- Bear in mind being a landlord is a business
Just like any business; you make money, you have expenses, and you pay taxes. If all goes well you’ll make a profit each month. While property is a fairly safe long-term investment, there is no guarantees of success, just with any other business.
Many people become a landlord because they think it’s an easy way of making money. It is not always that easy as it seems. There are no guarantees.
- Understand what being a landlord actually means
Many landlords step into the arena with a totally distorted view of what being a landlord actually entails.It seems exceptionally easy from a distance. You need to choose your tenants carefully. Be aware that you may end up dealing with repair and maintenance bills or rent arrears.
The laws can be excruciatingly unfair towards landlords.
They may come across more protecting of tenants and they are frequently changing.
You always need money on the side so you can cover any unforeseen expenses.
Void periods are common, this is when the property is vacant for short periods, particularly in-between tenancies. During that time you won’t receive rent, but you’ll probably still have a mortgage to pay, plus other expenses.
There are a few expenses: complying with regular legal obligations e.g. gas safety checks, EPCs, landlord license, electrical safety certificate, mortgage, insurance, agency fees, accountants fees etc.
- Check if you’re even allowed to let your property
Funny thing, thousands of landlord are letting their properties illegitimately.
If you plan on renting a house you once lived in, the odds are you have a residential mortgage. So you need to ensure you have a mortgage policy that covers buy to let. Contact your lender to see how to make the switch.
Lenders can retract the loan if you have an incompatible mortgage.
If you have a leasehold property, check the lease, as many leases do not permit sub letting (you’d effectively be sub-letting if you let a leasehold property).
If you purchased your property as part of a shared ownership scheme – you should check with the housing association and any other parties involved what the deal is with letting.
- Check, understand and meet your legal responsibilities
First and foremost, your rental property must be “fit for habitation”, which means it needs to meet certain standards. In practical terms, the following must not be an issue:
- the building has been neglected and is in a bad condition
- the building is unstable
- there’s a serious problem with damp
- it has an unsafe layout
- there’s not enough natural light
- there’s not enough ventilation
- there is a problem with the supply of hot and cold water
- there are problems with the drainage or the lavatories
- it’s difficult to prepare and cook food or wash up
- or any of the 29 hazards set out in the Housing Health and Safety (England) Regulations 2005
Some local councils require landlords to obtain a landlord license before they’re able to let their property. On average, the license will set you back approx £500, and it will need renewing every 3 years or so.
Check with your local council if a license is required.
Gas Safety Check:
Landlords must ensure that all gas appliances, pipe work and flues are maintained in a safe condition. In order to ensure this, a landlord gas safety check must be conducted annually by a Gas Safe engineer (any respectable plumber/gas man will be Gas Safe qualified).
Energy Performance Certificate (EPC):
An EPC is a report which shows the energy efficiency of a property, rated from A (most efficient) to G (least efficient).
Since April 1st 2018 it has been a legal requirement for landlords to ensure their rental properties in England & Wales have a minimum EPC rating of ‘E for new tenancies and renewals.
As of 1st April 2020, all existing tenancies must have minimum EPC rating of ‘E, not just new ones or renewals.
You should get an EPC before marketing your property, as prospective tenants are required to view it BEFORE a tenancy agreement is created i.e. you should show the EPC tenants during the viewings. A property that isn’t very energy efficient will cost more to run, so that’s useful information for tenants.
Smoke and Carbon Monoxide Alarms:
A properly tested and fully-functional smoke alarm must be fitted on each floor of the property, and a carbon monoxide alarm is required in rooms which have a usable fireplace or wood burner.
Every electrical appliance supplied by with the property must be safe to use; the electrical installation in the house must be completely safe. This check must be carried out every 5 years.
Minimise risks of Legionella:
Ensure property ha a minimal risk of Legionella in the premises. You need this check for properties that had a cold water tank or for all properties that was unoccupied for sometime, in that case you need to have the taps running for 10 minutes and have this noted on the inventory report,
Secure tenants deposit into a deposit scheme:
When securing a deposit from a tenant, you need to register and transfer the deposit into one of the deposit schemes, and also serve your tenants the prescribed information.
Ensure your tenant has a right to rent in this country:
Carry out immigration checks
Landlords have to ensure their tenants have a legal right to rent and live in this country. It involves checking the identity of each applicant (e.g. passport, driving license).
For prospective tenants that come form further afield (e.g. doctors from India), you may have to run a few extra checks. Here’s a more complete guide on the right-to-rent legislation.
- Decide if you want to manage the let and tenants yourself
Use an agent to find tenants and fully manage the property:
This is the solution for landlords that want minimal involvement with the tenancy.
The privilege of doing nothing comes at a cost – Most agents typically charge between 10 – 15% of the rental amount for fully managing + extras.
Use an agent to find tenants and take viewings:
This is a middle ground – whereby you pay an agent to typically advertise your property, conduct viewings, conduct referencing, draw up the tenancy agreements, and secure the tenancy deposit. Once a suitable applicant is found and secured, you then handle the management. This is a much cheaper option than the full management package.
Find tenants yourself and manage the let:
This option is when you do all the work.
This D.I.Y option entails you taking on every aspect of the tenancy, including marketing, finding the tenants, referencing, managing, carrying out viewings, making decisions. This means you do more work, but you save money.
- Decide between online agent & high-street agent
So, the decision, do you want to use an online or a high-street agent? I can’t say which is better or more suitable for new landlords, because it depends on how much you require in-person support.
If you don’t feel comfortable carrying out your own viewings, and you want the option of being able to walk into your local agent for face-to-face support, you’re better off paying the premium rate of a high-street agent.
- Preparing the property
Firstly, you need to choose between providing a furnished and unfurnished property.
Use neutral colours, keep the house clutter free, spacious and clean (that’s exactly how the property should be presented during the viewings). If your house is neither of those things prior to marketing, you have work on it..
The key is to neutralise the decor, so it appeals to general public. Little personal touches are usually a waste of time and detrimental.
- Finding & referencing tenants
You should conduct independent referencing which should include credit checks, and verifying references.