Profit To Be Made From Renting Property

Although currently there is little movement in house prices, rentals are increasing. Naturally this is a good thing for landlords though not so good from the perspective of tenants. The bottom line is that there are substantial profits that can be made from renting a property.

If you already have a property, then depending on where it is located rental returns can typically be from 5% to 7% of the property’s value. This means that for a property worth £300,000 located outside London you can expect to receive a rent of at least £1,200 a month and possibly as much as £1,750 a month. That is far more than you would make in a savings account, and it is far less risky than investing on the stock exchange. Furthermore, you will benefit from any increase in house prices which are predicted to rise by 15% over the next five years.

Naturally there are costs involved too. Primarily you will need to maintain the property and its services in good order. Unless you are able to manage the tenancy yourself, you will need a letting agent. Letting agents generally have an upfront charge for letting a property and should you wish them to manage it, then they will charge for that. The amount charged will depend on the level of management required, though typically management fees vary from 7% to 17%, though 10% is fairly standard.

You will also need to have landlord’s insurance which must include landlord’s liability cover and possibly public liability cover.

If you intend to fund the purchase of a property using a BTL (buy to let) mortgage, then obviously you will need to allow for the cost of mortgage repayments. Most BTL mortgages are interest only and favourable rates are available for landlords who can put down a 40% deposit. Specific insurance is also necessitated, so be sure to check out and read up on the information available to you.

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