How do I get started as a landlord
How do I get started as a landlord
Being a landlord seems pretty easy – you find some tenants and watch the rent roll in, right? There’s no doubt it can be a lucrative and secure way of making money, but there are also responsibilities. So, if you’re thinking of starting a property empire, here’s what you need to know.
What is the first step if I want to become a landlord?
Before you decide to rent a property to tenants, you need to be sure you have the right to do this from the property owners. If you own the property that’s straightforward enough, however, a leased property may have restrictions that you’ll need to check.
Once the decision has been made, you need to do your research. That means making sure the area and property will appeal to the audience you want to target.
If you’re pitching a three-bed house to a family, you’ll want to be near a good school, as well as parks and shops. If you’re targeting young professionals, a garden won’t be nearly as important as good transport links.
How much rent do I need to make?
That will depend on the size of your mortgage. But assuming you have one, your lender will want to see you earn around 125-145% of your mortgage payments.
Sounds easy enough. What else do I need to think about?
Don’t forget to factor in your expenses. As well as maintaining the property, you’ll need to budget for any empty periods between tenants. You’ll also have tax to pay, as well as agency fees. And interest rates may rise, increasing your mortgage costs.
What about making sure I get the right tenants?
You’ll need to make sure that whoever you’re renting to lives in the UK and has the right to rent your property. If you don’t check and they turn out to be here illegally, you could be fined £1,000. You can find out more here.
Do I need a tenancy agreement?
Absolutely. The tenancy agreement should clearly state these things:
- when the tenancy starts and ends
- how much rent needs to be paid and when
- details of notice periods
- if you include any services such as cleaning or gardening
Do I need an inventory?
It’s important to make sure you know exactly what state your property’s in when you let it, as well as what’s included. Don’t forget to include the little things – toilet seats and roll holders, curtain poles and curtains, light fittings – it might sounds overly detailed but it will help you whenever the tenancy changes. Take photos so you know the condition of everything at the start of the tenancy.
What are my legal obligations as a landlord?
You’re legally obliged to have the following:
- a qualified gas engineer complete a gas safety check every year. If you don’t, you could end up with a £6,000 fine and six months in prison
- you must also give your tenant an Energy Performance Certificate
- make sure your furniture and electrical equipment meet safety standards
- each floor must have a smoke alarm and any room with a fire or woodburner must also have a carbon-monoxide detector.
How quickly do I have to complete repairs?
Try to resolve queries and faults as soon as possible. It will show you’re a concerned landlord and help maintain good relations with your tenants. Plus, a speedy response could mean you nip potential issues in the bud and save yourself money in the long run.
I want to see how my tenants are treating my property. Can I pop in while they’re out?
No! Your tenants have a right to privacy. You do, of course, have access rights, but if you’re going to show up, you need to give your tenants 24 hours’ notice in writing.
How much tax will I have to pay on my rental property?
That depends on how much you earn. It’s important to check tax legislation as tax rules changes. Currently, the first £1,000 you earn will be tax free, but anything you earn over £2,500 a year you’ll need to report on a self-assessment tax return. You may also need to pay Class 2 National Insurance.
Do I need to get landlord insurance?
You’ll need to make sure you have the right insurance in place. Standard home insurance won’t cover you if you let out your property, and you could find your policy is invalidated.
Landlord insurance will cover you for a raft of potential problems, including:
- costs if fire, storms or floods damage your property
- loss of rent
- malicious damage by tenants
- buildings and landlord’s contents insurance (tenants are responsible for insuring their own belongings)
- liability in case your tenant has an accident.
You can also add optional extras, such as accidental damage insurance and legal cover if you ever need to go to court.
There are roughly 1.75 million landlords in the UK – why not join them.