Our Quick Look Guide to Becoming A Landlord is a snapshot of some things you should consider. This is not a detailed guide and we will be posting more in depth guides for you over the coming months covering these topics as a whole.
1. Rental Income
- Firstly, no matter how tempting it may be, never charge too high a rent. It is better to let your property for a realistic rental than leave it empty waiting for a higher price. An empty property will not only cost you loss of rental income but you will still have to pay council tax every month until a tenant is found.
- If you use a letting agent they will let you know a realistic rental figure. However, if you are confident and experienced enough to rent the property yourself then look at similar properties in your area to see what the going rate is. Search property websites such as Rightmove and Zoopla and see what other landlords are charging.
- A clean well-maintained property, combined with an affordable rent, can mean the difference between a long term tenant paying you a steady monthly rent or needing to look for new tenants each time the rental period expires.
- Another practical dividend is to charge a slightly lower rent each month in return for a 12-month contract as opposed to the more common six months.
- Keep accurate records of rent received, as you will need to disclose this on your tax return. Ensure that the rent is paid by standing order and be wary of any tenant who wishes to pay in cash.
2. Good Tenant Bad Tenant
There is nothing worse than a bad tenant, any landlord will tell you this.
With more people renting properties it is extremely important to ensure you have the right tenant, especially one who can afford to pay the rent.
Always ensure you carry out rigorous checks on any potential tenant. The extra time and effort spent doing this will be worth it in the long run as problem tenants can be extremely difficult to deal with and not to mention very expensive.
If you use a letting agent to manage your property, they will have the appropriate application forms for the tenant to complete and will carry out the necessary and legal checks required.
If you do not use a letting agent then as a minimum you should obtain the following information and carry out the appropriate checks:
- Always obtain the full name, date of birth and National Insurance number of each prospective tenant. Ask for proof of identity e.g. Passport, driving licence or other official photographic document.
- Ask for details of the last three years addresses
- Request to see proof of income through an employer’s letter confirming the tenant’s salary, or the last six months payslips. If the tenant is self-employed, request an accountant’s letter or previous years tax return.
- If your prospective tenant is on state benefits or is retired, ask to see the relevant benefits confirmation payment or pension statement.
- We cannot emphasise enough the importance of obtaining a full credit history check on the tenants. This will highlight any CCJ’s, bankruptcies or IVA’s.
- If your tenant has rented a property previously you should ask the previous letting agent or landlord for a reference to confirm there were no issues of rent arrears or neglect to the property.
You can get help with most, if not all, of the above by using a tenant referencing company. Simply search the Internet using the search term “tenant referencing”.
Remember you have a choice of who to rent your property to. If any of your checks come back negatively or something doesn’t quite stack up then simply look for a better tenant.
3. Tenancy Agreements
Once you have secured a tenant do not let them take possession of the property until you have a signed an Assured Short-hold Tenancy (AST) agreement.
An AST will provide a legal basis for the contract you are entering into and will detail yours and your tenants responsibilities and duties avoiding any potential disagreements in the future and prevent your tenant refusing to pay the rent.
4. Costs and Maintenance
Keep your property well maintained and handle maintenance issues straight away. This will not only make your property more desirable but small maintenance issues dealt with quickly can avoid bigger more costly problems arising in the future.
Keep complete and accurate records of all work and maintenance carried out at the property. The majority of these costs are deductible against tax and can prove you dealt with an issue in a timely manner should your tenant or a member of the public have an accident at the property.
5. Inventory
An inventory is critical and should be part of your tenancy agreement.
The more concise the inventory the less likely disputes will happen in the future.
Create a full a description of the condition of the property, preferably room by room, adding as many photographs as possible.
It is essential that you and your tenant agree the inventory and they sign to accept the condition of the property. Allow approximately seven days to sign acceptance and confirm back to you. If you have not received a confirmation within the said time, advise them in writing that it has been taken that the inventory is agreed.
6. Deposits
Always take a deposit from your tenant to cover the costs of any damage they may cause at the property.
We would recommend six weeks rent is taken, but as a minimum this should not be less than one months rent. The decision on how much you charge is completely your choice but remember if you do not take an adequate amount to cover breakages, dilapidation, damage or other items that are not deemed fair wear and tear then it is highly unlikely that you will be reimbursed when your tenant moves out.
It is well worth carrying out six monthly inspections of the property. This provides you opportunity to quickly pick up any damage giving your tenant a reasonable time frame to make good.
You are also required to protect the deposit you take in a relevant deposit scheme and provide your tenant with a copy of the certificate issued.
7. Compliance with Regulations
There are several regulations that every landlord must comply to. Breaching these regulations can lead to prosecution and in some cases very heavy fines and/or imprisonment.
It is important you are fully aware of your legal requirements when renting your property, these include:
- Gas Safety Certificate – if your property has gas you are legally required to have all gas appliances serviced each year and obtain a gas safety certificate, a copy of which must be given to your tenant.
- Electrical Safety – you have a legal requirement to ensure all electrical supplies and appliances at the property are checked – we recommend you have an inspection annually by a qualified NICEIC electrician.
- Energy Performance Certificate – you have a legal requirement to have an up to date Energy Performance Certificate for your rental property.
- Fire Safety Standards –ensure you comply with the Furniture and Furnishings (Fire Safety) Regulations 1998 and ensure the property has adequate escape routes in the event of a fire.
- HMO – if your property is legally designated a House in Multiple Occupation (HMO) there are additional legal requirements, such as licences, fire alarms and fire extinguishers. You should take independent legal advise or contact your local authority for precise details on what you must do to protect your tenant.
8. Insurance
It is very important you acquire adequate insurance created especially for landlords. An ordinary home insurance policy will not apply and if you haven’t notified your insurance company you are renting your property then you will probably find your policy to be void and you would not be paid in the event of an incident that leads to a claim.
It is essential you cover yourself for not only the standard perils such as fire, escape of water, storm, flood, theft etc. but include cover for malicious damage caused by tenants too.
Most insurers do not offer this malicious damage cover. Therefore, we recommend Just Landlords for offering you landlord insurance as they provide a 5* Defaqto rated policy covering you for all these risks and more.
You can get a quote by clicking the following link www.justlandlords.co.uk
In addition to covering the property you may wish to cover yourself against the tenant defaulting on the rent.
Our insurance partner, Just Landlords, offer cover for tenants defaulting from as little as £63.60 plus their policy will provide cover for legal expenses.
9. Keeping up to date with news
Keep yourself up to date with the latest landlord news and legislation amends. The law is constantly changing and many new regulations are being brought in to protect tenants.
By registering for free on our site you will be kept fully informed hot off the press about changes to regulations in addition to guides, tips and suggestions and so much more.