The UK rental market is thriving, not only is buy-to-let a strong market, but homeowners who have difficulty selling their property are increasingly turning to the rental market to keep their heads above water.
Whilst things are improving, thanks in part to recent government initiatives, it’s a slow process and so we’ve put together some of our top tips for those considering becoming a landlord.
First steps, inform the right people
Firstly, it’s a good idea to get in touch with your mortgage provider, if you have one, as you’re legally obliged to do so under the terms of your mortgage agreement. You may have to remortgage and take out a buy-to-let loan if the lender is unwilling to agree a change of tenure of your current agreement.
Whilst this isn’t always the case, it’s certainly worth checking out thoroughly to protect yourself legally.
Find a good agent
Whilst you can manage the property yourself, there are numerous problems that can occur with tenants that you may not be prepared for. An agent will know all of the applicable laws that you will have to comply with as a landlord, will be able to arrange repairs quickly and will be able to take a hard line should you be unlucky enough to end up with problem tenants.
Managing a property yourself takes a lot of work and can be very stressful, especially if this is your first time, so choose a good agent to take some of the weight from your shoulders.
I would strongly recommend using an ARLA (Association of Residential Letting Agents), NALS (National Approved Letting Scheme) or Safe Agent member as they will have client money protection insurance and comply with the latest legislation.
image courtesy of www.whatmortgage.co.uk
Get the house insured
You should have buildings insurance anyway, especially if you have a mortgage as it’s required under the agreement. However, whilst you may think that it’s up to the tenant to take care of contents insurance, it’s wise to make sure you are covered anyway.
The tenant should have insurance for their own possessions, but what about yours? Even if you let the property unfurnished, things such as carpets, curtains, kitchen cabinets and so on will still need to be covered.
Standard insurance is unlikely to cut the mustard, so have a look around at special landlord’s insurance that includes liability cover.
Safety certificates and precautions
It’s vital to ensure that you have certificates to say that all electrical equipment, furnishings and gas appliances comply with current safety regulations. It’s also advisable that you ensure the property complies with fire safety regulations too.
For gas, a Gas Safe registered engineer should be employed to carry out checks and these should be done annually. Again, a letting agent will be able to carry this out for you and will know all of the necessary rules.
Deposits, credit checks and tenancy agreements
It’s a good idea to obtain references for prospective tenants at the very least. A better idea is to perform a credit check to ensure that the tenant will be able to afford the rent and confirm their identity.
If you’re not using an agent, some letting agencies will perform this on your behalf as a standalone service.
You will also need an assured shorthold tenancy agreement, which can run for 6-12 months and then renew on a rolling basis. Don’t be tempted to make a verbal agreement with a tenant, even if you know them well, as things could turn nasty if you need the tenant to move out.
It’s also wise to get a deposit from the tenant, usually this is equal to around 6 weeks rent and is payable in advance. As a landlord, you are not entitled to keep hold of the deposit yourself and it must be placed in a deposit protection scheme.
Failure to use a deposit protection scheme can result in a penalty of up to three times that of the deposit amount and will also mean that you will find it very difficult to remove tenants in the event of a dispute.
Renting out a property is relatively straightforward when done properly and can give you an extra income. Don’t be tempted to cut corners and use a reputable letting agent and you should find it a stress-free experience.
This article is written by Matthew Fine Managing Director of Hunters Marylebone branch.