According to the latest research from LV= landlord insurance, a surge in ‘part-time’ landlords across Britain is happening as people attempt to boost their income by letting properties on the side.
Over 7% of adults in Britain rent out a property to help supplement their income and receive on average £678 per month. This equates to almost £28bn a year across the country.
As you would expect, 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). After deducting overheads of 60% (borrowing costs, management fees and maintenance costs), the average landlord is left a healthy pre-tax profit of approx 40%.
Moving to a new home and then renting out their old one is the driving force behind the trend as 55% of 'accidental' landlords 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.
Whatever the reason may be, all landlords must comply with current regulations on rented homes.
The law states 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.
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. Almost half of today’s amateur landlords manage their rental property on their own and do not have such protection. Of those self managing their properties, 27% have not had a gas safety check in the past twelve months and risk being prosecuted and fined up to £20k.
As well as exposing themselves to fines from the local authority, landlords could find themselves heavily out of pocket if one of their tenants decides to make a claim against them.
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.
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%).
19% of those who rent out houses – equivalent to over 400,000 landlords - do not have appropriate insurance in place and might not be covered should the worst happen. LV= landlord insurance has been designed to cover a range of scenarios for rented properties and to provide peace of mind to landlords in case things go wrong.
John O’Roarke, Managing Director of LV= landlord insurance, warned:
“Renting out a property can be a great way to cover your costs if you are 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.”