Ten unexpected costs of being a landlord.

Price hikes in the housing market have made it harder for buyers to get on the property ladder. But this has boosted the demand for properties in the market, with rental prices edging higher.

Landlords entering the market don’t always know what to expect – there are some costs that aren’t initially anticipated but have to be paid. It’s always best to seek advice from professionals and others in the market if you can, to better understand what it takes to be a landlord.

To help, we’ve pulled together a simple guide to highlight costs that might not have been fully factored so Buy to Let landlords know what they might come across.

1. Extra mortgage costs

Anyone who owns a property runs the risk of not being able to pay their mortgage, but the risks for landlords can be higher. Your tenant might pay their rent late, or not pay at all, and there may be times when you’re between tenancies with no rent coming in.

Lenders are aware of this and most tailor their Buy to Let products accordingly. This could mean they ask for a larger deposit - up to 25% rather than the 5 or 10% required for a personal buyer.

Lenders might also set their rates higher for Buy to Let customers and ask for higher fees when you buy the property – including up to 2.5% of the value of your mortgage as lender arrangement fees.

And don’t forget about valuation fees, booking fees, solicitors' costs and stamp duty (but only if your property qualifies).

2. Set up costs

You’re ready, the tenants are lined up and they’re about to move in.

But before you hand them the keys, there are a few things that have to be in place to meet legal regulations (and they might present some unanticipated costs).

• Tenant checks: Tenancies should start with a reference and a credit check; in the UK these can range between £5 – £30.
  
  Further, registering for the Deposit Protection Scheme comes with an additional cost (most providers charge a fee that’s a percentage of the deposit amount), but it means your tenant’s deposit is tucked away somewhere safe - protecting you, and them.


• EPC ratings: Up-to-date EPC (Energy Performance Certificate) scores need to be provided and can be found either online or through a paid assessor. Moving forward without being up to date with the Government’s standards could potentially result in a fine of up to £5,000. Want to make sure you’re on top of your property’s score? Visit our EPC Hub to find out if you’re making the right improvements to boost your rating .


• Gas safety checks: Gas appliances and heating all need to be checked by a Gas Safe-registered engineer at least once a year - costing between £60-£80 each time.


• Landlord registration: Check your local council’s rules because you might need to register your property. A one-time registration costs £70.


• Data protection registration: As you’ll be handling your tenant’s personal data, you’re classed as a data controller under the Data Protection Act. By law, this means you need to register with the Information Commissioner’s Office to say you’ll process and manage tenants’ data responsibly. Registration costs start at £52, and needs renewing every year.


• Buildings insurance: This isn’t a legal requirement, but most lenders won’t agree to a mortgage unless you have it. Costs vary depending on the property and prices start from £150 a year.

3. Letting agents

If you’ve just got one or two properties and have the time to commit, you might want to manage all the admin yourself, including listing your property to rent.

If you don’t want to juggle the management of one or multiple properties, sorting out any potential problems that might occur, you might want to consider a letting agent.

Offering a range of services, these agents lay the groundwork – from finding tenants, sorting admin, maintenance and repairs and collecting rents for a managed end-to-end service.

This comes with a price tag, of course. Full property management typically costs around 12% to 15% of the rental price (with some agents charging up to 20% in London). It may be worth considering which parts of the process you’re happy to manage and which parts you’ll need help with to keep these agency fees down.

4. Renters’ Rights Bill

A major change landlords will have to adjust to is the Renters’ Rights Bill, coming into effect in 2025. Aiming to create a more stable and secure private rental sector for tenants, the Bill will increase compliance requirements for landlords, some of which will come with some added costs.

Key reforms being introduced under the Bill include:

• the end of Section 21 ‘no-fault’ evictions
• replacing fixed-term tenancies with rolling, periodic tenancies
• a new Private Rental Sector Ombudsman
• the application of the Decent Homes Standard to the Private Rented Sector.

5. Problematic tenants

If things go wrong with your tenancy and you need to evict your tenant, you could potentially need legal help resulting in court costs. In most cases, it costs between £1,300 and £2,200 to evict a tenant in the UK, depending on whether you go with the cheaper-but-slower county court or spend more for a speedier High Court eviction.

You may also be dealing with a tenant who won’t pay. And while this can be covered through your insurance, it’s worth having money put aside as a contingency to make sure your mortgage payments are covered should the worst happen.

Whatever scenario, there’s always a chance of having an empty property on your hands. With no tenants paying rent, you have to consider the costs of ongoing expenses with a loss in rental income.

6. Stamp Duty impacts

The Stamp Duty surcharge for landlords was increased from 3% to 5% during the 2024 Autumn Budget and will come into effect on the 1st April 2025.

At the same time, the first threshold at which personal home buyers need to pay Stamp Duty tax will reduce from £250,000 to £125,000. At this amount, personal buyers will pay a 2% tax, which translates to a 7% tax for landlords.

This means landlords buying cheaper properties will be faced with higher Stamp Duty bills.

7. Paying tax

You’ve already paid Stamp Duty, but don’t forget that any profit you make on renting out your property is subject to income tax.

You’ll need to make sure you’ve got money put aside at the end of every financial year to cover your tax bill, which will vary depending on how much money you make.

If your finances are complicated or you’re set up as a business, you may want to employ an accountant to handle this for you, which is an additional outgoing to need to factor in.

8. Maintenance costs

Like any home, rental properties need regular upkeep and probably the occasional repair. Landlords may find there could be a few more expenses incurred if tenants aren’t careful, or if a thorough clean up isn’t completed between shorter tenancies.

Legally, landlords are responsible for making sure the property is safe for tenants, including annual gas, fire and electrical safety checks. If you’re providing furnished properties, you’ll have to make sure home decor, and electrical equipment meets the current safety standards.

While a tenant is responsible for tasks like cleaning and general upkeep, the landlord needs to ensure the property is safe – including things such as the structure and exterior of the building, walls, stairs and bannisters, the roof, external doors and windows. Plus, heating and wiring needs to be checked and maintained to a sufficient standard.

9. Licenses

Depending on the location of your property, you might need to get a license. This relies on the type of property you’re letting out – you may need a houses of multiple occupation (HMO) or selective licence, if you qualify. The best way to check if you meet the criteria of needing a license is to get in touch with your local council.

If you need to obtain either type, expect to pay as much as £500 every 5 years.

10. Growing property portfolios

One thing that you should take into consideration is - how much do you want to grow your housing stock as a landlord?

If your long-term plan is to grow your property portfolio, you may have to consider stock costs (house prices) in comparison to demand. Now, we can’t accurately predict the future, but doing research into the economic outlook and rental market can help you make informed decisions and reduce the chances of any surprise costs.

The demand for rental homes has soared since 2020, consistently pushing up the average asking price for rents. Landlords in 2024 saw an average of 11 enquiries per home advertised for rent (in comparison to the six enquiries in the pre-pandemic market of 2019).

When all is said and done, there are some hidden costs within the Buy to Let market. But property investment in the UK is on the rise, and opportunities for investment still offers good potential for long-term capital gains.

Comfortable with the costs of being a landlord and ready to get started on your Buy to Let journey? Get in touch with our expert team.