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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.

Written by
Rachel Lacey
Insurance and money expert
Last Updated
6 APRIL 2023
8 min read
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Why become a landlord?

The combination of rising rent and house prices can make becoming a landlord a tempting proposition. Easy money right?

Not necessarily. It’s important to be aware of the big picture before you begin. Not only is there a huge amount of legislation for landlords to contend with, you also need to be confident that you can cover all the costs and expenses that come with renting out a property.

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

Just because you own a property, it doesn’t necessarily mean you have the right to let it out to tenants.

If you have a mortgage on the property, you’ll need to check with your lender to see whether letting it is permitted – there may well be a clause that prevents you letting it out. If this is the case, you’ll need 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 huge raft of legal obligations that come with being a landlord. These include:

  • Ensuring that your property is in a fit state to rent out and that your furniture and electrical equipment meet safety standards
  • Having the right licence. Check with your local authority to see what you need. If you’re planning on renting 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
  • Getting a qualified gas engineer to complete a gas safety check every year. Fail to do this and you could end up with a £6,000 fine and six months in prison
  • Providing your tenant with an Energy Performance Certificate
  • Fitting a smoke alarm on each floor and a carbon monoxide detector in
    any room with a fire or woodburnerv
  • Providing fire extinguishers and alarms if the property is a large HMO.

Step 3: Decide who will manage your property

You might relish the opportunity to manage your rental yourself, but if you don’t have the time or inclination you can hire an agent to do it 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 eat into your profit – you can expect to pay between 10% and 20% of the monthly rent for full agent management.

Alternatively, you could just 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

You must put your tenant’s deposit into a deposit protection scheme within 30 days of you or your agent receiving the money.
Deposit protection schemes ensure tenants get their deposit back when they move out, as long as they’ve met the terms of your rental agreement. This protects tenants from rogue landlords who may unlawfully withhold repayment of some or all of the deposit.

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 or older tenants might prefer to bring their own furniture.

But just because you’re letting a property unfurnished, there will still be some basics you’ll need to supply, such as a cooker, fridge, carpets, bath, toilet and sink.

Step 6: Find tenants

A lettings agent can help you find tenants for your property – just make sure you compare prices and services to find the best deal. Also make absolutely certain you check your tenants references. If you’re using an agent, they should do this for you, if not it’s easy for DIY landlords to arrange tenant reference checks quickly and cheaply online.

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 as much as £1,000.

If you have an agent acting on your behalf, they will do this, but you can also check yourself using the government website.

Step 7: Consider landlord insurance

Landlord insurance is a type of buildings insurance that caters specifically to the needs of landlords. That means that in addition to the usual protection from floods, fire and storms, you’ll also get cover for the additional risks faced by landlords.

These are likely to include:

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

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

Frequently asked questions

How much rent do I need to make?

The rent you charge will depend on the size of your mortgage. Mortgage lenders will typically want you to charge in the region of 125% of your monthly repayment.

You can be more flexible if you own the property outright but you still need to make sure you have enough money to cover all the expenses you may face as a landlord.

As well as maintaining the property, you’ll need to budget for any empty periods between tenants, not to mention agency fees and tax on your rental income.

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.

If you use a letting agent, they can prepare the rental 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. Again, if you’re using a lettings agent they can arrange this 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, particularly where heating and water are concerned. 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. If you want to pop round to inspect the property or carry out repairs, 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 your overall income. Any income you earn from your property will be added to your overall income for the year and taxed accordingly. However, rental income is eligible for certain reliefs and allowances. For example all landlords can claim 20% tax relief on mortgage interest and the first £1,000 of rental income can be earned tax free. There are also a host of deductible expenses, for example maintenance and lettings fees.

Landlords will need to declare their rental income on a self-assessment tax return each year. You can do this yourself or employ an accountant to do it for you.

When you eventually come to sell your rental property, you may also have to capital gains tax on your proceeds.

Do landlords need to keep home insurance records for longer?

If you’re a landlord, you should keep proof of payment for home insurance for longer. It’s an allowable expense that’s tax deductible, which you can offset against your tax bill. HMRC generally expects self-employed people to keep records for at least five years after the 31 January submission deadline for theappropriate tax year.

For self-assessment, you should keep your records for at least 22 months after the end of the tax year your tax return is for. For example, if you send your 2022/23 tax return online by 31 January 2024, keep your records until at least the end of January 2025.

Limited companies need to keep records for six years from the end of the last company financial year they relate to, and even longer in some cases.

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