5 Things you need to know before becoming a landlord
10th December 2019
If you’re considering purchasing a buy-to-let investment for the first time, or are likely to become an accidental landlord through inheritance or changes in your family dynamics, read on to find out more about some of the common challenges you could face, and how to better prepare for these.
There are good tenants, bad tenants, long and short-term tenants
You only have to flick through some of the Freeview tv channels to see that there are several programs documenting the rather challenging behaviour some tenants can inflict on their landlords!
- Consider how you might go about finding your tenants and referencing them before you commit to a rental contract. A professional letting agent will be able to take care of thorough background checks for you. In addition, a Rent Management contract with a letting agent will support you in tackling any arrears.
- Think about how you will cover costs during void periods if your tenants leave after their minimum term. There are some insurances that will cover this, but, if you have an ongoing relationship with your letting agent, they can help by advertising the property again as soon as the tenant gives you notice. Your letting agent could also help you retain tenants for longer too because they’ll be able to offer a responsive service and build a relationship with your tenants if you opt for a management package
- Make sure you’re aware of the legal implications if you need to serve notice on your tenants because they’re not looking after your property or have stopped paying rent. This is definitely a situation that requires careful management and legal advice, and again, a trained and experienced lettings company will help you with this process.
- Make time for or make funds available for interval inspections of the property to make sure all is well. Every three to six months is standard. You will get an idea of tenant living conditions and spot any potential issues like leaks that haven’t been reported, for example, which if left could cause a lot of damage. Inspections can also help build a relationship with your tenant, because if they know you’re due to visit they may be keen to report on a few concerns, giving you the opportunity to support them through getting these sorted.
You will suddenly have new legal responsibilities
Becoming a landlord instantly makes you responsible for the health and safety of your tenants. If your property is in a good state of repair, you have enough time in your day to day life to keep up with the maintenance needs, and you’re aware of your legal obligations and have met these, there should be less to worry about. Section 11 of the Landlord and Tenant Act 1985 outlines each concern. Essentially, you must keep the structure of the property safe and in a good state of repair, and this includes drains and gutters. In addition, you must ensure any gas appliances including the boiler are checked regularly and that your Gas Safety certificate is in date available for the tenant to view. You should also have an electrical inspection at regular intervals to ensure your wiring and electrical fittings meet the required standards. And finally, you must make sure the deposit is correctly protected.
Depending on which local council is responsible for the town your property sits within, you may need a landlord’s license. If you falter on your duty of care for your tenants, expect them to become disgruntled, to leave, or worse still, to get environmental health involved. If you don't have enough time to respond to your tenant queries and visit the property if needed, definitely consider a professional property management service.
You may need to amend your mortgage
If the property you intend to let is one that you already own and had purchased using funds from a mortgage lender, it’s likely you’ll need to switch mortgage products to accommodate the new rental agreement. Most standard residential mortgages don’t allow you to let your property to anyone. There may be a fee for changing your mortgage, for example, early repayment charges or admin costs, and the percentage that you borrow at may be slightly higher than your current mortgage rate. So, before you make a decision on how much rent to charge, check with your mortgage lender about any additional costs you might need to cover with the rent.
Your tax obligations will change
Once you become a landlord, you will have a duty to report your rental income profits via an annual tax return. If you’re already self-employed this may be more familiar to you, but there are different rules about calculating profits depending on whether you offer a furnished let, holiday let, rent out a room in your own home or own just a standard letting property. For more information about recording profits see the HMRC website, but also consider consulting an accountant.
You’ll need some budget for repairs
Wear and tear on rental properties tends to be a little higher than the average family home. Whilst you may have dream tenants, and a new, luxury property, your tenants won’t be aware of how much your worktops cost or how hard you worked to get that plush carpet fitted. They might not care to water the lawn so much as you did. Don’t be surprised if you need to replace things at the end of the tenancy and get used to the fact that your “home” won’t solely be used by you and your family anymore.
Taking the leap to become a landlord needn’t be daunting. If you have a good support network around you, it’ll help alleviate some of the stresses. Speak to our Lettings and Property Management teams about our services, and if you’re looking for a buy to let property to purchase as your first investment, our Residential Sales team will be able to use our local knowledge to help you find something low maintenance that will attract good quality tenants.
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