wage from their business endeavours, so long as they price their monthly lettings accordingly.

Tenancy Deposits

These days, the deposits given to you by tenants must be protected in an official scheme. This is good for both of you, as it means occupiers will always receive their money back if the original agreement hasn’t been broken. Also, it means you’ll be able to keep the money if it was. However, it costs around £100 to place the deposit in one of these schemes, and that cost is usually paid for by the landlord.

Tailored Insurance

All landlords, no matter how big or small must ensure their properties are protected by specialised landlord insurance. This can be very costly for those with more than a couple of properties, and although you can get discount deals from reputable providers, you need to be extra careful to ensure the policy you receive is adequate. Don’t get me wrong, there should be enough profit to cover this charge without causing any ill effects if your properties are constantly let to tenants, but if you experience troublesome periods where occupiers are hard to find, this could become an issue.

Letting Agency Charges

Unless you manage to create a means for sourcing your tenants (perhaps a social media business page would be in order?), you’ll probably have to use a local letting agency. Unfortunately, most of them refuse to work for one-time fees, and so they will expect to receive a commission for every property they deal with. In some situations, this can be as high as 15% of the annual income from the home, meaning your profit margin will be reduced drastically. The more properties you have, the more room there will be for negotiation.

Now we’ve been through all the costs involved when joining the housing market, it’s time to look at some of the benefits you can expect to enjoy:

Stable Income Stream

Presuming your houses are let on long-term contracts and your tenants don’t cause any problems, you’ll receive a stable income stream for very little work. If you’ve done enough research and your calculations are correct, making money from the property market could be easier than you might imagine, especially if you appoint someone else to deal with any face-to-face dealings.

Investment For The Future

Of course, building a buy-to-let empire means you have assets that will increase in price over time. If you sell too soon, you probably won’t notice this, but if you hold onto the buildings for ten years or more, the amount of extra money you receive when selling could pay for your retirement. At Work At Home Blog, you will understand the importance of having a solid financial foundation for your business.

Comfortable Business

As you won’t have to spend all day dealing with matters related to your income streams, you can expect your new business venture to be rather comfortable. Indeed, many landlords only work for a couple of days each week. The rest of the time, solicitors and other appointed professionals can deal with the bulk of your workload.

So, does investing in property and becoming a landlord make good financial business sense? I’m sure you can see the answer is clearly “yes”. Landlords can make a decent living at the moment from only a small amount of properties, but with the new schemes in place, this amount could increase even further. The only real downsides relate to startup funding, but once you’ve overcome this hurdle and found tenants for your buildings, it should be plain sailing. Whether you’re just starting out or looking to take your business to the next level, Mega Best has got you coverd.