Recently, there has been a surge in buy to let mortgages, as investors take advantage of low interest rates and make the choice to pool their money into property instead of taking their chances on the stock exchange.
Renting out a property can be a very lucrative business. However, it comes with lots of responsibility and isn’t just a case of handing over a set of keys to your tenant and collecting their rent.
Check out our top tips for new landlords and find out how renting a property can work for you.
Don’t get personal
Before you even think about tenants, you need to source a suitable property.
It can be easy to want to buy to let in an area you love or are familiar with. This is a bad move, as you could be missing out on a more lucrative area. Don’t write off somewhere just because you’re not a fan of the area. You need to go where the money is!
Be wary of property developers hyping up a supposedly up and coming area. This may not be entirely accurate and may see you investing in a ‘new and trendy area’, which doesn’t live up to expectations.
Make it desirable
Ideally, you want a long-term tenant who will look after your property and treat it as a home. In order to achieve this though, you need to make your rental space a desirable place to live. A one bedroom or studio flat, which is tired and in need of a paint will not command the type of tenant who will look after it. In fact, they are more likely to treat it as a stop gap until they find something more desirable to move into. Make sure your place is the desirable flat people aspire to live in.
To furnish or not to furnish?
Once you have a property, you need to decide if you want to furnish it or not. This age old debate really depends on the type of tenant you want to attract. The key pros and cons are:
- You can charge a higher rent.
- You can deduct part of the furniture purchase cost from your tax charge.
- For a fully furnished property, where a tenant can simply move in with their belongings and start living, you can offset ten per cent of your rental income against your annual tax bill as a ‘wear and tear’ allowance.
- Your style of furniture may not be to everyone’s taste.
- You will need to investigate landlord’s contents insurance to find out what items you need to be covered.
- Many tenants already have their own furniture and may not need yours.
- Your furniture may get damaged, and tatty furniture will put future tenants off.
Always check your potential tenants’ references. Make sure you get one from the previous landlord as well as one from their current employer. Don’t be afraid to phone up references as well. You can gain a lot more information from a five minute phone call than a five sentence reference.
A managing agent can be a godsend and could save you countless sleepless nights as you resolve an issue.
Typically, a managing agent will act as a go-between between the landlord and the tenant. They charge around ten per cent of your rental income and will be responsible for collecting rent and ironing out any minor concerns.
Make sure you check the terms of your managing agent contract when it comes to hiring subcontractors to carry out work, and that you have a clause written into your agreement that requires you to be contacted if there is any work that needs to be carried out that will exceed a certain amount of money, for example, £50.
A managing agent can be a good choice if you live abroad or don’t live near your rental property. Otherwise, unless you have a large portfolio of properties, you should be able to manage your landlord duties without the need of a managing agent.
As a landlord, it is your responsibility to provide your tenants with an Energy Performance Certificate for the property and gas safety certificates for every gas item in the home.
An energy performance certificate can be obtained for around £100 and allows your potential tenants to see how energy efficient your property is.
This is a mandatory requirement if you are renting out a self-contained space, such as a flat or a house. You don’t need to provide an EPC if you are renting out a room in a house.
Gas safety tests must be carried out by an engineer who is registered on the Gas Safety Register. These tests must be carried out on an annual basis.
Landlords are also responsible for the safety of electrical equipment in the property and all furniture provided must meet fire safety regulations.
Is it worth it?
Ask yourself whether any alterations you make to your property will either increase the rental yield or increase the value of the property. If not, it’s not worth doing.
Remember, your primary objective is to create a home for renting out to tenants – it is not an opportunity for you to create your dream flat or house (unless you want it to be, of course).
Know your market
For first-time landlords, it’s much better to build up a portfolio of similar properties, so you can cater for a single market, such as families or young professionals. Over time, you will get to know the needs and wants of your target audience and will be able to provide a suitable dwelling and maybe even pre-empt their requests.
If you do your research and provide a good quality, safe home, there’s no reason why the landlord life can’t be for you. Just remember to look after your tenant and in turn, they will look after your investment.
Howard Lester is the Director for Romford’s leading Letting Agents – Balgores Romford Lettings. Howard has been in the industry for over 30 years and has a wealth of experience and knowledge in properties.