How to become a landlord

Being a landlord isn’t as simple as finding some tenants and watching the rent roll in. Landlords have responsibilities too. So, if you’re thinking of starting a property empire, here’s what you need to know.

Being a landlord isn’t as simple as finding some tenants and watching the rent roll in. Landlords have responsibilities too. So, if you’re thinking of starting a property empire, here’s what you need to know.

Chris King
Home insurance expert
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Posted 28 FEBRUARY 2020 Last Updated 17 FEBRUARY 2022

Why become a landlord?

With rents at record highs and rising, becoming a landlord can be very attractive. But it’s important to be aware of the big picture before you begin. There’s a lot of legislation to comply with as a landlord, and you need to make sure that you can cover all the expenses that come with renting out a property. Here’s a step-by-step guide to becoming a landlord, plus common questions answered.

Step 1: Make sure you have the right to let your property

Before you decide to rent a property to tenants, you need to be sure you have the right to do this.

If you have a mortgage on the property, you’ll need to check with your mortgage provider to see whether letting it is permitted – sometimes there’s a clause that forbids this. If this is the case, you may be able to switch to a buy to let mortgage.

With a leasehold property, even if you own it without a mortgage, there may be restrictions on letting your property, so check your lease.

Step 2: Understand your landlord responsibilities

There is a raft of legal obligations that come with being a landlord. Among other requirements, you must:

  • Ensure that your property is in a fit state to rent out and that your furniture and electrical equipment meet safety standards
  • Have the right licence. Check with your local authority to see what you need. If you’re intending to rent to students or groups of friends, be aware of any restrictions on the number of houses in multiple occupation (HMOs) in your area  and that you have the correct licence. Again, check with your local authority
  • Have 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  
  • Give your tenant an Energy Performance Certificate
  • Have a smoke alarm on each floor and a carbon monoxide detector in any  room with a fire or woodburner
  • Provide fire extinguishers and alarms if the property is a large HMO.

Step 3: Decide who will manage your property

You may want to manage your rental yourself or hire an agent to do some or all of the management for you. Agents can do everything from finding tenants and drawing up tenancy agreements to collecting rent and arranging repairs and maintenance. This will mean less work for you but it will cut into your profit, as their fees won’t come cheap – you can expect to pay between 10% and 20% of the monthly rent for full agent management.

Alternatively, you could use an agent to advertise your property, find and reference tenants for you and draw up the agreement, but manage it yourself from then on.

Step 4: Join a deposit protection scheme

Deposit protection schemes are designed to make sure tenants get their deposit back provided they pay their rent and bills, meet the terms of the tenancy agreement and don’t damage the property. The deposit must be put into a scheme within 30 days of you or the letting agent receiving it.

In England and Wales, your tenant’s deposit must be held in one of three schemes: 

  • The Deposit Protection Service
  • mydeposits  
  • Tenancy Deposit Scheme.

Scotland and Northern Ireland have their own tenancy deposit schemes.

Step 5: Decide whether to let furnished or unfurnished

Which you choose will partly depend on the type of tenants you want to attract. Short-term tenants, like students, may appreciate having everything provided for them, while longer-term tenants might prefer to provide their own furnishings.

But even if you let unfurnished, there are certain things you’ll need to provide – a cooker, fridge, carpets, bath, toilet and sink will all be expected.

Step 6: Find tenants

An estate agent can help you find tenants for your property – compare prices and services to find the best deal. And make absolutely certain that you or the agent check tenants’ references – this could save you a huge amount of trouble further down the line. 

You’ll also need to make sure that whoever you’re renting to has the right to live in the UK. If you don’t check and they turn out to be here illegally, you could be fined £1,000. If you have an agent acting on your behalf, they will do this.

Step 7: Consider landlord insurance

Landlord insurance is especially designed for rental properties. As well as the usual protections home insurance offers against floods, fire and storms, it can also cover you for:

  • Accidental damage by tenants
  • Emergency cover for repairs
  • Legal expenses related to being a landlord.

You can also add optional extras, like cover for rent arrears or vacant periods when you don’t have a tenant.  

Frequently asked questions

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 cover at least 125% of your mortgage payments.

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.

Do I need a tenancy agreement?

Absolutely. The tenancy agreement should clearly state: 

  • When the tenancy starts and ends
  • How much rent needs to be paid and when
  • The deposit amount and how it should be protected
  • Landlord and tenant obligations
  • Who’s responsible for bills and repairs
  • Whether the property can be sublet.

The letting agent may draw up the tenancy agreement for you.

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 light fittings, toilet seats and roll holders, curtain poles and curtains – it might sound 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. You may want to ask the letting agent to draw up the inventory for you.

How quickly do I have to complete repairs?

You’re obliged to carry out repairs within a ‘reasonable time’, although what that is isn’t precisely defined. However, it’s in your interest to carry out repairs as swiftly as possible. It will 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. If you fail to carry out repairs, your tenants can report you to the local authority’s environmental health department .

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 can enter to carry out repairs or inspect your property, 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 on a property you personally own will be tax free, but anything you earn over £2,500 a year will need to be reported on your self-assessment tax return. You may also need to pay Class 2 National Insurance.

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