October 31, 2023
How Do I Become a Landlord?
Becoming a landlord for the first time can be a rewarding venture, but it’s not without its challenges and responsibilities. If you’re considering entering the world of property rental in the UK, there are several crucial aspects to understand and manage. In this comprehensive guide, we’ll walk you through the process of becoming a landlord, from property selection and legal requirements to finances and exit strategies.
What do I need to be a landlord?
If you’re wondering about how to become a private landlord, you’ll need to firstly consider the type of property you want to let. Will you be renting out your own home or looking to buy a new property to rent out?
If you’re renting out your own home, you’ll need to think about whether there’s any work that needs to be carried out to ensure your property meets a good standard. Will you rent out your property furnished or unfurnished? Where will you live, and do you have sufficient funds to finance more than one property?
If you’re looking to purchase a buy-to-let property, you’ll need to do some research into the type of property that you want to rent out, and to whom:
The location of a rental property plays a significant role in its rental potential. How close is your property to amenities, public transport, schools and local job opportunities, for example?
You will need to research the rental market in the area to understand the level of demand and the rental rates being charged.
Type of property and target market
Wondering how to become a private landlord? It’s important to appreciate that the type of property you rent out is linked to a particular tenant market, so you’ll need to make sure you can service their specific needs.
Will your property best suit families, for example? Students? Working professionals? What will these people be looking for when they rent a property? Will they want a garden? Parking? How many bedrooms will they need?
Additionally, you will need to think about the various issues that each property type might have. For example, a flat is more likely to target a young working professional tenant. With this type of property, you will need to consider any letting restrictions on the leasehold, as well as additional expenses such as ground rent and maintenance costs.
It may be you go down the route of a buy to let retirement property. If so, you’ll need to understand whether you’re eligible to buy this type of property, as well as checking on associated maintenance fees and any restrictions on the lease. A completely different approach to marketing will be needed with this type of property in order to reach your desired tenant compared to others.
Other property types, such as a shared ownership property or a right to buy property, will have their own rules and regulations relating to whether you are able to rent them out, as well as guidelines and restrictions about renting.
It is important to think carefully about the property type before you buy, researching who will be interested in it and considering all the issues and additional costs associated with it.
Familiarise yourself with the legal requirements
If you’re asking the question, “How do I become a landlord?”, it is vital that you familiarise yourself with all the associated legal obligations and responsibilities in the UK.
Understand tenant rights and responsibilities
In the UK, tenants have rights relating to the property they rent. These include:
- The right to a safe and habitable property
- Protection from unfair eviction
- The right to a written rental agreement
- Privacy and notice before visits
- Protection against discrimination
Be aware of safety regulations
Ensuring the safety of your tenants is paramount. There are many legal obligations that you need to follow before you even think of finding tenants. You must adhere to safety regulations, for example, and conduct regular checks on the property.
- Gas safety – annual gas safety checks must be carried out on all gas appliances by a Gas Safe Registered engineer, and a safety certificate issued and supplied to tenants
- Electrical safety – regular checks must be undertaken to prevent electrical hazards and an EICR – Electrical Installation Condition Report – issued
- Fire safety – regulations must be followed, a smoke alarm provided on each habitable floor and a carbon monoxide detector placed in any room where there’s a solid fuel burning appliance
- HMO licensing – Houses in Multiple Occupation (HMOs) have specific safety regulations, and you may need to obtain a special licence from the local authority
Familiarise yourself with local authority licensing
In some areas, local authorities may require landlords to obtain a licence for certain types of properties. The purpose is to ensure that landlords maintain safe and well-managed properties.
Be sure to research the licensing requirements within your specific area as they will vary from one local authority to the next.
Organise a tenancy agreement
A well-drafted tenancy agreement is vital to protect your interests and those of your tenants.
The tenancy agreement should include:
- Duration – You should specify the length of tenancy and whether it’s a fixed-term or periodic agreement.
- Rent and deposit – The rent amount, due date and deposit should be clearly stated. The deposit should be protected in a government-approved scheme.
- Responsibilities – The responsibilities of both the tenant and the landlord should be outlined, including who is liable for maintenance, repairs, insurance and utility bills.
- Termination dates – The conditions by which the tenancy agreement can be terminated by either party should be clearly stated.
- Notice periods – You should specify notice periods for rent increases or ending the tenancy.
- Additional clauses – Include any additional terms, such as restrictions on smoking or keeping pets.
It is highly advisable to use a specialist property lawyer to draft your tenancy agreement to ensure it is legally sound and covers every base.
Other points to consider: a guide for landlords
Finances – balancing costs and income
As a landlord, you will need to balance your income against your costs. To understand how much you might gain in income from your rental project, it’s a good idea to work out your property’s potential rental yield before committing to renting a property out.
The rental yield calculates, as a percentage, the cost of the property against the rental income it generates. This helps you determine what you should be charging in rent.
In addition to working out the profitability on your rental property, there are several factors which affect how quickly it takes to rent a property and to start earning an income. Factors include location, rental rate, the condition of the property and the time of year that you take it to market.
Becoming a landlord for the first time, you quickly need to get to grips with your finances, specifically understanding all the costs associated with being a landlord. These will include:
Buildings insurance is the responsibility of the landlord. If you are renting your property furnished, then you’ll also need contents insurance. Specific landlord insurance is not a legal requirement, but is a wise investment as it can provide cover for loss of rental income, theft and vandalism and legal fees, amongst other things.
Maintenance and repairs
You will be responsible for the ongoing costs of repairs and maintenance of your rental property. It’s important to budget for these, as maintaining a rental property is not only a legal requirement, but also vital for attracting and retaining tenants.
Whilst council tax is usually the responsibility of the tenants, you should be aware as a landlord, that if your property is vacant at any time, certain local authorities shift the responsibility of paying council tax to the landlord. You should budget funds to allow for this possibility.
If you have an outstanding mortgage on your rental property, you will need to factor in meeting your monthly repayments, and this will have an impact on the profit you make from your rental income.
Property agent fees
Employing a property management company to look after your property means that you can get help with sourcing and marketing to tenants, organising inventories and mid-term inspections, collecting the rent, handling tenants’ queries and organising maintenance and repairs. Such a resource is helpful for busy landlords, but does mean that you have to budget for the cost.
You will need to allow for any void periods. If your property sits empty, you are still responsible for paying the mortgage and bills, as well as having to cover the costs of sourcing new tenants.
To help with costs and overheads, as a private landlord, you may consider increasing rental charges to tenants. Be aware of regulations and ethics relating to this.
If you’re wondering “How do I become a landlord?”, it’s a good idea to understand how to end a tenancy that is both legal and in accordance with the tenancy agreement.
Typically, most tenancies are ended by the landlord serving a Section 21 or a Section 8 notice, depending on the circumstances.
How much notice a landlord must provide to tenants depends on several factors, but rests mostly on the type of tenancy agreement that you have in place. It is usually at least four weeks’ notice, and often cannot be given to tenants until at least six months after the tenancy began.
If a tenant refuses to leave the property, you will need to initiate the eviction process through the courts. This can be delicate and time consuming, and you will need to engage a specialist lawyer to help you through the process.
If you decide to sell your rental property, you can do so at any time once you have served the correct notice to tenants, and they have vacated the property.
If you sell your property, be aware of Capital Gains Tax implications, as you may be liable for tax on any profit made on the sale of the property.
What is a guaranteed rent scheme and how can it help landlords?
Becoming a landlord for the first time can be a daunting prospect. There is a lot of information, financial considerations and legal obligations that you need to understand and arrangements to make, which can be time consuming and costly.
A guaranteed rent scheme can help ease the burden and mitigate the risk in many areas of being a landlord.
With a guaranteed rent scheme, you let your property to a specialist letting agent instead of directly to a tenant. The agent becomes your tenant, and goes on to rent your property to vetted local authority tenants.
An agreement is made for a set period which is usually between three and seven years. Then, for this entire duration, you will be paid an agreed rental rate each month. This will continue even if the property sits empty or if the tenants are not paying their rent.
Benefits of a guaranteed rent scheme
A guaranteed rent scheme reduces landlord risk and removes the administrative burden involved with being a landlord, whilst providing a guaranteed rental income each month.
A guaranteed rent scheme will:
Source new tenants
You won’t have to spend time and money on marketing your property to find new tenants. This will become the responsibility of the guaranteed rent scheme agents who often work closely with council housing departments and housing associations to tenant your property.
Cover repairs and maintenance
Certain rent guarantee agents, like City Borough Housing, are backed by a professional property management team which manages and covers the cost of everyday repairs and maintenance to ensure that it meets legal requirements. They will also organise interim property inspections to make sure the tenants are meeting their responsibilities.
Liaise with tenants
The guaranteed rent scheme agents will deal with the everyday tenant queries. Whether it’s a faulty boiler, a broken window or questions about obligations under the tenancy agreement, they’ll relieve you of all those calls.
Handle the administration
As part of a guaranteed rent scheme, your property will be checked to ensure that it is legally fit and ready to rent to tenants. The tenancy agreement, referencing and legal paperwork and inventory checks will all be dealt with too.
You’ll also have peace of mind that your property will be returned to you in its pre-let condition at the end of the agreement, less fair wear and tear.
Want to know more about becoming a landlord for the first time? Talk to the experts at City Borough Housing.
There’s a lot to understand and deal with when becoming a landlord for the first time.
You will need to choose and market your property to the appropriate tenants, get to grips with the legal requirements, balance your projected income against the costs involved and understand how you will exit the landlord business should you want to.
A guaranteed rent scheme is worth considering, because it helps to save you time and money whilst ensuring that you are paid a fair rental rate each month without ever having to chase payments.
To find out more about how a guaranteed rent scheme works and to request your free valuation, please get in touch with our professional team.