The Costs and Problems of Bad Tenants
Becoming a landlord is an attractive prospect for many people, providing the opportunity to make long-term investments and increase your annual income – particularly if investing in high yield property locations like these. However, being a landlord can also be costly, particularly when it comes to bad tenants. But just how much could this set you back?
From general maintenance to income tax, there are numerous costs that are part and parcel of being a landlord. For example, this may include letting agency fees for maintenance, tenant screening and managing applications. Or for private landlords, fees for tenancy agreements, deposit schemes and landlord associations. However, tenant troubles could add further costs, eating into your rental income and leaving you in need of additional funds.
Here we take a look at the common problems and associated costs that come with every landlord’s nightmare: bad tenants.
Repairs and Redecorating
As a landlord, you should expect to carry out repair work for general wear and tear. However, if you have let your property to a bad tenant who has deliberately damaged or neglected your property, you may find yourself having to carry out extensive renovations.
While you can retain the deposit or even take tenants to court, repairs could be expensive. This depends on the work required, which could range from cleaning and redecorating, to installing new appliances and repairing structural damage. In addition, the property will be vacant while work is completed. This means you will receive no rental income during this period, while still paying the mortgage, council tax and any utilities, subsequently increasing costs.
Late or Lost Rent
UK rental prices hit an all-time high earlier this year, at an average of £761 per month (excluding London). This equates to £9,132 per year. For a landlord, this means that any late or missed rent can quickly add up, which could leave you covering the mortgage without receiving the rent required to cover it.
Although there are a number of reasons why rent may be withheld or not paid, from unemployment to disputes over repairs, you could find yourself in a difficult financial situation. Costs of non-paying tenants could also increase, especially if eviction or court proceedings are required.
It is a landlord’s worst fear: you have rented out a property but the tenant has ceased paying rent, reminders and letters have had no effect and now you must begin eviction proceedings.
On average, it takes eight months for an eviction to be completed. This means you could stand to lose £6,088 in missed rent (if using the £761 average monthly figure). Furthermore, evicting a tenant typically costs a further £2,000, taking into account legal fees and bailiffs. Unless you have landlord legal expenses cover, this means a bad tenant could cost you in the region of £8,000.
Before you take on a tenant
Before you take on a tenant, it is important to run a credit check. This will indicate whether they may have had issues in paying financial commitments like loans and credit cards in the past which will help paint a picture of their financial habits.
While being a landlord can be a profitable and very rewarding endeavour, it can also be costly. Hopefully this article will help you to protect yourself against bad tenants and plan for any additional expenses.