For a variety of reasons, homeowners often find themselves having to let out their property to a private tenant. Maybe you’re relocating for a while due to a work commitment, or perhaps your home has been on the market for some time and it doesn’t appear to be shifting despite the fact that you and your family have outgrown your home and need to upsize. Whatever your reasons, you need to be aware of your commitments and responsibilities.
While seasoned property investors tend to be savvy to this, many homeowners simply aren’t aware of the myriad concerns of a landlord. Letting out your home to a private tenant on a long-term basis is a very different beast to letting out your spare room for rent. It’s a big commitment to which you are legally (and morally obligated) and there are certain measures you must take for your own protection as well as that of your tenants and the property.
Letting / property management agents
Some may prefer to sidestep the whole process by letting through an agent. This is a perfectly viable option, though if you’re planning on using rent payments as a form of passive income then be aware that an agent’s fees will cut significantly into your margin (to the tune of around 10-15% of the rental income you receive). If you do decide that this is the way to go, it’s important to choose the right letting agent for you. Property management services are diverse and far-reaching and you want to ensure that you don’t let an agent upsell you into loss with optional extras that you won’t need. Find an agent that’s local to you and receptive to your needs and you’ll be able to go about your business safe in the knowledge that your property is in safe hands.
At the very least a letting agent should be willing to do the following for you:
•Advertise your property.
•Suggest an appropriate rental price.
•Show potential tenants around.
•Draw up a compliance-friendly tenancy agreement. Of course you can always use conveyancing Solicitor’s to Help you.
•Deal with your tenants if you do not wish to do so directly.
However, if you’re patient and of a handy disposition, there’s no legal reason why you can’t do it yourself if you’re mindful of your obligations.
Do your research
You don’t want to market your property at a rental price that will make you a loss, but you don’t want to scare away potential tenants with a prohibitively high price either. Get a feel for the local market by researching rental prices on similar properties near to you. You should also look into the terms and conditions of your mortgage contract. While most contracts will be permissive of letting out your property, you will likely have a legal obligation to inform your mortgage lender of your intentions, and acquire a ‘consent to let’ before you can proceed.
Get your property tenant-ready
If you think all that you need to get your property ready for your tenant if emptying out the cupboards and giving the skirting boards a quick once over, think again. These are the bare-minimum requirements for getting the property ready for a tenant:
Ensure white goods and appliances are clean and in good working order.
Carry out any essential repairs on fittings and fixtures. If a tenant electrocutes themselves on a bare wire, you are legally responsible.
Remove anything that is precious or fragile.
Ensure that the property is clean, tidy and ready for your tenant to make their own.
Get to know your prospective tenants
While vetting tenants is obviously important, you’ll probably want to get to know them to ensure that they’re a good fit for the property and that you feel confident leaving your property in their hands. A letting agent will be able to process your prospective tenants’ references and credit checks but even if you’re not using a letting agent, you still need to protect yourself, should your tenants turn out to be less trustworthy than they appear. Credit checks on your prospective tenants are fairly quick and easy to carry out and can save you the nightmare of letting to a seemingly lovely couple who proceed to trash the place then disappear without a trace.
Landlord insurance is also an absolute must in order to protect you from a range of potential pitals from flooding or hurricane damage to intentional vandalism. It can also cover your legal expenses if you need to take your tenant to court for a tenancy agreement violation or pay your mortgage if your tenant defaults on their payments.
Know the costs
Even though you no longer live in the property, you’re still liable for the costs that are incurred and your income from rent may not necessarily cover them all. Remember that your rental income is taxed at the same rate as your income from your day job (20%-40% depending on your tax band). Between tax deductions and letting agent’s fees your passive income may be significantly less than you expect. Your net income should at the very least be enough to cover your mortgage payments but what happens if something gets broken or damaged in your property? What if someone breaks in and kicks the door down? You are liable for the repair costs of any damages that are incurred to your property. If you’re of a handy disposition then you might be able to mitigate these costs by doing a lot of it yourself, but if not it’s an excellent idea to have a kitty set aside to pay for repairs and addressing minor wear and tear issues.
More compliance issues
Finally, these are some sundry compliance issues that you need to be aware of:
Smoke alarms and extractor hans need to be fitted.
Gas appliances must be tested by a Gas Safe registered engineer.
Your furniture’s upholstery needs to be flame resistant.
Registering with the Tenancy Deposit Scheme will protect your tenant’s deposit and make you a more appealing prospect as a landlord.
An Energy Performance certificate is not legally essential but, again, it will vastly improve the property’s appeal to an energy conscious tenant.
