How much profit can you make from being a landlord (again a novice guide)
Looking for passive income ideas in 2022? Landed on this page via Google searches?
Now we get asked this a lot, and again, this is for novices, so we want to keep it very simple. The quick answer is not very rich and not very fast!
Property price £100k
Upfront cost £38k (save, beg, borrow but please don’t steal J )
(see our article on how much I need to get started in property to understand this breakdown better)
Cost of utilising the service of a bespoke property agency to help you with securing this = £4k. This is from initially finding you the right property to helping you secure this. If you fancy doing this yourself, please do minimise this, but a wrong property can cost you a lot more than this. Please do work with approved organisations like My Landlord Cares, who are trusted professionals and have close contacts with local councils and social housing organisations. Want to find out more then check out our contact us page.
A mortgage at generally 5% will be about £350 on mortgage repayment per month (this is if you want to repay the debt and own the house as a pension pot)
If you just want to service the debt and are not interested in owning the property, then the repayment will be roughly £200 per month.
Letting agent = £75 per month (again, My Landlord Cares will find you the right tenants for your property). Also,o please do factor in tenant find fees – in our organisation, we only take our fees from rent payments, and break up tenant find across the year to help with your monthly cashflow management. This generally costs about £200 and includes sourcing, vetting, advertising,and creating tenancy packs.
Rent per month £550 – 650 per month (depending on area/ property etc)
So let’s do the maths
£650 per month rent
Minus mortgage = £350 – we always advocate paying off the loan to invest for your own future (so you own the property after 25 years)
Letting agency fee = £75 (we won’t put the tenant find for the moment because this can be taken flexibly)
= £225 per month (this is without factoring in maintenance budgets, insurance, tax, etc)
As you can see, this is no quick money scheme, and you may be thinking, is it even worth it???
If you grow your portfolio (own more houses), then you can build this number up. But the up-front costs are the big boohoo, hence why you see many property people looking for investments.
Also, in the long term, if you overpay your mortgage or just complete your mortgage term after 25 years, then all of a sudden your monthly cash flow is £575 per month. So this is a nice tidy sum from one property. It can feed into your pension.
So the question to, can you be rich through property, not very quickly if you do it sensibly. Now there are a lot of deals, projects, and conversions out there that promise a lot more. But as a novice, we would always advise sticking to a safer strategy, don’t borrow beyond your means, and think long term.
If you fancy a chat then book on to one with us.