What are the rewards and risks of being a landlord?

Most people want to get onto the property ladder to ensure security in the fact that a tenant pays their mortgage off. Property is one of the best assets you can invest in because you can watch the capital value climb. 

But not all people want to rent out that property to tenants because there are some risks involved. Here, we’ll look at the rewards and risks of renting out your home and being a landlord.  

The risks of being a landlord

Let’s first take a look at the risks of being a landlord before we go into more detail on the rewards. Currently, the risks are higher than they have ever been and being a successful landlord now requires a business mindset, rather than looking at it as though it is a hobby. Here’s why:H3: The financial risk (Section 24)

The biggest hurdle in being a landlord is taxation. Under Section 24, individual landlords can’t deduct mortgage interest in full from rental income; instead, they receive a basic-rate (20%) tax credit for finance costs. This can mean a higher tax bill and, for some higher-rate taxpayers, tax can exceed the cash profit. For higher-rate taxpayers, this can also lead to situations where the amount of tax due exceeds the actual cash profit. 

Regulatory and legal compliance

Being a landlord in the current property market means that there is no room for making mistakes when it comes to compliance and regulations. In England, landlords will be required to sign up to the PRS Database and a new PRS Landlord Ombudsman as these are rolled out from late 2026 onwards (phased implementation).

• Fines: If you are unable to provide valid Gas Safety certificates, EICR or EPC certificates, you’ll run the risk of severe financial penalties. 
• The right to possession: You are also unable to regain possession of your property if there are no legal grounds to do so. So, non-compliance can delay or complicate possession action. Even with Section 21 abolished from 1 May 2026 in England, landlords can still seek possession for rent arrears using Section 8 grounds, but you need to follow the correct legal process. 

The risks of renting your home

Even if you find yourself being an accidental landlord, there are often emotional, as well as financial risks involved.  

• Property depreciation: Wear and tear is inevitable with renting out your home to a tenant, but seeing a tenant treat your property with less than perfect care can be stressful, too. 
• Consent to let: If you fail to inform your mortgage provider that you’re renting your property, you may be in breach of your contract. This can be a breach of your mortgage terms, and the lender may take action, such as requiring you to get permission, changing your rate/terms, or (in serious cases) demanding repayment.

So, as you can see, there are numerous risks to being a landlord and renting out your home, but these can easily be avoided if you make sure to follow the correct procedures and remain compliant. 

The rewards of renting out your home

Despite the risks of renting out your home, owning property remains one of the best assets you can invest in. Unlike the volatility of the stock market, a rental property is a tangible asset that offers multiple avenues for wealth creation. 

• Capital appreciation: Property has always served as a great long-term barrier against inflation. 
• The power of leverage: Investing in property gives you access to the multiplier effect, where the property will increase in value, which means your return on investment will be significantly higher. 
• Monthly cash flow: Choosing a property in a high-demand area will provide you with a consistent monthly surplus after expenses are paid. 
• Direct control: You have the ability to force appreciation by modernising certain features of the property. This will directly influence the value of your asset, meaning you have direct control over this.  

Managing people

One of the most unpredictable landlord risks is the relationship with the tenant. It is always in your best interest as a landlord to ensure your relationship with your tenant is open and positive. Always keep in mind, however, that life does happen, and there is always a risk of rent arrears. 

The stress test

You always need to think ahead as a landlord. So, you need to make sure that you’ll be able to pay the mortgage on the property for at least six months in the event that the tenant is unable to pay rent. If you cannot secure payment for at least six months, the risks of renting out your property may outweigh the rewards. 

A professional standard

So, is the reward worth the risk?

As you now know, being a landlord in 2026 is more of a professional endeavour rather than a hobby on the side. But the rewards of long-term wealth and having a continuous monthly income are still a huge possibility. You will just need to keep in mind that these rewards are protected by regulation, so always ensure you remain compliant. 

If you always make sure to navigate being a landlord with care and a high level of organisation, while also understanding the risk of renting your home, you’ll be able to build a successful property portfolio. 

At CIA Landlords, we have the knowledge you require to find a quote that is best suited to your needs. Feel free to visit our advice centre for more information on how to manage your property. Otherwise, make sure to get in touch with our team of specialists at CIA Landlord Insurance on 01788 818 670.