Across the United Kingdom, investing in property is considered a wise thing to do. The property market offers an excellent opportunity to increase your wealth in the long-term, all while giving you a great place to live.
The people who own flats often face the question: ‘Should I be renting it out or living in it?’. There is no one-size-fits-all answer to this question – there are several factors you must consider before deciding to rent out your flat.
So, what exactly are these factors which you should consider? And is now a good time to be renting our your flat? Read our blog below to find the answer to all these questions, and more.
Advantages of renting out your flat
There are several advantages to renting out your flat which make it an attractive proposition to homeowners.
Firstly, renting out your flat enables you to unlock an additional source of income. Even if you have a full-time job, the amount of money you earn will greatly increase if you are making a profit from your flat, too. Some people even make property ownership a full-time pursuit, and if your goal is to achieve this one day, then renting out your flat can be an excellent first step to achieving financial freedom.
Another advantage of renting out your flat is that it gives you the ‘fall-back’ option of having somewhere to stay if you fall onto hard times. Although you will have to give your tenants a reasonable eviction notice, the terms of which may vary depending on your contract, you will always have a property under your ownership which can be utilised in times of difficulty.
Things to consider before renting out your flat
Renting out your flat is not easy, and while property ownership is often described as ‘passive income’, this is certainly not the case.
There are lots of ongoing costs associated with renting out your flat, so while it can potentially provide a route to financial freedom in the long-term, you will have to manage your finances carefully and ensure you are always making healthy margins. If there are issues such as damage to your property, rent arrears, or refurbishments required, then this is going to cost you financially.
As a landlord who is renting out their flat, you are also obligated to follow all the legal requirements of doing so. Some of these can be complicated and unexpected, so completing thorough research and meeting all your requirements can be a challenge. Documentation required will include an Energy Performance Certificate, Gas Safety Certificate, Electrical Appliance Safety, and many more things besides. Keeping up with all the legislation, and spending money on tests and documents, can be a hassle.
Thirdly, practically every landlord goes through ‘void periods’ where there is no one renting out their property. This will be a challenging period financially, as you will not be making any money from the flat, but there will still be costs to pay. The condition of the UK property market is not in your control, and if the market conditions are poor, it may prove extremely challenging to find a tenant for your flat.
Above all, it is critical that you have the time available to manage all the above aspects involved with renting out your flat. Some people choose to use a letting agent as a means of reducing the time commitment involved.
Is It Profitable to Rent Out My Flat in 2023?
It is completely possible to make a profit by renting out your flat in 2023 – as long as you are prepared to manage your margins carefully and forget the myth that property ownership is a passive way to make money. Some flat owners choose to rent it out because it offers more long-term financial opportunities than selling a tenanted property.
If you own a flat in a big city which lots of people are keen to live in, there you are less likely to face ‘void periods’ which means that (in theory) your likelihood of making a consistent profit will go up. In this instance, it might be helpful to know the most profitable postcodes in the UK to see if your area is on there.
You should also aim to list your flat on the market during a period of high demand, if possible, as this may enable you to increase what you charge for rent, or simply be more selective about which tenant you opt for.
Furthermore, it is important that you choose your tenant carefully. Spending money on repairs and refurbishments is one of the most significant costs for a landlord in 2023 – so, if you choose a tenant who is well-behaved and doesn’t damage your appliances, then you are more likely to make a profit.
Finally, it is important that you maintain healthy profit margins when renting out your flat. A general guide is to aim for a 30% profit margin, because once you factor in repairs, void periods, safety tests and more, it may reduce the amount of money you make.