If you’re looking to invest in a rental property, or you’ve already signed on the dotted line, there are a lot of factors to consider and a lot of preparations to undertake before you hand over the keys to your tenants. In this guide for first-time landlords, we provide a starter checklist ranging from legal obligations to preparing the property for let and ongoing maintenance. Even if you’re a veteran landlord, you may find this rental property guide useful.
Buying a property to let – costs vs returns
If you’re looking to buy a property specifically to let, you’ll need to factor in the higher interest rates that come with a buy-to-let mortgage. One common route for people to get into the market is to switch an existing residential mortgage to a buy-to-let before purchasing a new home, or indeed even switching over and then renting out their existing property. In any case, be sure to work out whether your expected rental return will more than cover your mortgage repayments.
Having a thorough understanding of all the upfront and day-to-day costs involved in buying a property will also give you a better position to calculate the costs versus the returns. In the case of property rentals, you’ll have the potential income from rent as well as any capital growth from the property value going up. If you’re looking to become a landlord, you’re looking at a medium to long-term investment risk.
Some of the expenses that you’ll need to be aware of before fully committing include:
- Property purchase price
- Stamp duty
- Legal fees, including property checks
- Mortgage fees (be sure to check your lender’s conditions about whether you can let under any standard mortgage you might have or whether you’ll need to switch to a buy-to-let mortgage)
- Income tax (payable on your rental income, minus any day-to-day running costs)
- Class 2 National Insurance (only applicable if you’re renting your property as part of running a business)
- Renovation costs (for example, to enhance the energy efficiency of your property – you will not be allowed to let the property if it has an Energy Performance Certificate rating below the minimum of ‘E’, though some exemptions apply)
There are a number of monthly or yearly fees to be aware of too, including:
- Mortgage interest
- Landlord’s insurance
- Letting agent’s fees (if you’re choosing to go through a professional provider)
- Safety checks (due annually, such as a gas safety check on each appliance and flue, ensure the electrical system and any supplied appliances are safe, and ensure the property has a working smoke and carbon monoxide alarm)
- Rent insurance (available to protect you against tenants falling into arrears or having a vacate property)
- General building maintenance
- Redecorating (decorating and furnishing your rental property can help fill vacancies sooner, which might mean putting a new lick of paint on the walls, considering different quality flooring for high traffic areas so it lasts multiple lettings, putting in white goods as an added incentive, or including furnishings, particularly if you’re looking to appeal to a student market or to those on temporary working contracts)
In considering all these costs, you’ll need to think about your potential rental returns and research the best way to rent your property out based on its location, size and amenities. For example, are you looking to rent out your property to an individual, couple or family and have one lease? Or have you considered having a lease for each room and letting to multiple parties? If the latter, you will also need to look into the rules for houses in multiple occupancy. Doing your own research on the rental offerings in the local area and speaking with an estate agent can help you figure out a letting strategy, assist with marketing and have a competitive price point.
Responsibilities as a landlord
There are a number of ‘must-do’ activities that you have to complete as a landlord, and there are also a number of ‘nice-to-do’ things. We include the breakdown of each.
Must-do as a landlord
Provide the following to your tenant/s:
- Tenancy agreement (this will more than likely be an assured shorthold tenancy agreement – the lawyers at Insight Law can provide assistance with this)
- Ground 2 Mortgage Notice (available for download from the Landlord’s Guild here – only applicable if you have a mortgage on your property as this notifies the tenant that possession may be sought in the future by the lender)
- Energy Performance Certificate
- Government ‘How to Rent’ Guide (available for download here – be sure it is the latest version from the date the tenancy starts)
- Inventory of the property (it is a good idea to include corresponding photos to show their condition at the start of the property and so it’s clear when each line item is referring to, and be sure to do an inventory walk-through and have the tenant sign each page if they agree with the description)
- Smoke and carbon monoxide checklist (while it is your responsibility as a landlord to provide these alarms, it is common for the tenancy agreement to state that it is the tenant’s responsibility to check these at regular intervals throughout the year)
- Protect any deposit received (you must put a tenant’s deposit in a government-approved Tenancy Deposit Protection (TDP) scheme within 30 days of receiving it; it is possible to rent out a property without taking a deposit, though it’s not advised)
It is also your responsibility as a landlord to carry out an immigration Right to Rent check to verify that the tenant/s who occupies your property has legal status to live in the UK. You must do this before the start of the tenancy for all tenants over 18 years of age, even if they are not listed on the tenancy agreement. You must check all tenants, and not just those who you think are not British citizens. For more information on this, visit the government website.
Nice-to-do as a landlord
- If you were the prior resident, arrange to have your mail redirected
- Let the council know that you’ll no longer be the resident so they can arrange for the tax to be paid by the new tenant
- Leave instructions for all appliances with each appliance (and keep all of your warranty information to hand in case you need to arrange any repairs or replacements)
- Make sure all relevant equipment is labelled correctly
- Share final meter readings with the tenants
- Demonstrate the workings of relevant appliances, including how to use any safety equipment
- Provide a list of emergency contact numbers
- Copy the house keys so that each tenant has their own set (you will need to do this if you have a house in multiple occupation)
Specialist landlord advice
There are a number of points before, during or after a tenancy where you might benefit from tailored landlord advice, which is where our team at Insight Law can help. If you would like to ensure your tenancy agreement is sound, you have a dispute during the course of the tenancy, or you need to evict a tenant (either during the course of the lease term under a section 8 notice or at the end of the fixed term under a section 21 notice per the Housing Act 1988), then call our team of property lawyers for advice.
We help landlords navigate the complexities of letting so you don’t have to do it on your own. Speak to us today to see how we can help by calling 02920 093 600.
Posted by Insight Law on
16 October 2019