Understanding the Financials of Letting: Is a Monthly Loss Inevitable?
If you’re considering letting your property, here are some key financial factors to explore to help ensure your investment remains sustainable and profitable.
One of the biggest concerns for landlords is whether renting out a property will mean taking a financial hit every month. In our February Home Moving Webinar, a key question was raised: Is it inevitable to run at a loss when letting out a property? One attendee shared their experience using an online calculator, which predicted a staggering £500 monthly loss once all costs—including mortgage repayments, management fees, and insurance—were factored in.
This highlighted an important topic, so we wanted to break it down in this supportive blog. If you’re considering letting your property, here are some key financial factors to explore to help ensure your investment remains sustainable and profitable.
1. Have You Explored All Your Mortgage Options?
Your mortgage is likely the largest outgoing cost each month, so reviewing your options is essential. Many landlords stick with their existing mortgage provider without realising there may be more flexible and cost-effective alternatives. A specialist buy-to-let mortgage broker can assess whether refinancing, switching to an interest-only option, or extending the term could reduce your monthly payments and improve cash flow. Our partners at Mortgage Tribe would be more than happy to talk you through your options.
2. Are You Charging the Right Rent?
Setting the right rental price is crucial. The property market is always evolving, and rental values fluctuate based on supply, demand, and local trends. If your rent is set too low, you could be missing out on potential income. If it’s too high, you might struggle with void periods. Our Avocado Property Lettings Team offers a free rental assessment to ensure your property is competitively priced while attracting the right tenants.
3. Could You Reduce Lettings Costs?
While certain costs are unavoidable, there are ways to manage them more efficiently. Here are a few areas to review:
- Letting Agent Fees: Are you getting the best value for money? Consider switching to an agency that offers a more transparent pricing structure.
- Insurance Policies: Bundling multiple landlord insurance policies (such as buildings, contents, and rent protection insurance) can often result in discounts.
- Energy Efficiency Improvements: Investing in upgrades like better insulation or more efficient heating systems could reduce long-term maintenance costs and attract tenants looking for lower energy bills.
4. Have You Explored Tax Efficiencies & Reliefs?
Tax is a complex area, but knowing what deductions and reliefs are available could make a huge difference to your bottom line. Some common tax efficiencies landlords should explore include:
- Mortgage Interest Tax Relief: While the rules have changed in recent years, you may still be able to offset some costs through the tax credit system.
- Maintenance and Repair Costs: Many property maintenance expenses are tax-deductible, reducing your overall tax liability.
- Capital Allowances: If you provide furnished properties, there may be additional allowances available to you.
Speaking to a property tax advisor can help you navigate these options and ensure you’re making the most of all available savings.
A Word from Andy Brown, Director of Lettings at Avocado Property
"Many landlords worry about monthly losses, but with the right strategy in place, letting can still be a profitable and rewarding investment. Reviewing mortgage options, optimising rental income, and making smart financial decisions can significantly improve your returns. Our team at Avocado Property is here to support landlords in making informed choices and ensuring long-term success."
Need Tailored Advice? We’re Here to Help
At Avocado Property, we understand the challenges landlords face, and we’re here to make the letting process as financially viable as possible. Our Avo Property Lettings Team can walk you through your options, from optimising rental income to managing costs effectively.
If you’re concerned about the financial viability of your rental property, let’s have a chat. Contact us today to book a consultation and ensure your investment remains a profitable one! Alternatively listen to our bi-weekly podcast The Investors Corner for more helpful hints and tips for managing your property portfolio.