Being a landlord can be challenging. You'll need to think about legislation and compliance, as well as managing your property like a business, ensuring you get the best possible return on your investment. That's why we've collated guidance and advice for landlords over the years, and we can now share this knowledge with you.
Know your market
When you are running a business, whichever product or service you are offering it is important to know the specific market to which you are pitching those goods or services. Running a buy-to-let business is no different and it is important to know the market which you intend to target as prospective tenants.
Your target market is likely to be determined by a number of factors, such as:
- The location of your let property – not just the town or city in which it is located, but the particular area of that town or city.
- The availability of other rented accommodation in your area, its general standard, rent levels and types of tenant living in it.
- The general standard of accommodation you are offering, such as its appearance, state of decoration and quality of furnishings, fittings and appliances.
- The rental income you are hoping to earn from your tenants.
- The ongoing expenses you might incur in maintaining your property, the payment of any fees and taxes and annual costs such as landlord insurance.
- Whether you are looking for long-term tenancies or a continuous series of relatively short-term tenancies (for example if yours is a student let) although your ability to find tenants who are reliable in paying the rent is likely to be critical whatever your target market.
- The extent to which you want to be involved in the day-to-day management as the landlord of the let property, which may also depend on how close you live to the rental property or properties you are letting.
- Your assessment of the likely success of the business relationship you are able to strike up with the tenants occupying your property.
Types of tenant
Different types of properties will appeal to different people, so it is important to understand your market in order to find the right tenants. Generally, the type of tenant you choose may affect the duration of their tenancy period and they fall under the following categories:
- Young professionals: young professionals often fill their time working or socialising, so may require simple but modern living accommodation. Many will share with friends before buying a place of their own.
- Families: families often look for larger spaces which are unfurnished and may bring many personal belongings with them, although some may wish to move into a readily-furnished property, especially if they are coming from abroad.
- Corporate: a company let – when a company takes a tenancy for the benefit of one or more of its employees. This type of tenant may have had their relocation paid for by their company.
- Students and graduates: students will usually be looking for furnished accommodation near their place of study or work placement. Depending on their academic circumstances, they may rent long or short-term.
- Older singles or couples: this group of tenants includes retired couples. The tenants spend much of their time at home and can be long-term tenants.
- Housing benefit recipients: tenants on housing benefit (Local Housing Allowance) often occupy rental properties which have a lower capital value to rent ratio. This can be attractive to some landlords, as the return on investment is typically higher.
Your decision as to whether or not tenants will be permitted to smoke in the property or have pets living with them may affect a prospective tenant’s decision to rent the property.
Preparing the property
Finding a tenant can be made easier by making sure your property looks as good as it can. Smart and well-maintained properties usually attract individuals who will keep it that way and pay their rent on time. You may decide to upgrade a kitchen or bathroom as a long-term investment. Alternatively, a lick of paint and a thorough clean can be all your property requires.
Think carefully about the exact date you want your property to be let. Beginning to market it 6-8 weeks before that date is recommended, as this allows us to release advertising campaigns and to find and select the very best tenants.
The London lettings market moves at an extraordinary pace. Tenants expect to be able to view at short notice, and if you're flexible about your move date, it pays to be ready to move at any time. If you have current tenants, don't forget to let them know they will be receiving calls from us requesting permission for viewings.
- General condition: electrical, gas, plumbing, waste, central heating and hot water systems must be safe, sound and in good working order. Repairs and maintenance are at the landlord's expense unless misuse can be established.
- Appliances: similarly, appliances such as washing machine, fridge freezer, cooker, dishwasher etc. should be in usable condition. Repairs and maintenance are at the landlord's expense unless misuse can be established.
- Decorations: interior decorations should be in good condition, and preferably plain, light and neutral.
- Furnishings: it is recommended that you leave only minimum furnishings, and these should be of reasonable quality. It is preferable that items to be left are in the property during viewings. If you are letting unfurnished, we recommend that the property contains carpets, curtains, and a cooker.
- Possessions: personal possessions, ornaments, pictures, books etc. should be removed from the premises. All cupboards and shelf space should be left clear for the tenant's own use.
- Pets: people love their dogs, but hate the smell of other people's. If there's dog in your life, get it into someone else's before a viewing.
- Gardens: these should be left neat, tidy and rubbish-free, with any lawns cut. Tenants are required to maintain the gardens to a reasonable standard, provided they are left the necessary tools. However, few tenants are experienced gardeners, and if you value your garden, or if it is particularly large, you may wish us to arrange maintenance visits by a regular gardener.
- Cleaning: at the start of a tenancy the property must be in a thoroughly clean condition, and at the end of each tenancy it is the tenant's responsibility to leave the property in similar condition. Where they fail to do so, cleaning should be arranged at their expense.
- Mail forwarding: we recommend that you make use of the Post Office redirection service. Application forms are available at their counters, and the cost is minimal. It is not the tenant's responsibility to forward mail.
- Instructions: it is helpful if you leave information for the tenant on operating the central heating and hot water system, washing machine and alarm system, and the day refuse is collected etc.
- Keys: you should provide one set of keys for each tenant. Where we are managing we will arrange to have duplicates cut as required.
Landlord responsibilities
When you become a landlord you take on some legal responsibilities. The following is only an introductory guide as legislation changes continuously, so you should talk to us for the most up-to-date information.
- Electrical safety: some types of property or tenancy require an Electrical Installation Condition Report, although we recommend that these be done for all rented properties.
- Energy performance: to market your property, you’ll need a registered assessor to inspect the property and issue you with an Energy Performance Certificate (EPC). Unless it qualifies for an exemption, the property will need a minimum E rating.
- Fire and furnishing regulations: furniture provided in the property should comply with current furnishing standards.
- Gas safety: an annual inspection should be carried out by a registered plumber or heating engineer to ensure the property is ‘Gas Safe’. You’ll be issued with a Gas Safety Certificate.
- Insurance: we recommend you take out specialist landlord insurance to protect the property and its contents.
- Inventory: you’ll need a professional inventory which is checked at the beginning and end of the tenancy in order to be able to deduct for any damage caused by the tenant.
- Legionnaires’ disease: you’ll need to make a risk assessment against this.
- Permission to let: you may need written permission from your mortgage provider or the freehold owner of the property to let it.
- Portable appliances: if you have a furnished property, all your appliances should meet current safety standards.
- Property condition: the tenant has the right to live in a safe and secure property, which must be maintained in line with statutory requirements.
- Right to rent: your tenants must be eligible to rent under government legislation.
- Smoke and carbon monoxide alarms: you’ll need a working smoke alarm on every storey and a carbon monoxide alarm in any living room with a solid fuel appliance.
- Tax advice: we recommend you seek tax advice on your rental income and deductible expenses.
- Tenants’ deposits: the majority of tenants’ deposits must be held in a government-approved Tenancy Deposit Protection Scheme.
Tenancy agreement
For private rentals, the most common type of tenancy is an Assured Shorthold Tenancy (AST). These tenancies usually begin as fixed term tenancies where the duration is defined from the outset, typically anywhere between 6 months to three years and mutually agreed between the landlord and tenant.
There is not a maximum length to an AST, which can end at the end of a fixed term or in line with a pre-negotiated break clause by either party with sufficient notice (usually no less than two months). However, if the tenant is in serious breach of the terms of the tenancy agreement (including rent arrears) then the landlord can apply to the courts for a possession order.
Among other important details and conditions, the tenancy agreement will include the following:
- The address of the rental property
- The name and address of the landlord
- The name of the tenant(s)
- The date the tenancy will start
- The amount of rent to be collected and the frequency of its collection
- The duration of the tenancy
- The amount of the deposit that has been paid
- The details of the tenancy deposit scheme being used
- How and when the deposit will be returned
- What to do if there is a dispute over the deposit
- Which other payments need to be made by the tenant (e.g. council tax and utility bills)
- Whether or not sub-letting is permitted
- Whether or not pets are permitted
- Whether or not smoking is permitted
- The notice period required from the landlord for them to access the property for inspection (this must be at least 24 hours)
- The maximum length of time the property can be left vacant during a tenancy without informing the landlord
Levels of service
You need to decide how much involvement you want from your letting agent. Do you just want them to find you a tenant and conduct all the security checks, or would you like them to look after the ongoing rent-collection and property management? Of course, there is an additional cost for the agent's ongoing involvement, but it could save you a lot of time and effort in the long run.
Letting service
The most basic service is the finding of a suitable tenant; this usually includes advertising, vetting the tenant and showing them around the property. A good letting agent will have prospective tenants already registered on their database. A letting agent will arrange credit checks to be carried out on any prospective tenant and also references from the current employer and previous landlord. This process is often carried by out by an independent specialist credit referencing company.
Full property management
Appointing a managing agent to help manage your investment has many benefits. A full property management service will leave the letting agent to deal with all matters which arise, including any emergencies as well as manage the general upkeep of the property. This is an attractive choice for many landlords as the letting agent will deal with all the time-consuming and often stressful day-to-day management of the property. This includes emergency repairs, scheduling property visits, liaising with utility suppliers and the local authority as well as arranging professional cleaning and deposit settlement, giving peace of mind that the property and tenants are in good hands.
Typical costs
There are a number of costs to a landlord when letting a property:
- Management fees: letting agents provide a variety of services which can make life easier for landlords. The degree of service a letting agent provides will command a different price, which is usually a percentage of the rent based on the percentage of the term.
- Maintenance: landlords are obliged to keep the property in a fit and proper state, and this comes at an expense. Many of these costs are tax deductible, however, including re-painting, replacing damaged furniture, replacing water pipes and disposal ducts, cleaning and gardening.
- Safety certificates and EPCs: to cover any necessary gas safety records, show that the electrics in the property and the appliances are safe, and demonstrate the energy performance of the property.
- Inventory: this details the exact condition of your property including all its contents before a tenant moves in. If any damage occurs later, a case can then be put forward to the Tenancy Deposit Scheme which will decide if the tenants are responsible for any charges.
- Tax: income tax needs to be paid on the rental income, and if the price of a property has increased when it comes to selling the profit may be subject to capital gains tax.
- Landlord insurance: including buildings insurance, contents insurance, landlord liability insurance (in case a tenant or visitor is injured in the property), and rent guarantee and expense insurance.
- Unpaid rent and voids: the risk of unpaid rent, or an empty property between tenants. Many landlords will budget for this contingency, and rent protection policies are also available to cover these eventualities.
- Contingency funds: putting aside a little of each month’s rent means funds are available to cover any unforeseen expenses. It can also help make mortgage repayments during periods when no rent is being paid.