If you’ve been looking into how to become a landlord, look no further. Our experienced team of Ilford estate agents at RE/MAX Star has put together this complete guide to becoming a landlord with easy steps you can follow to ensure you are not left venturing into the unknown and guarantee your success.
Here are the steps you need to take and the elements you need to consider when you want to become a landlord:
The first item on your list should be the state of the property. This element will weigh in most when determining the amount of rent you can charge for your home.
If the home is in complete disrepair, you will, of course, have to invest in renovation works that will bring the property up to code and make it appealing to potential tenants. This means you will incur costs before you will be collecting money.
On the other hand, if your property is in tip-top shape and fully renovated with top-quality materials, this probably means you can charge more rent for your property than the average of the area.
The other elements you should consider before letting your property include:
Next, you will need to make sure you have set yourself up as a business owner before you start letting out the property. To do this, register with the HMRC for self-assessment.
The income you collect from letting the property should be included in a tax return that needs to be registered by 5 October of the following year.
Some landlords prefer a more hands-on approach to letting their properties, while others find hiring a letting agency more convenient. A professional agent or agency will charge a fee, but they will also take on much of the work described in this landlord’s guide on your behalf, such as:
A letting agent or agency will also be able to advise you as regards the rent you can charge for your property and how you can make the home more appealing or increase its value so that you can charge more rent.
You also have the option of choosing a property management company that will also handle:
If having more free time and less hassle when letting your property sounds better for you, a property management agency may make more sense.
The decision is up to you based on your specific preferences and conditions.
The Local Council is allowed to perform Housing Health and Safety Rating System (HHSRS) inspections on rental properties at any time they choose. The property must also be up to standard according to the Homes (Fitness for Human Habitation) Act, namely, to be comfortable and safe for the tenants to live in.
If the property does not meet the Homes (Fitness for Human Habitation) Act requirements, your tenant may take legal action against you.
Therefore, as a landlord, you will have to ensure your property meets health and safety requirements such as:
Any gas and electric equipment and appliances in the property must be in working order and have the required safety certificates.
The home will also need to be fitted with smoke detectors and carbon monoxide alarms.
Whenever you are renting out or selling a property, you must have a valid Energy Performance Certificate (EPC). If you already have an issued certificate, make sure it is still valid. The standard EPC validity is 10 years.
To ensure your tenants’ health and safety, your rental property must be kept in good condition throughout the tenancy.
You are, as a landlord, responsible for repairs relating to:
You should also take into account that, unless it’s an emergency, you will need to notify the tenant 24 hours in advance when you need to come in to make any repairs. Otherwise, you are liable to a rent abatement, which is a rent reduction your tenant can claim when you are being disruptive.
As you probably well know, letting a property also comes with some costs. You will most likely be able to cover these costs with the rent you collect from the tenant. In addition, you may also consider setting up a fund for unexpected costs.
The costs of being a landlord include:
If you bought the property with a mortgage, you can consider using the rent you collect to cover the mortgage repayments. If you own your property, this cost does not have to be included in your budget.
If the property you are renting out is not yet up to code, you will incur costs relating to health and safety fittings like fire safety precautions or electrical upgrades.
Energy performance certificates cost between £50 and £100 and last for 10 years.
If you decide to use a letting agency or a property management company to handle your property, you will have to pay them between 10 and 15% of the rent.
As a landlord, you will cover the costs of repairs relating to your property. This includes structural, plumbing, or equipment repairs. If the property is rented with furnishings, you will also need to ensure they have fire safety labels and are safe to use or incur costs for their replacement.
Your property will have to be insured against damage like floods or fires. You will need to discuss with your insurance provider to determine which type of insurance best suits your needs as regular home insurance does not cover properties that are rented out and you may need a landlord insurance policy. You can also consider a rent guarantee insurance that covers situations when your tenant does not pay the rent on time.
To make sure your tenancy agreement includes terms that are beneficial to you, you should hire a solicitor. They will be able to manage all the provisions relating to rent increases, permitted use, or eviction.
Landlord associations offer benefits to members such as providing tenancy agreement drafts. However, they will also charge you up to £200 per year.
Your main responsibilities as a landlord relate to protecting your property as well as your tenants.
Property and Equipment/Appliance Maintenance
As previously mentioned, you will be responsible for bringing the property up to code, as well as for property and equipment repairs. If you are using the services of a property management company, they will be managing the repairs on your behalf and bill you for them.
Rent Deposits
The deposit paid by your tenant must be kept in a Tenancy Deposit Protection Scheme. You can either do this by yourself or let your letting agency handle the tenant deposit for you.
Rent Increase
You are only allowed to increase the amount of rent you charge for your property in certain situations. These include:
Property Access
You will still be allowed to see and access your property after you rent it out, provided that you notify your tenants 24 hours in advance. You will also need a reason for your visits, such as making repairs or scheduled checks.
Rent Collection
It is, of course, your right as a landlord to collect rent each month on the date agreed with your tenant in the tenancy agreement. The tenancy agreement should also include the circumstances in which you can evict the tenant if they fail to pay the rent on time.
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