Running a successful property investment business means carefully balancing your rental income with your monthly outgoings.
But if you’re a new landlord, you might be surprised at just how much the costs of acquiring your legal compliance paperwork can affect your profits.
We’ve highlighted 5 hidden paperwork costs of being a landlord below…
Energy performance certificate (EPC)
Before your property can go up for sale or rent, it needs to be inspected by an accredited energy assessor and given an energy performance certificate (or EPC).
This shows potential buyers and tenants how energy-efficient your property is, and provides an estimate of the power and heating costs they can expect to spend. (If you own a public building, the equivalent is a display energy certificate or DEC.)
Getting an EPC will set you back anywhere from £60 to £120; but besides those fees, most properties will also need to achieve an EPC rating of ‘E’ or higher before they can be let out to tenants.
Improving a less energy-efficient property up to ‘E’ standard can involve thousands of pounds of renovations. Currently, if you’re unable to improve your rating to ‘E’ or higher after £3,500 of renovation investment, you can apply for an exemption.
Worse, under proposals set to become law from 2025, landlords will need to achieve a rating of ‘C’ or higher. The exemption cap will also be raised to £10,000; which should give you a good impression of just how much more expensive your renovations could be.
The good news is, once you have an EPC in place, it stays valid for 10 years, and you won’t need to get a new one after those 10 years unless you want to rent it out to new tenants or sell it on.
Air conditioning inspections
If your property has air conditioning with a combined energy output of 12kw or more, it will also need a separate energy performance assessment (known as a TM44 certificate of compliance) every 5 years.
Prices can vary depending on your air conditioning setup, but you can expect to pay at least a couple of hundred pounds for one.
And unlike a regular EPC, you’ll need a valid air conditioning certificate whether your property is on the market or not.
Electrical installation condition report (EICR)
As well as measuring your property’s energy performance with an EPC, you’ll also need to ensure all the electricals are safe to use.
For this, you’ll need an electrical installation condition report (or ‘EICR’) carried out by a qualified and competent person. These can cost between £70 and £300 or more depending on the size of your property, and you’ll need to get a new one for your property every 5 years.
If your report comes back with no serious issues, congratulations – your report essentially serves as a certificate of your property’s electrical safety. Unfortunately, if the report comes back with issues, you’ll need to spend out on the works to fix them.
The silver lining is, you don’t have to use the same electrician for the report and the repairs; you’re free to show around for a cheaper repair quote if you wish.
Portable appliance testing (PAT)
While an EICR inspects the electrical systems built into your property (such as wiring, sockets, switches etc), portable appliance testing checks the appliances around the property.
The rule of thumb is, if it comes with an electrical plug attached, it probably needs a portable appliance test.
The thing is, PAT testing is not a legal requirement for landlords. However, they can potentially get you out of a tight legal spot if a tenant suffers an electrical injury while using one of the appliances you’ve supplied to them.
A PAT test for a typical residential property should be around £60 to £80, which covers anywhere from 10 to 50 appliances. There’s no strict requirement for how often you should get your appliances tested, with different ‘classes’ having different recommendations.
Landlord gas safety record (LGSR)
And as for your property’s gas safety, you’ll also need a landlord gas safety record (or LGSR; otherwise known as just a gas safety record or GSR).
This is essentially the gas equivalent of an EICR; except you’ll need a Gas Safe approved engineer to carry out the inspection and record, and you’ll need a new LGSR once every year.
In terms of costs, you can expect to pay around £60 to £100; but again, if the inspection uncovers any serious issues, you may end up paying far more in repairs or replacements.
One last thing…
Don’t forget, each property you own will need its own set of certification paperwork; which means the costs across an entire portfolio can quickly add up.
Need help managing your property investment finances? At GNS Associates, our team of expert landlord accountants and small business tax consultants in Uxbridge are here to help.
Book your consultation today – call us on 0208 090 2604 or email firstname.lastname@example.org.