There are a number of reasons people become residential landlords. Often, it’s because someone wants to do more with their savings and sees property as a sound investment with a regular income. It might also be that a person becomes an accidental landlord after inheriting a property or moving into a house with a partner.
Here are seven things to think about when becoming a landlord.
1. Set-up costs
Finances matter, the numbers have to stack up. If you’re going to obtain a buy-to-let mortgage, the lender needs to know about your income, and what rent you hope to achieve. They have to ensure that you can cover the costs. You’ll probably have to pay for surveys too so they can be sure the house is worth what you think it is. Then there are the legal fees and the search costs. Many law firms who specialise in conveyancing will be able to give you an early indication of what your final bill will be.
2. DIY or use a lettings agency
You could manage the property yourself, and many do as it helps to reduce costs, but you should decide what is best for you. Do you want to use a lettings agency to find you a tenant and arrange the initial agreements? You can then keep on top of things for yourself. Or would you rather hand over all the management to the agency? This will certainly reduce the pressures on you, but will come at a cost as the agency will take a fee for doing this.
When you are renting out a property, you should obtain landlords insurance. This is because a home insurance policy will not cover you for what you need, and also because the right insurance will protect you, your property and your tenant. If you’re taking out a mortgage to buy the property, your lender will insist that you have insurance. The costs of insurance will vary depending on the level of cover, such as personal liability, contents cover and buildings cover, and loss of rent cover. Speak with an insurer or a broker and be absolutely clear about what you need.
4. Furnished or unfurnished
Whether you rent out a property that is fully furnished or unfurnished is a decision you need to make early on. If you’ve inherited a property, then it might well be an easy decision. If this is the case, you might find this suits a potential tenant, and you will be able to get a better monthly rent. If you rent out a property unfurnished, obviously it means you don’t need to buy things for it. Some potential tenants prefer this as they can put their own furniture in and make it their home. Don’t forget; it’s best practice to get an inventory carried out as this will affect your insurance policy and could minimise disputes at the end of an agreement.
One of the top tips for being a landlord is to be well organised and up to date with paperwork from the start. It may seem daunting having a lot of documents, but organisation is key. Not only will this ensure you don’t fall foul of any legal responsibilities, but it should also mean that if any disputes arise, you know straight away where things are. (It’s also particularly useful when you’re doing your accounts or checking information).
6. Legals & Responsibility
There are certain legal obligations and responsibilities that need to be understood. These are in addition to the tenancy agreement that you and your tenant should be signing. For example, before a property is let, you’ll need an up-to-date Energy Performance Certificate for it. A gas safety certificate is required for each gas appliance in the property, each home has to have smoke alarms and a carbon monoxide detector and any appliances or furniture must meet the required safety standards. There are also rules about a tenant’s deposit and how it is kept in a Government-approved scheme. If you need help with any of these, we can advise you.
7. Right to rent checks
A relatively new aspect of renting out a property is the need to carry out a Right to Rent check. A landlord must, by law, check whether a potential tenant has the legal right to rent a property in the UK. Failure to carry out the required checks could result in hefty fines so if you do need advice, then contact us and we will be delighted to help.