Letting properties on the side boosts income

Britain is seeing a boom in ‘part-time’ landlords where people are letting properties on the side to boost their main income, according to new research from LV= landlord insurance.

 

Over one in twenty (7%) British adults rent out a property to supplement their income and receive an average monthly rent of £678, equating to nearly £28 billion a year across the country. Landlords in London and the South East collect the highest rents at £1,079 and £816 respectively, followed by the West Midlands (£678) and East Anglia (£676). Approximately 60% of this is spent on borrowing costs, management fees and maintenance costs, leaving landlords a healthy pre-tax profit of 40% on average.

Rental trend

The trend is mainly being driven by people moving to a new home and then renting out their old one. In fact, over half (55%) of these landlords are renting out properties that they never intended to, often because they wanted a bigger property (15%), they had to move for work (10%) or they wanted a garden (8%). One in twenty (6%) landlords say they ended up renting out a property because they moved in with a partner and did not want to sell or couldn’t sell their own.

Current regulations

Whatever the reason for letting out a property, all landlords must comply with current regulations on rented homes. By law, all landlords must ensure that gas and electrical equipment is installed and checked annually by a registered engineer. Tenant deposits must be held in a deposit protection scheme, and some local authorities insist that landlords in their area obtain a licence.

Taking responsibility

A managing agent will usually take responsibility to ensure that all legislation is complied with for a fee, as well as check tenants and manage the rent collection. However, nearly half (49%) of today’s part-time landlords manage their rental property themselves and do not have such protection. Of those managing their properties directly, over a quarter (27%, equivalent to nearly 500,000 landlords) have not had a gas safety check in the past twelve months and risk being prosecuted and fined up to £20,000.

Compensation culture

As well as risking fines from the local authority, landlords could find themselves heavily out of pocket should one of their tenants make a claim against them. Slips and trips can result in expensive compensation claims for property owners who are liable for any harm to a tenant or member of the public as a result of the condition of the property. For example, a landlord could be sued by someone who falls and is injured because a pathway has not been maintained. Landlords can also be liable for damage to adjacent properties, such as an overflowing gutter causing water damage to a neighbouring house. Analysis of LV= data shows that the number of liability claims being made against property owners has been steadily increasing in recent years, which can be attributed in part to Britain’s growing compensation culture.

Insurance needs

The insurance needs of a rented property are very different to those of an owner-occupied home, and standard home buildings insurance will not usually cover homes that are tenanted. Almost a third (32%) of landlords say their rental property has been damaged at some point and has had to be repaired, which has cost them £1,200 on average. Of those who have had their property damaged, the main cause has been damage by tenants (44%), followed by flooding (17%) and storm damage (8%). Letting properties Renting out a property can be a solution to cover your costs if you’re unable to sell or want to hold on to a home and make some extra money from it, but it is not without risk. Landlords not only need cover for any damage to their property but they also need to think about their tenants and how they will house them if the property becomes uninhabitable, as well as the lost rental income. If you are thinking of renting out a property, you should check the current regulations for letting properties in your area and make sure you have the right cover in place.

Source data:

The research was conducted by PCP Research and commissioned by LV= landlord insurance. PCP questioned 2,278 UK adults including a bespoke sample of 209 adults who own one or two rental properties that they do not live in. The research was carried out between 6-15 October 2014.