The private rental sector has been growing steadily. In England, the number of households living in rental homes was approximately 4.4 million in 2020, equating to around one-fifth of total households. Industry experts expect this trend to continue as rising house prices mean many people struggle to save the deposit required. This trend has led many people to give serious thought to becoming a landlord.
Whether you are an accidental landlord or embarking on a career in property, it is essential to understand what the role involves. In this guide, we help new landlords understand the critical responsibilities of owning a buy-to-let property.
Check if you’re even allowed to let your property
If you own a leasehold property, you must determine whether you have the legal right to let your property. Check your leasehold agreement; most will contain a clause requiring you to get permission from the freeholder to sub-let your home.
If you have a mortgage on your home, you must seek the permission of your lender to rent out your property. If you are renting for a fixed period, for instance, to cover a temporary job relocation, your lender may grant their’ consent to let’, allowing you to remain on the same mortgage rate and terms. Otherwise, you will be asked to switch to a buy to let mortgage, you will incur an arrangement fee, and the interest rate is likely to be higher than your current residential mortgage.
Letting your property without your lender’s consent can be considered a breach of the terms and conditions of the loan and entitle the lender to demand immediate repayment.
Weigh up the costs of being a landlord
You will need to work out whether or not the property will be a good investment.
Find out how much rent you can charge by checking on Rightmove and Zoopla to see how similar properties in your area are priced. Ask a few local estate and letting agents to visit your home. They will be able to give you an accurate estimate of current market rents.
Then make a list of all your outgoings, this includes:
- Costs associated with meeting your landlord responsibilities – continue reading to find out what these are.
- Letting agent fees
- Marketing costs of finding tenants (if you don’t use a letting agent)
- Mortgage interest
- Maintenance and repairs
- Income tax
Deducting your costs from your rental income will determine whether renting out your home is financially viable.
When you weigh up a property investment, calculating its rental yield helps you to understand the return you are likely to make. Click here to read our blog on How to Work Out and Calculate Rental Yield for UK Properties.
Things to decide before getting started
Before you start looking for tenants, here are a few questions you might want to ask yourself:
Will I rent out my property furnished or unfurnished?
There is no clear-cut answer to this question. Your choice will depend on the type of property and your target market.
Furnished properties will attract tenants wanting hassle-free renting. This includes students and young professionals, and corporate tenants. Unfurnished properties attract tenants who want to put their stamp on a rental property as well as couples or families who already own a lot of their own furniture.
Will I allow pets?
Britain is a notoriously pet-loving nation; around 40% of households have one. When it comes to buy-to-let landlords, only a few embrace the idea of a pet in their property because of concerns about smells and damage to their property. However, the tide may be turning as more landlords are open to well-behaved pets. Allowing pets may increase your pool of potential tenants, enabling you to charge a higher rent and find tenants who want to stay in your property for longer.
Will I allow tenants to smoke in the property?
If you don’t want smokers, make sure you include a no-smoking clause in your tenancy agreement and advertise the place as being for non-smokers only.
Will I hire a letting agency?
You can hire a letting agency to find tenants and collect your rent, leaving you to get on with the day-to-day management of the property. If you would like, your letting agent can also fully manage the property for you.
Alternatively, you may choose to go it alone.
The option you choose will depend on whether you live close to your property and have the time to look after your investment. A letting agent will save you time, but there are fees to consider.
Your responsibilities as a landlord
As a landlord, you must fulfil certain legal and health and safety obligations. While it is unlikely that your Belgravia home will be unfit for habitation, it is easy to get caught out if you don’t know the law around areas such as gas safety, electricity safety and tenancy deposit schemes.
Repairs and Maintenance
Landlords are responsible for most repairs and maintenance in a rental home. People who live in Belgravia want the best, which means they will not compromise on the property they rent. If you plan to be a landlord in Belgravia, you will need to ensure that your property is maintained to a very high standard.
EPC Certificate and MEES regulations
You must have an Energy Performance Certificate (EPC) before you can market your home. The EPC will appear on your properties listing allowing tenants to compare the energy efficiency of rental homes. EPC certificates are valid for 10 years.
Minimum Energy Efficiency Standards (MEES) regulations require all private rented property to achieve an energy efficiency rating of at least E. Landlords will need to take action if their property’s EPC rating is F or G.
As a rough guide, you should budget around £60–£120 for an EPC certificate.
By law, landlords must carry out an annual gas safety check conducted by a Gas Safe registered engineer. Tenants must be supplied with a copy of the record of that check.
Expect a gas safety check to cost at least £80.
New regulations require landlords to commission an Electrical Installation Condition Report (EICR) at least every five years. The inspection must be performed by a ‘competent and qualified’ person. If remedial work is required, this must be completed within 28 days.
Although it is not a legal requirement, responsible landlords carry out Portable Appliance Testing (PAT) on all electrical appliances they provide. PAT testing should be conducted at least every two years.
Expect an Electrical Installation Condition Report to cost between £80 and £150 and PAT testing to cost between £1 and £3 per item.
Landlords must install at least one smoke alarm on every storey of their rental property. There must be a carbon monoxide alarm in every room that has a solid-fuel burning appliance. At the beginning of every tenancy, landlords must ensure that all the alarms work as expected.
All furniture and furnishings provided by the landlord must be made from fire-resistant materials. Check that the manufacturer’s label carries the fire-safe symbol. The items you provide which do not carry this symbol should be replaced.
Run a right to rent check
Landlords must check the immigration status of their prospective tenants to ensure that they are legally permitted to rent property in England. Every tenant aged 18 or over must show original documents to prove their permission to be in the UK. Find a complete list of acceptable documents on the gov.uk website. You must check all tenants, not just those you think are not British citizens.
Protect your tenants’ deposit
You must place your tenants’ deposit in a government-backed tenancy deposit protection (TDP) scheme within 30 days of receiving it. You can use any of the following schemes if your property is in England or Wales:
Local licensing and HMO permit?
A house in multiple occupation (HMO) is a property that is occupied by three or more people who are not from one household. All large HMOs, those with five or more occupants, require a licence and many councils, including Westminster, have additional licensing arrangements for small HMOs. Check with your local council.
Some areas are subject to selective licensing schemes where all landlords must apply for a license to rent a property. The purpose of selective licensing is to force unscrupulous landlords to clean up their act and reduce unsociable tenant behaviour. Councils introduce selective licensing in areas where there are persistent problems. If you rent out good quality accommodation in a nice neighbourhood, this will probably not affect you, but it is worth double-checking with the council.
Your rights as a landlord
You have a right to expect your tenants to pay rent on time, look after the property and meet the terms in your tenancy agreement. If they don’t, you have the right to take eviction proceedings against them under Section 8 of the Housing Act 1988. You also, currently, have the right to ask your tenants to leave the property without giving a reason once the initial fixed-term period of their tenancy is over, under Section 21 of the act.
When you rent out your property, you no longer have the right to access the property whenever you like. You must give the tenants 24 hours’ notice before visiting, even if it’s to carry out essential repairs.
Always obtain references for your tenants, including from previous landlords. Ask for copies of bank statements and proof of income. As a rule of thumb, only rent to tenants whose monthly income is roughly three times the rent. It is also worth investing in credit checks to be sure of their past payment history. Credit reference agencies such as Experian can do this for a fee.
Things to do before your tenant moves in
Make sure the property is clean and tidy. You should also make sure you have left instructions for all appliances, your contact details, and any additional information about the property – such as when the bins are collected.
You should make sure that your tenant has read and understood everything in the tenancy agreement. You must give them copies of the gas safety certificate, electrical safety certificate, energy performance certificate, and the government’s How to Rent Guide.
Draw up a complete inventory of your property, ensuring sure you include the condition of the property itself and every item within the property. Support your inventory with photographs and videos. Your tenants should sign the inventory to confirm that everything it lists is present and in the stated condition.
While specific landlord insurance isn’t a legal requirement, you should give it serious consideration.
The following types of landlord insurance are available:
Landlord building insurance – If you own the freehold of the property, buildings insurance is a good idea. You generally won’t be able to get a buy-to-let mortgage without proof of buildings insurance.
Landlord contents insurance – Although tenants are responsible for insuring their personal belongings, if you’re renting out a furnished property, you might want contents insurance to cover the things you own.
Landlord liability insurance – covers you if a tenant or visitor is injured in the property.
Rent guarantee insurance – protects you if your tenant falls into arrears.
Home emergency insurance – provides emergency assistance in the case of plumbing, heating or electrical failures or if damage to the doors or windows compromises the security of the property.
Declaring tax on your income
If you make money from letting a property, you will have to complete a self-assessment tax return. The tax year runs from the 6th April to 5th April the following year. You must file your self-assessment tax return and pay your bill to HRMC by the 31st January following the end of the tax year.
Calculate the profit you earned from your rental property for each tax year by deducting your allowable expenses from your rental income. Then subtract your £1,000 tax-free property allowance. You will pay tax on this amount.
Your taxable rental income is added to your other income from your job or pension, and you are taxed according to the standard income tax brackets.
Becoming a landlord for the first time can seem daunting. Here at Best Gapp, we are experts in the Belgravia property market and can help you make your investment a success. Contact us to discuss your budget and your long-term objectives – we’ll show you how to achieve them!