Top 10 Tips for New Landlords
We get asked a lot of questions about letting a property so thought it might be a good idea to compile a ‘top tips’ list to share which will hopefully demystify some of the seemingly daunting processes of letting a property for the first time. Whether it’s your own home or a buy-to-let investment, the tips below should give you some insight into becoming a landlord and what you can expect. If you get it right then it can be such a rewarding business!
1. It’s very important to get some sound financial advise so you know if it’s a viable option to let your property out. When drawing up your financial plan make sure you take into account all the costs of renting a property out, this will include any repairs or updates you need to make to the property, don’t forget to include estimated periods when the property might be empty and therefore not bringing in any income, these are called ‘void periods’ and are often overlooked by new landlords. Contact several local agents to get a realistic estimate of the likely rental income to give you a better view of whether the rent will be enough to at least cover all your costs.
2. If you work full time, then managing a property can be very stressful and time consuming. If you decide that you just won’t have the time you have the option to use a letting agent, meet with several that are local to the property. They usually offer packages ranging from ‘Let Only’ where they will find you tenants, check references and draw up the tenancy agreement. All the way to the other end of the spectrum with ‘Premier’ packages which encompass everything including all legal requirements, safety checks and maintenance so the landlord doesn’t need to lift a finger. All these costs are tax deductible but the rental income will obviously determine what package is financially viable for you. If you do choose to use an agent, make sure they are registered with one of the professional regulatory bodies. These include NALS (National Approved Letting Scheme) and ARLA.
3. Find out what your obligations are as a landlord and make sure you can fulfil them, if you rent your home on an assured shorthold tenancy that started after 6 April 2007 you are legally required to put your tenants deposit in a government-backed tenancy deposit scheme (TDP)
Make sure your home is safe to be rented out. Plenty of things that you have been prepared to live with for a long time will not be suitable if someone else is coming to live in your property.
You will need to obtain a gas safety certificate from an engineer registered with gas safety body CORGI and instal carbon monoxide detectors. You will also need to get the wiring checked by a qualified electrician. “It would be good practice to get a certificate for this too,” Salusbury, at the NLA, says. Some larger properties may also need fire detectors before being rented out.
It is also your responsibility to obtain an EPC certificate for the property. You must order an EPC for potential buyers and tenants before you market your property to sell or rent, this will give potential tenants information about a property’s energy use and typical energy costs.
4. We would recommend that landlords meet any potential tenants face to face, it’s not just a nice thing to know who is moving into your property, but the track record is that people who have met in person generally have a better chance of resolving any potential issues that may arise between them, this in turn makes life easier for everyone involved.
5. Attracting good quality tenants, and then keeping them for as long as possible is the aim of the game! Think about your home’s kerb appeal. Make sure that the property feels like home – all appliances are in working order (that includes all light bulbs!) Securing that all-important first impression, for example via your letting agent’s website, property brochure or when conducting property viewings, and then ensuring general upkeep is therefore crucial to make sure that happens.
6. Have a contingency fund; reapirs and general wear and tear are issues that are always going to arise when you are letting a property so expect to replace carpets, appliances and other fixtures and fittings in the future. It helps to have this in mind so would be an idea to keep some money aside specifically to finance these so you wont have a nasty shock when something out of the blue occurs.
7. Rental income will be treated as income and taxed in line with your basic or higher-rate tax bands, so try and work out the tax implications of renting out your property before putting it on the market. There are however certain costs that can be offset against tax. Including mortgage interest payments, letting agency and management costs and any costs for repairs and the general upkeep of your property so make sure you keep a record of all outgoings i.e invoices from contractors and mortgage statements etc. You are required to keep these records for 5 years.
8. Be flexible and try not to put too many unnecessary restrictions i.e allowing children and pets unless you have a real reason to do so. Try to present your property as a tempting proposition, especially if its a large family home, potential tenants with children will be more concerned will safety and shabbyness than say a group of younger sharers would be.
9. If you are renting your property out, you are still responsible for buildings insurance on the property, as well as your own contents, fixtures and fittings. The insurer will need to know that the property is being rented out, if they don’t know and something goes wrong your policy could be considerered invalid. A specific landlord’s insurance policy will cover you for things like loss of rent and landlord liability.
10. Make sure you inform your mortgage company, do not be tempted to leave your lender in the dark about your tenants. If you don’t inform them, you will be in breach of your mortgage conditions, and your insurance would be invalid should anything happen, says Malcolm Harrison of the Association of Residential Letting Agents (ARLA). In some cases, your mortgage company will not force you to change your mortgage, but they all have different criteria.
You may find that your lender forces you to change to a buy-to-let mortgage with a higher interest rate, it’s best to know where you stand so you can build this into your costs before you go ahead and then find its not financialy viable.
We hope this has shed some light on just some of the important issues that you need to consider when looking to let a property, if you do decide to take the leap, we wish you all the best in your new and exciting future as a landlord!