It’s no secret that the cost of renting a home is on the rise all over the country. When you hear news like this, the thought of becoming a landlord yourself can seem like an easy way to make a consistent income on the side. Here are some of the pros and cons of the situation, so you can figure out if this is the right business venture for you.
Can You Spare the Time
While being a landlord may seem like a great way to make passive income on the side, it’s not without its share of downsides. Not only can the additional tax issues take their toll, simply finding a property in a suitable location can also be extremely time-consuming. Likewise, it’s worth spending the extra time necessary to properly vet any potential tenants. You need to ensure you find people who’ll treat the property as they would their own home.
Of course, in the vast majority of cases, you’ll be able to hire a third-party to take care of any issues. This could end up eating a significant portion of your profits, though, so you should consider early on how much time you’ll be able to devote to this new project. You may even enjoy the extra responsibilities the job demands, whether it’s fixing a leaking faucet or putting the finishing touches on any outstanding contracts.
Dealing with Taxation Rules
When you start renting out a property, you’ll have to immediately inform HM Revenue and Customs (HMRC). If your profits are over £5,965 a year, then you’ll be required to pay Class 2 National Insurance. Likewise, you must report income from property rental on any Self Assessment tax return if it’s £2,500 to £9,999 after allowable expenses or £10,000 or more before allowable expenses. For more details on the kind of changes you can expect, check the GOV.UK website.
Last year, tax breaks for buy-to-let landlords were decreased in an effort to combat the country’s housing crisis. However, it’s not all bad news. Certain lenders have consequently had to offer more competitive rates and, as a landlord, you’ll still be entitled to several tax deductions from the government, including the cost of replacing damaged furniture, any accounting processes, and buildings and contents insurance.
While becoming a landlord may not be the easy solution you originally thought it was, it can still be an extremely lucrative venture. Take into account both the pros and cons and decide if it’s the right choice for you.
Is Becoming a Landlord Right for You?
