Becoming a landlord is a serious business. Avoid the pitfalls by following some simple steps.
There are an estimated 1.5m landlords in the UK – but they are not all intentional ones. Some are 'accidental landlords' who needed to move from the home they own but do not wish to sell it.
This situation can arise for a whole host of reasons. You may have to move temporarily for a new job or to look after a family member, for example. Or it could be that you want to wait for the property market to pick up before selling.
FIND A PROFESSIONAL LETTING AGENT: Especially for inexperienced landlords, a good lettings agent can be worth their weight in gold. Look for a Licensed member of ARLA (Association of Residential Letting Agent) or a similar professional body. The Agent's services will include assessing the rental, advertising the property on the major property portals, finding and screening tenants, drawing up contracts and other legal documents, holding the deposit in a regulated scheme, and preparing a detailed inventory and schedule of condition.
If you only require a lettings agent to find the tenants and draw up the relevant documents, you will probably be charged a one-off 'tenants-finding' fee of around one month's rent (plus VAT). But if you want them to manage the property too, fees can be in the region of 10% of the monthly rent (plus VAT).
However, lettings agents' services vary so make sure you agree a service relevant to your needs and especially whether they will carry out regular visits and checks on the property throughout the tenancy and chase late or unpaid or rent if they are managing your property.
WHAT TYPE OF TENANT? : This will depend on the size of your property but you may have your own opinions too. Are you happy with small children for example? Or a family with three cars? What about if tenants work from home or work nights? Will you allow smokers or pets? Make sure you tell your Agent the type of tenant you would prefer.
PREPARE THE PROPERTY: Homes are personal to their occupants so if you want your property to appeal to as many tenants as possible, it needs to be neutral. Give walls (and ceilings) a coat of neutral coloured paint and lay reasonably-priced flooring throughout. If you are renting your home furnished, remove any items that are old, delicate, personal or just not fit for purpose.
FAMILIARISE YOURSELF WITH THE LEGAL REQUIREMENTS: Although this this responsibility will fall to the lettings agent, it is still worth knowing that by law your property will need a Gas Safety Certificate and an Energy Performance Certificate. Your tenants will also need to be presented with the Government's downloadable How to Rent guide. And the deposit will need to be put into a recognised Tenancy Deposit Scheme. New right to rent checks also mean it's now the landlord's/ agent's responsibility to check tenants have a right to be in the UK.
TERMS OF THE TENANCY AGREEMENT : The standard contract between a landlord and tenant is called an Assured Shorthold Tenancy Agreement (AST). Your lettings agent will draw it up for you but make sure you are happy with key points such as the length of the tenancy and the notice to leave that is required from either party.
DECIDE ON THE SERVICE : You will need to decide if you want to manage the property yourself or get a lettings agent to manage it for you. If you do not live locally or have a busy job, the latter option is often well be worth the money and save you time and frustration.
CLEANLINESS : Before tenants move in, use professionals to give your home a deep clean – (including windows, bathrooms, kitchens, carpets etc. etc.) Although an additional expense, it is essential to set a standard for the tenants, and they will need to return the property in a similar condition when vacating.
INSTRUCTION MANUALS : Look for any instruction manuals – such as for the boiler, alarm system, cooker and white goods – so the tenant has them to hand. And leave any keys they might need for gas and electricity meters to be read.
NEW TAX RULES : Once you are a landlord, you should familiarize yourself with the current tax legislation relevant to letting.
The rent you get from your property will be classed as taxable income but – from 6 April 2016, if you are letting a furnished property, you will no longer be able to claim 10% 'wear and tear' costs against your tax bill. And from April 2017, relief on mortgage interest will start to be capped for all landlords at the basic rate of 20%, even if you pay tax at 45%.
FINALLY : If you are thinking about buying another home while your previous one is rented, you are likely to be hit an extra 3% Stamp Duty under a new Government clampdown on second homes which kicks on from 1 April this year.
WANT TO FIND OUT MORE? Find out more from Drewery – ARLA licensed members. www.drewery.co.uk
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Speak to me: If you'd like to have a chat about anything in this article or property related, drop me an email at email@example.com – I'd love to hear from you.
Paul Long (Director & Author of The Sidcup Property Blog)