A Guide To Becoming A Landlord
It is a simple guide to becoming a landlord in Coventry, and some people want to grow a property portfolio and generate rental income by purchasing their first investment property.
Many people fall into becoming accidental Landlords. We receive comments asking us for information on becoming a landlord to help with a buy-to-let mortgage.
We have decided to put some information together on becoming a landlord. What are the dos and don’ts of the tenancy agreement? Do I need a certificate from a gas safe registered engineer?
It is an important subject because there are so many misconceptions about what it means.
I hope this guide will clear up some of those misconceptions and help more people feel comfortable with the idea of being landlords.
Matthew James Property Services in Coventry offer complete or part property management. Contact us today! We will be more than happy to discuss your needs.
Let’s drive-in
Why Become A Landlord?
This guide will help you determine if you should sell or rent your property.
Renting private homes can be an excellent way to make money and receive an annual rental income while protecting your savings and assets over time.
Many people fall into this and become accidental landlords.
New Landlords need to be knowledgeable and informed about the process of renting.
In addition, landlords need to educate themselves on the types of costs such as buildings insurance, gas safety checks, and other costs associated with being a residential landlord.
Making money by renting out your property is a big commitment, but our guide will help you make the most of this opportunity.
Getting Started
The first place to start when looking at an investment property is whether or not it’s appropriate as an option for a prospective tenant.
If you’re considering renting out the house, make sure you’re clear on how many bedrooms and bathrooms you need to meet your needs.
You’ll also want to know how much repairs will cost and budget accordingly before making any decision. But, again, the aim is to achieve the most rental income possible.
Consider how much work and time is needed to have your home ready to rent to prospective tenants. For example, if you’ve just inherited property, it may need a lot of TLC. Consider getting that done before renting it out.
Time is money, after all, and you want to work as swiftly as possible to get your property investment into good shape so you can start earning that annual rental income as soon as possible.
It is essential to work out what your expected rental yield will be. There are online rental yield calculators you can use to check this.
You can check to see if there is demand for renting your house. For example, 20% of families in the UK rent instead of owning a home.
You can check websites like Rightmove and Zoopla so much information, discover how fast your house is likely to rent, what the overall property value is expected to be, and how much rental yield you can achieve.
It pays to keep up to date on all property news and what the market conditions are doing.
So what’s the first step to becoming an experienced landlord. You’ll need to pay an income tax register for self-assessment with HMRC so that you don’t get in trouble with the taxman.
You might also want to chat with some experienced landlords who can advise property management and find the right tenant at this point in your journey.
There are a few decisions to make, such as being hands-on or hiring a letting agent to rent out the property. First, you will need to decide whether you will rent your property investment as furnished or unfurnished property.
Questions To Ask Yourself?
Furnished Or Unfurnished?
A furnished property may seem like a good idea when you first purchase it but remember that any furniture or appliances left inside will become your responsibility to repair if they break.
Should I Hire A Letting Agent?
A letting agency may be an extra expense, but they can manage a lot of the legal responsibilities tenants’ deposits and are great for liaising with all parties involved. Consider what’s best and most important for you before making any decisions.
Costs Of Being A Landlord
Repairs
If something goes wrong or if something breaks in the house, it could be up to you to pay for the repairs. For example, you may need a plumber because of a leak, or you might need to buy a new appliance. Keep all receipts for things you have paid for and save them because they are tax detectable.
Mortgage Repayments
Owning rental property is beneficial because you get to deduct mortgage interest. You may want to consider a buy-to-father mortgage, and most mortgage lenders offer these. To avoid foreclosure, you should make your mortgage payments on time. As a property owner, you will still need to pay income tax. Tax reliefs may be changing, so plan carefully and keep up to date with property news.
Insurance
While existing tenants usually take responsibility for paying their monthly utilities, you’ll still be responsible for sorting out and paying for insurance. You can search the web for more information about landlord insurance and Legal cover. In addition, there are lots of financial services available across the web.
Agency Fees
Hiring a property management company to oversee your home can take away a lot of the stress. However, you will be expected to pay to let agent fees. Often you can find online letting agents. Most of the time, their prices are lower than high street agents.
Solicitor’s Fees
When writing your tenancy agreement, it’s a good idea to consult with a solicitor or legal professional to ensure it is legally safe. If you are part of an association like the National Landlord Association, there may be access to lawyer-written tenancy agreements as part of your membership fees.
Bringing Your Property Up To Standard
Being a landlord, you need to get your property up to spec. This includes making it safe from fire risks, electrical hazards, and more.
You’ll need things like a Carbon monoxide alarm, consider electrical safety, and get a gas safety certificate. You will also need to make sure your rental properties are energy efficient.
Property Portfolio
Suppose you buy to let property for a House of Multiple Occupation (defined as a property with three or more unrelated people living in it). In that case, you can expect to comply with additional regulations. Additionally, refurbishment costs need to be budgeted, like decorating and carpentry.
Furniture
You’ll need to buy furniture that meets fire safety standards and budget for replacement parts when they wear out.
Energy performance certificate (EPC)
Under British law, it’s a legal requirement that property owners obtain an EPC. This cost usually ranges between £50-£100 and lasts for ten years from acquiring the house or renter. Your property will also need to meet minimum energy efficiency standards.
Membership of a Landlord Association
Although joining a landlord association is optional, and many landlords do, it has many benefits. The membership cost varies by the Association’s location and level of engagement they choose, with some Associations charging £50 and others as high as £184 per year.
Rights & Responsibilities
Insurance
As a landlord, you will be responsible for sorting out insurance to protect your property against accidental damage. In addition, your tenant will need to arrange their contents insurance to protect their possessions. There is also insurance for rental arrears, which will cover you if a tenant stops paying rent.
Appliance Maintenance
You might need to replace the furniture and appliances in your home when you rent them out. This is a good thing because you don’t want DIY-mad tenants damaging the property. If you use a letting agent, they will handle this for you, but if you are hands-on, make sure that you keep all appliances in good working order.
Property standards
From fitting smoke alarms on every floor to ensuring an alarm in every room using solid fuel. You’ll also need to ensure everything meets minimum energy performance standards by 2018!
If you rent your property to a person with special needs, you may need to make adjustments.
Tenant’s Deposit
One of the many tasks a landlord has to do is take care of the tenancy deposit. If you’re using a letting agent, they will likely deal with this for you, but if not, you will need to find out about Tenancy Deposit Scheme.
You’ll need to make sure that you have all the necessary orders. Some examples are EPC, Gas Safety Certificate, and tenancy agreement.
Paying Rent
Landlords must inform their tenants about how and when to pay rent, the requirements for a security deposit, and the consequences for late payment.
Increasing your Rent
The landlord can increase the rent if,
- If a tenant signs a new contract, they are legally bound to follow its terms.
- There is a rent review clause in their contract.
- In the event of a rent increase, a landlord can only issue a section 13 notice once during each calendar year.
Fit for Human Habitation Act
As a landlord, your responsibility is to ensure that houses or flats are safe and comfortable for tenants. It is also a legal requirement, and you can find lots of information on your local council website. If the tenant thinks the house is unsuitable for them, they can take legal action against you. The court will decide if the property is fit enough for human habitation.
Your rights as a landlord
You no longer have the right to enter a property that you own. Therefore, it would be best to give the tenants 24 hours’ notice before entering.
In some circumstances, landlords have the right to ask tenants to leave their property. This is done through legal channels, and such requests can be granted in certain conditions.
You also have the right to take legal action if someone does not pay.
If you are worried that you will not keep your property, there is a way to end the contract. You can include a break clause in your tenancy agreement so that you and your tenant can stop at any time during the first six months.
Getting Your Paperwork In Place
As a prospective landlord, you may need to acquire some documents before listing your property. Some will be given to the new tenants, and others will be for your records.
Energy Performance Certificate (EPC)
An accredited Domestic Energy Assessor will come and measure how efficient your house is. They will provide you with a certificate of that rating. Most homes range from D to E, which is not very efficient. If you don’t provide an EPC, you could be fined up to £200.
Starting in April 2018, you cannot rent out your property if it has a rating lower than E. If you do, there can be a penalty of up to £4000. In addition, landlords must give their tenants an Energy Performance Certificate (EPC), which says how much the house will cost to maintain.
Tenancy Agreement
A contract is a deal between people. You can negotiate the terms of the agreement with your tenant. The contract should say when they have to pay rent and when they need to leave.
Inventory
If the flat is furnished, keep a list and take pictures of everything you provide. A tenant’s deposit can be used to replace broken items.
Gas Certificate
If your property has any gas appliances, you will need a Gas Safe Engineer to come in for an inspection. They will give you a certificate to your tenants at the start of their tenancy agreements and after each inspection.
Written Permission From Your Mortgage Lender
An important document must be completed for landlords with a residential mortgage or buy to let a property before renting out the property. You will need a mortgage to rent permissions from your lender. As a landlord, you will need to find the right mortgage lender for your business. They may charge higher rates because they recognize that landlords tend not to be regular with their payments and are often more at high risk due to property depreciation. However, now is still an excellent time to buy to let, given low-interest rates and relatively stable house prices.
Leasehold Property
In leaseholds, you can’t usually rent out the property. You need to talk to your landlord if you have a subletting restriction on your lease.
Shared Ownership
If you have a shared ownership property or are part of a shared ownership scheme, you should ask about the agreement for letting.
HMO License
If you rent your home to three or more people who are not related, you will need a special license. You can apply to the council in England, Wales, and Northern Ireland. The license lasts for five years in England and Wales and three years in Northern Ireland.
Legionella Test Certificate
Legionella water samples are not required by law, but many landlords choose to get them. If a tenant receives sick with Legionnaire’s Disease from the water at that property, the landlord could be prosecuted. That is why landlords should do a Legionella risk assessment and minimize any risks.
Literature
Landlords in England must provide tenants with a copy of the government’s ‘How to Rent guide. This outlines your tenant’s rights and responsibilities, as well as what to expect from their landlord. You can’t serve a Section 21 eviction notice at the end of a tenancy if you haven’t provided them with this guide.
Right to Rent
To make sure a person can live in Britain, you need to check their documents. You need to do this for every new tenant. First, make copies of the documents showing that the person can live there, such as a birth certificate, council tax bill, or biometric residence permit.
Rental Income
Do your sums
The first step to becoming a landlord is making sure you can meet your financial objectives. The way you handle these decisions will depend on your region’s situation and market condition. Many companies offer financial services and can help.
Do your research
Find out by viewing similar properties in your local area and see what people are willing to pay. Check back often- you’ll start noticing if someone is unrealistic about the price. Their property will be stale while others get picked up. Give yourself the best chance of getting your property rented out.
There are various tools available to help landlords. For instance, Home.co.uk has a list of property rents by town and type, while Zoopla displays an estimated monthly rental value when you use its free online valuation tool. You will also find rental yield and mortgage repayments calculators online.
Speak with other local landlords when you’re looking into becoming one yourself. They will share how the market is doing locally and some pricing tips.
Be specific to your property
When considering renting your house, think about how the prices for other places in the area compare to your home. If it has newer things or better features than other homes, then you can rent it for more. On the other hand, if your home does not have as many good qualities, you may need to lower the price for renting it.
Landlord Support
Landlord-related support is available in various forms through agencies, associations, and other offerings. You can even chat with a previous landlord and find out what they think from their experiences.
Letting agencies
Choosing to rent your property through an agency will relieve you of all the day-to-day management tasks. Services like an advertisement, vetting potential tenants, repairs, inspections, and rental yield calculations are then outsourced to a third party that you make monthly payments for. On top of this, they’ll take care of any necessary paperwork, such as tenant verification and legal compliance, as well as collect rent for you. There is usually a fee, 10-15% of the monthly rental income.
If you don’t have time and feel hands-off, using a letting agent can be an option. However, there are some disadvantages to this strategy. For example, letting agents may send someone else to do the less severe jobs-ones you could easily handle yourself–but still, charge you for it.
Online Estate Agent vs. High Street
When choosing an agent, there are good and bad things about both. You need to do your research to find the right one for you.
Online Estate Agents
Advantages
- Cheaper: You’ll pay less than high street agents.
- 24/7 support: Entrust your property to a professional online letting agent who will manage viewings and any time-sensitive tasks.
Disadvantages
- Add-ons: Many companies online will automatically include an additional cost for services that you may not necessarily need. These extraneous fees can drastically inflate the price of your rental.
- Upfront payment: online estate agents usually require an upfront payment.
High Street Estate Agents
Advantages
- Personal service and local knowledge: Many people prefer to interact face-to-face when completing tasks such as property acquisition. Moreover, the real estate employees will usually have extensive knowledge about the area and the local property market.
- Accompanied viewings: Conducting property viewings, so you don’t have to.
Disadvantages
- More expensive: High street agents are more expensive
- Not 24/7: Most high street estate agents are not open on weekends or after hours.
Landlord Associations
Joining a landlord association will meet their professional standards and give you an edge with prospective tenants.
The National Landlords Association (NLA) is the UK’s largest.
Finding The Right Tenant
Things to consider when advertising for a tenant
- Staging
- Photography
- Where to advertise
- Targeting
- Showing them around
- Protecting yourself (and them)
The Equal Opportunity Act 2010 prohibits unlawful discrimination, including refusing to rent based on a protected status. These are disability, race, religion, gender reassignment, sex, and sexuality.
Background Checks
One way to ensure the renter is reputable is to perform a tenant check. An express review from the National Landlords Association can identify if someone has ever signed a lease before and whether they had any judgments against them in court. In addition, you will want to look at:
- credit history
- current debts
- evictions
- criminal records
- public records
Contact employers and previous landlords. They will tell you if the person is good or not.
If you rent a house in England, you will need to do right-to-rent checks.
Things to do before your tenant moves in.
Health & Safety Checks
Make sure you perform all the necessary safety checks, such as making sure your fire alarms work. Get your electrical and gas inspections organized if you haven’t already.
Risk Assessment
Look for any areas that might need repair, like:
- Doors and windows
- Any damp
- loose plug sockets
- holes in the wall
- plumbing issues
Paperwork
The AST is the most popular. It gives you the right to take back your property when the initial term of the agreement ends. You will need to provide your tenants with two months’ notice before you can take their property back.
With an assured tenancy, your tenant won’t be able to be kicked out of your place unless they have done something wrong.
Once you and your tenant have agreed on a lease, they should sign it. Next, decide on a date for when to move in together.
What To Do On Moving-In Day
On the morning of the move, you should give your house one last clean. You should give them the keys when they arrive. Make sure that you walk them through your home and show them all of it. Ensure that everything is in order and good shape when you hand over the place to them for good.
You can leave your details with them, so you are contactable in case of an emergency.
Dealing With Tenant Disputes
Nobody wants to start an argument with their renters, but disputes may arise from time to time. The key to solving these issues is usually communication, so try arranging a conversation about it.
Bring along copies of the tenancy agreement and How to Rent guide/Tenant Information Pack to understand your job and theirs.
It is essential to stay calm when talking to someone. If they start to get angry, do not use strong language or raise your voice. If you feel yourself getting mad, calmly walk away.
To avoid a court battle, try alternative dispute resolution. Formal methods such as mediation or arbitration are better than the chance of ending up in court with an un-impartial judge.
How To Keep Your Tenants Happy
- The key to successful tenant retention is keeping them happy, so they don’t move once the lease is up. Here are some ways you can make your tenants happy:
- Answer messages right away.
- If there is a problem with your house, fix it before it gets worse.
- consider letting your tenants decorate
- communicate
- being friendly – send them a Christmas card
Legal Cover & Insurance
It’s essential to be vigilant when screening tenants and performing your checks. But, unfortunately, there are still things that can go wrong.
- When you own a property that is not your primary residence, you will need to be covered against damage like fire and flood.
- It may be tempting to go with a regular home insurance policy, but this type of plan may not cover you if the property is rented out to tenants. Landlord insurance policies are more tailored for this purpose.
- Liability insurance – in the event your tenant becomes injured on your property and decides to sue you.
- If you have home insurance with alternative accommodation cover, it will pay for your guests’ food and living costs while repairs are carried out.
- Cover for up to ten properties – perfect if you’ve got big plans.
The policy should also include legal aspects of home insurance, such as building insurance and cover against ground slip or subsidence.
There are some optional extras you can add to a landlord insurance policy, too:
- Accidental damage cover – this covers you if you spill wine on your beige carpet.
- In many instances, landlords may be able to claim some of their lost rental income due to any damage to the property.
- Contents cover – this is a good idea if you’re renting the property furnished.
Landlord insurance policies are deductible, too, so that they won’t cut into your rental profits.
Taxes
The growing number of tax changes have made being a landlord more complicated.
Registering for self-assessment
If you’re earning up to £2,500 on your property each year, you won’t need to do anything other than keep track of acceptable expenses. However, if the amount you make from renting is between £2,500 and £9,999 each year after allowable costs (or more than £10,000 before expenses), then you will need to fill in a tax return.
Registering for and filling in your tax return is an easy process. However, for the first year, we recommend completing it by January 31st to have enough time to sort out any issues you may have.
Another option is to hire a professional accountant to handle it for you.
Tax-deductible costs
Running a property can incur certain costs to the landlord, known as “allowable expenses.” After accounting for all these expenses and tax deductions, landlords only pay taxes on the profit they receive after paying off qualified and allowable expenses.
Some allowable expenses for landlords are:
- Letting agent fees
- Legal fees
- Accountant fees
- Buildings and contents insurance
- Maintenance and repair costs
- Utility bills
- Cleaning services
- Direct costs such as pens, paper, envelops, etc
Tax relief is available when you provide a new bed or fridge to your tenants, but not if they redecorate.
Stamp Duty Changes
In recent years, a significant change to the tax levied on landlords has been the increased stamp duty land tax (SDLT) applied to second and subsequent homes. Therefore, if you want to expand your property portfolio, you must be aware of any increases.
Capital Gains Tax
As a landlord, you need to consider capital gains tax when selling a second property. However, the tax only applies to the gains (profit) you make when you sell something that makes money from investments in your portfolio.
End Of Tenancy
Giving notice
Becoming a landlord requires much more than simply signing the contract. You may need to ask your tenant to leave the property, which can be frustrating or confusing if you are not prepared.
England and Wales
Section 21 notice is sent by landlords to short assured tenants before the fixed term of their rental contract ends. The two-month period allows them to find a new property and get their affairs in order. Form 6a must be filled out for this process to begin, which requires you to follow government guidelines.
If your tenants are not fulfilling their obligations, you can serve a Section 8 notice that will give them two weeks or two months to leave the property. To fill out this notice, you must mention them in Form 3 and under Schedule 2 of the Housing Act 1988, with the reason for eviction. For most landlords, grounds will generally be two rental arrears or damage caused to your property.
Northern Ireland and Scotland have their own set of rules.
What to do if there’s an issue
In most cases, if your tenants are given proper notice, they will leave accordingly. However, always seek legal advice to support the process if you have some stubborn tenants.
England and Wales
A court will provide a go-ahead for an accelerated possession order if the tenants do not pay the money they owe you. If this is your preference, complete all necessary paperwork and submit the warrant for possession to get in touch with bailiffs.
What’s next?
Now that you know what it takes to be a landlord, are you ready to make the jump?
Many people become accidental landlords and just kind of fall into it. Whichever way you become a landlord, it can be an overwhelming process, but we are here to help. We want you to feel empowered with every new step in your journey, from tenants and applications to insurance and inspections.
Equip Yourself With The Landlord-Tenant Laws
Before you purchase your first property, make sure to acquaint yourself with the rights and responsibilities. It is advisable to hire an Estate Agent who can guide you through the process and help you adhere to the law.
Learn About The Rental Market
It is vital to research the region where you plan to invest. Strong knowledge of the housing market will help you make strategic decisions, such as whether it would be profitable to invest in this location and what other investment opportunities may present themselves.
Determine The Price Of Rent
Researching rental rates is important to ensure you are charging an appropriate amount for a particular property. In addition, you can find the right price by looking at other properties in your area or consulting with current owners.
A landlord needs to know what the tenant wants and vice versa.
In general, it is best to consider the similarities in the price of nearby houses. In addition, consider your level of comfortability with the crime rate and how populated the area is.
Buying And Refurbishing
Before purchasing, think about whether or not it will be furnished and decide if it needs any repairs. Budget accordingly.
Price Fixing
After refurbishing your rental property, the next priority is establishing a fair price.
A price should be negotiated only after you have assessed your environment. For example, what are the average rental prices or rents of homes in this area? What is the current housing market like? What is the average local income?
Tenant List Of Requirements
Having a set of preliminary tenant requirements from the start will help you find the best possible candidate for your rental property.
As a landlord, you’ll need to review people’s income, credit scores, and history of rental payments.
Rent Out Property
Once you have gone through these steps, it’s time to rent your property!
This involves advertising your property first to ensure you find renters on time.
Rental Contracts
If you are dealing with this for the first time, it is beneficial to consult a professional to ensure the process is efficient.
The contract should contain the termination process. Any timely rental payment rules of the property. Disclosing all contracts with both tenants and landlords is important and will keep things clear in the future.
Managing Tenants
Routine check-ups are necessary to maintain an open dialogue with your tenants and ensure everything is updated.
Collection Of Rent Fee From Tenants
Landlords have to look for tenants who fail to make their rental quota. However, there are a couple of ways you could go about nipping this in the bud, one being through gentle reminders and another by offering online payment as an option.
Managing Your Property
Landlords must maintain their property in a habitable condition.
Accounting
One of the most complex parts of being a landlord is doing your taxes. An account can help maximize deductions and keep you on track for tax time so that you stay up-to-date with changes in accounting.
At Balsall Common Estate & Lettings Agents, we make your property management as a landlord as easy as 123. We have affordable Landlord Property Management packages for you to choose from.
If your property is in Coventry or surrounding areas like Leamington Spa and Kenilworth, you’re in luck as we are ready to work with you.
Your Local Letting agent
Contact Us on 02477170170!
