Updated November 2023
- 1 Becoming a landlord
- 2 Investing in property
- 3 How to find property
- 4 Building a property portfolio
- 5 Insuring your property or properties
Becoming a landlord
In one sense, becoming a landlord couldn’t be easier.
All you really need to do is to start to obtain any form of rental income from your property and you have, by default, transformed into a landlord. In other cases you might accidentally become a landlord (see our Accidental Landlord guide).
However, doing it properly and professionally is an entirely different affair.
Please note that this guide is for informational purposes only. It is based on our current understanding of legislation and is liable to change. Please always check with the relevant authority or a professional. We can accept no responsibility for any omissions or errors.
Researching what’s involved
The basics of being a landlord are relatively straightforward:
- you, as the property owner and person letting out your property or part of it, are the landlord;
- the person paying rent to you, is the tenant;
- if you are using an intermediary between you and the tenant for the purposes of administrative ease, they will typically be called the letting agent;
- the legal framework governing the relationship between the landlord and tenant is called the tenancy;
- there are a number of different types of tenancy and each one of them may have their own specific legal framework governing what you will need to do in order to meet the requirements of the law;
- you should find out what they are and decide what is appropriate for your situation, by consulting a number of sources including the government’s website: https://www.gov.uk/private-renting-tenancy-agreements
It will be highly advisable for you to ensure that you understand, in advance, the respective legal rights and obligations of all parties involved in letting a property.
Other key parties involved
As a landlord, you should also seek to understand the roles played by:
- Her Majesty’s Revenue and Customs (HMRC) http://www.hmrc.gov.uk. Remember that typically, though subject to allowances and thresholds, any income you obtain from rent will be taxable;
- your local authority / government. In England, the regulations imposed by local authorities may vary from one area to another as might the landlord’s need to formally register their business. Broadly speaking, it is the local authorities that enforce the laws governing tenancies. In Scotland, Wales and Northern Ireland, your local parliament or assembly may have defined laws and regulations that are significantly different to those in England and their respective sites should be consulted;
- your insurance provider. Once you start obtaining any form of rental income from a property, any existing owner-occupier insurance cover may become invalid. You will need landlord’s insurance to maintain your protection and we at Cover4LetProperty or your own insurance provider will be able to offer more advice.
Your key obligations
Wherever you are in the United Kingdom, the law will insist that you provide your tenants with a safe and habitable environment. While the obligations listed below are current as, please note that these requirements continually change, so the following should be used as a reference only and are primarily for properties in England only. Different requirements may be required depending on were your property is.
Aspects of that requirement may be subject to legal interpretation but in other cases the rules are specific and strict. Notably:
- protecting your tenants deposit in a government approved scheme;
- your entire property must be subject to a full gas safety survey annually and that must be conducted by a registered Gas Safe engineer;
- only electrical appliances carrying the European CE certification mark must be used and electrical safety must be maintained;
- you must provide the tenant with copies of operating guides and manuals for all gas appliances;
- all residential landlords should now have smoke alarms and carbon monoxide detectors installed in their properties;
- you must provide new tenants with copies of the most recent gas safety inspection certificate and the energy performance certificate for the property;
- checking your tenant has the right to rent your property if it’s in England;
- give your tenant a copy of the How to rent checklist when they start renting from you (you can email it to them);
- if yours is a furnished property, furnishings such as mattresses and some other items will need to meet fire safety regulations.
The law also requires you to conduct your business in a responsible fashion, including dealing with things such as notices to quit and eviction notices by legal means, should your relationship with your tenant ever deteriorate.
Your tenants may also have the right to question through independent panels, whether you are charging a just rent or any rent increases you impose in the future.
Once you have attended to some of the points outlined above, you will be well on your way to becoming a fully professional landlord!
There are a number of obligations you are required to fulfil if you are a residential landlord. The following list is based on current legislation and is by no means exhaustive. Here we review some of them…
- electrical appliances, installations and fixings need to undergo regular checks by qualified tradesmen and include the smaller items, such as a toaster or kettle right up to the wiring, and light and plug sockets;
- in April 2016 MEES was introduced. Under the Minimum Energy Efficiency Standards (MEES) unless they have a valid exemption in place, landlords can no longer let or continue to let properties covered by the MEES Regulations if they have an EPC rating below E ;
- if your property is connected to gas mains, then every year, you must arrange a yearly maintenance check of gas pipe work, appliances and flues. This should be carried out by a Gas Safe registered engineer and copies of checks need to be given to the tenant (failure to carry out these checks could also invalidate your landlords insurance, which typically requires that your gas central heating system has an annual service). More information can be found here: http://www.gassaferegister.co.uk/advice/renting_a_property.aspx ;
- you need to ensure your property is free from hazards and that your tenants have a clear escape route in the event of fire – depending on your property, you may need to provide fire extinguishers and alarms too;
- if you have an HMO, then typically further safety precautions must be made, such as installing fire doors etc. Please read our blog: Landlord guidance: Fire door safety in HMO’s and Flats for more information;
- any soft furnishings you provide need to comply with The Furniture and Furnishings (Fire) (Safety) Regulations 1988 (see here: http://www.firesafe.org.uk/furniture-and-furnishings-fire-safety-regulations-19881989-and-1993/);
- you are responsible for the general safety of your tenant/s and are obliged to check that they have safe drinking and hot water, ventilation, no pollution or damp problems etc under the Housing Health and Safety Rating System (HHSRS). You can find out more information here: https://www.gov.uk/government/publications/hhsrs-operating-guidance-housing-act-2004-guidance-about-inspections-and-assessment-of-hazards-given-under-section-9. Failure to meet the standards could see you face an investigation by your local council and possibly even a criminal charge.
While this may sound like a lengthy list, most of it is common sense stuff that you’d carry out in your own home anyway. To find out more about health and safety in the home – and your responsibilities as a landlord – visit the Government website at: https://www.gov.uk/private-renting/your-landlords-safety-responsibilities.
Here we share our top tips on starting out as a landlord, gleaned from our – and our customers’ – many years’ experience in this sector. Many of these topics have been expanded on within this Guide, so do check elsewhere…
- first of all, while property investment may be a way to see a sizeable profit when you eventually come to sell it, do remember that, particularly in the early days, you may find that you are running at a loss. Things like property maintenance and repairs, insurances, paying for regular checks on electrics and gas appliances etc, voids in tenancy or a change in mortgage interest rates can all eat in to any profit you may have made. The key is to be realistic – if you are looking to make a quick buck, this probably won’t happen;
- secondly, how “hands-on” do you want to be? If the idea is to enjoy the capital growth on the property in say 10 or 15 years, without getting that much further involved, then you’ll need a management agency to take care of the day to day running of your property. Obviously, this will cost, usually either a one-off yearly fee or a percentage of the rent;
- if, on the other hand, you are happy to collect the rents, carry out routine checks and be there in the event of an emergency (which, depending on the tenant could be anything from a light bulb needing changing to the boiler cutting out), then self-managing your property may be suitable for you;
- decide who do you want to let your property to? If you have already bought the property, then this may dictate as to the type of tenants you will attract – for example, a four bed property in the outskirts but within driving distance of the nearest railway station may attract a professional couple or family;
- if you haven’t yet bought a property, then think about your ideal tenant. For example, if you live in a university town, you’ll have a neverending supply of student tenants, so this may appeal to you. But if the thought of students (rather unfairly) reminds you of the TV series “The Young Ones” then you may wish to attract a professional individual or couple, with a high specification flat or small house near to all amenities;
- once you’ve made these decisions, and you have your investment property, probably the most important thing you’ll need to do is to ensure you have adequate let property insurance in place. This is generally part choice and part mandatory. If your property is mortgaged, then your home loan provider will usually ask that as part of your contract, you protect both your interests with buildings insurance – usually when you exchange contracts (ie. before you’ve completed). Third party liability insurance may also be essential if you want to protect yourself against being sued for damages or negligence;
- as you may need landlords contents cover, also, at the same time you need to think about whether you are letting the property furnished or non-furnished;
- do note that if your property is going to stand empty for more than 45 consecutive days, you’ll typically need additional protection with unoccupied property insurance. Obviously, we can help with all your landlords insurance needs – read our Guide to unoccupied property here or check out our short video;
- you also need to ensure you get your marketing right and that you take advantage of any opportunities available to help promote your property as effectively and as cheaply as possible;
- don’t forget that as a landlord, you have a number of legal obligations that need to be met, involving regular safety checks etc. More information can be found on the Government website: https://www.gov.uk/private-renting/your-landlords-safety-responsibilities
- once you have a prospective tenant in place, make sure that you – or your lettings agency if you decide to have one – carry out the full range of credit checks on any potential tenants to make sure they are credit worthy. With student lets, parents often act as guarantors for their child;
- finally, don’t forget to keep on top of your book keeping. Just like any other UK business, you need to keep financial records.
We hope this has given you some food for thought. Being a landlord can be a very rewarding experience, but it’s more than simply a case of renting out a property and hoping for the best – to truly succeed, you need to be dedicated, organised and realistic. However, once all the pointers above have been put in to action, all the hard work is done – for a while, at least!
There could be any number of reasons why you have a property that is standing empty – maybe you’ve just finished refurbishing it perhaps, or you have inherited a probate property that you have decided to let out. Of course, it could be that your current tenant has left and your property is standing empty.
So, how do you go about attracting (the right kind of) tenants? Here are some ideas…
- think about the type of tenants you are trying to attract (for example, professionals, a family etc) – that way you can tailor the marketing to them. For example, if you are looking to let to students, then your first port of call will be the local University – many will allow you to advertise your property for free. Similarly, if you are looking to attract professionals with no children, then that second bedroom can be called a “home office”;
- check with your local authority to see if they have any initiatives in place to help – some have Empty Property Officers whose role is to help keep properties occupied;
- join an association for Landlords – they will be able to give you useful tools and information – read our guide to Landlord Associations;
- use a letting agency – this service will of course cost (fees vary), but using a well-known agency puts you at the forefront of any potential tenants. There are both pure online letting services as well as agents who have both an online presence and have shops on high streets. You may want to use a combination of both types. It is also worth noting that should you use a letting agency, they will set up viewings and run credit checks on prospective tenants, which you may prefer, rather than having to do it yourself;
- advertise on one of the specialist letting forums and websites – some may charge a fee for this;
- take advantage of social media such as Facebook and Twitter etc – while you may not personally know someone looking for a place to rent, they may have a friend of a friend who does – do be careful of not advertising the actual address of the property, however. If it is standing unoccupied, this could attract burglars etc;
- if you have a portfolio of properties, why not build your own website? This doesn’t have to be as complicated as it sounds – using blog software such as WordPress will enable you to easily update and change your website. Or try one of the ‘off the shelf’ packages available online.
Of course, there are some things that you shouldn’t do when looking to let your property…
- no matter where you are advertising, never actually say that the property is currently empty – this is like a green light to burglars and squatters;
- don’t forget that, even if empty, your property needs to have adequate insurance. Your standard landlords or residential home insurance will normally become invalid after typically 30-45 consecutive days (depending on your provider), and you’ll need special unoccupied property cover;
- again, on the subject of insurance, do check that your insurer covers the type of tenant you are hoping to attract (for example, Cover4LetProperty we insure all tenant types, such as benefit recipients and students – not all insurers do);
- if your property was not bought with the intention of being let out (for example, it was your home but now you need to work abroad for a year or so and want to let your home out in the interim), don’t forget to advise your mortgage lender. They may permit you to let your home out, but you may be charged a fee.
We hope these tips have helped you think about the best ways in which to market your property – hopefully they’ll help you quickly find your dream tenant!
Further reading: Guide to Marketing your Properties
Once you’ve bought your investment property, you need to decide whether you’ll be letting it furnished, unfurnished – or part-furnished!
What are the differences?
A furnished property is one that typically includes everything from a bed to lightshades; white goods to storage cupboards; and, in some properties, everything else to make it liveable such as an ironing board to cutlery and tea towels!
An unfurnished property generally includes things like carpets, some basic white goods, but not items such as a TV or crockery etc.
Part-furnished properties tend to have the basics, plus maybe a table and chairs. This allows the tenant, if they so wish, to bring in their own furniture, such as a bed.
The above definitions are just a guide only and it is important that both you and any tenant are in agreement as to what comes as included, and what doesn’t.
This is where inventories are key – not only for the tenant’s information, but so you can check off items when your tenant eventually leaves. A signed (by both parties) inventory – including photographic evidence too – could prevent disagreements further down the line.
An inventory is also important for calculating the sum insured amount should you require landlord’s contents insurance.
Furnished vs. unfurnished?
So, what should you take in to account when making your decision?
A lot depends on the type of property you have (for example, is it a small flat or a large house?) and the type of tenants you are looking to attract, as well as your own financial circumstances.
4 reasons to let your property furnished
- a furnished property may be easier to let, because tenants can simply move in and don’t need to buy anything themselves, making it cost-efficient for them;
- smaller properties and flats tend to attract younger, more mobile tenants, so a furnished property may suit them better than an unfurnished property;
- you own the furniture, so new tenants can use it, or you can use it yourself when your existing tenants move out.
4 reasons to let your property unfurnished
- you don’t have to worry about your furniture being damaged and any ongoing replacement costs;
- you will not need landlords contents cover as the tenant will be responsible for his or her own contents;
- if yours is a large flat or house, you’ll typically attract older couples and families, who may well have their own furniture anyway;
- as the tenant has invested money in their own furniture and moving it in etc, they may stay in your property longer.
As a landlord, you may no doubt be aware of your legal obligations to your tenant, such as annual gas appliance checks, electrical checks at the beginning of each new tenancy (to read more, visit the Government website here: https://www.gov.uk/private-renting/your-landlords-safety-responsibilities
However, if you decide to go down the part-furnished or furnished route, note that you have a number of obligations to your tenants in relation to the furnishings too. For example, all soft furnishings (e.g. sofas, armchairs, mattresses) must conform to the legal fire-resistant standard.
If you are going to furnish your investment property, read our top tips on getting it right…
So, you’ve got your property, you’ve met all your legal obligations, and you have a tenant or tenants ready to move in. Here are some ideas how to get them settled in comfortably as well as building that all important relationship:
- give each tenant a “moving in” pack that details everything from local amenities to the day that refuse is collected – and highlight their obligations including recycling, keeping the garden tidy etc;
- remind them of noise pollution rules and ask that they respect their neighbours. Remember, if things escalate and official complaints are made, you could face a fine;
- give them a contact number (either yours, your letting agency or a domestic emergency service) they can call if there is an emergency;
- arrange to pop around (at an agreed time) and see how they are settling in after a week or so and encourage them in the interim to write down any questions they may have – such as, how does the washing machine work;
- as part of your Tenancy Agreement, make it your tenants’ responsibility to find another flatmate if one should leave – while reserving the right to vet them – and make them aware that they will be liable to make up the extra rent until the tenancy is filled;
- encourage email communication – that way you have documentation of everything in writing should problems crop up further along the line, and it also saves any misunderstandings for both parties.
Letting can be a rewarding business – by taking the steps above, you can both make sure you start off on the right foot.
Are you a landlord without even realising it? If you are one of the many people taking advantage of the income generated and the tax breaks offered by renting out a spare room in your home, you could be.
What this means is, as a landlord, you have certain obligations to meet and duties to carry out to ensure you protect your tenant and yourself. So, what do you need to know?
Firstly, read our Accidental Landlord Guide.
Before you even think about letting a room or rooms in your home, you should contact your mortgage lender and get their approval. Again, this is because your property will face different risks by having a “stranger” in the home.
Failure to advise your lender of your letting intentions and obtaining their permission could see you in breach of contract.
Rent a Room Scheme
This enables you to earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home (figures correct as at November 2023 – these rules may change) whether you let out a single room or a whole floor.
If you’re not in the Rent a Room scheme, you will have to pay income tax on any rental income you get after paying out for expenses associated with the letting. These expenses typically include:
- repairs (but not improvements);
- utility bulls
It is important to either elect to join, or not join, the Rent a Room Scheme and understand whether you need to complete a tax return relating to your let.
More information is available here: https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme
Your traditional owner-occupier buildings and contents insurance will not be suitable if you have a tenant. Even if you only rent out one room, you will still need specialist landlord insurance. This is because, having a tenant, whether living in your home with you or renting the whole property, puts:
- you potentially at more risk of being sued by a tenant for personal injury or loss that occurs while on and around your property (if it can be proved that it is down to your negligence);
- your property potentially more susceptible to malicious damage or theft by having a “stranger” in the house, etc.
Because of these and other risks, it is essential that you have adequate let property insurance place.
Now that you are a landlord, there are a number of legal obligations you will need to meet. These revolve around the safety and well being of your tenant and include obligations such as:
- having annual gas safety checks;
- regular checks of electrical appliances;
- ensuring your home meets health and safety standards (so it offers a damp-free, safe environment which is free from hazards);
- having fire–safe furnishings etc.
Scroll up our guide to our section on Your legal obligations to find out more.
In summary, even if you are only letting out one room in your home and you are still living there, then your paying guest is classed as a tenant. This means you need to carry out the duties of a landlord.
As a landlord, investing in property essentially means thinking with a primarily business head as opposed to your heart.
You’ll be examining properties both from the point of view of assessing their suitability for generating regular rental income for you but also in terms of future growth in the capital you will have invested in them.
This class of property is occasionally very attractive to landlords, as they often bring with them a multi-year guarantee from the original builders – see here: http://www.nhbc.co.uk
They might also, with a reasonable degree of luck, be expected to require less in the way of emergency fixes and maintenance than might be the case with older properties.
On the downside, significant numbers of people in the United Kingdom still profess to prefer the charms of older traditional properties over typically smaller and more modern ones. That might mean that certain categories of tenant may look elsewhere if you are only offering new build type properties.
This is an area that proves attractive to many landlords looking for property.
Significant numbers of private owner-occupier buyers might be put off by properties that are in a dilapidated state and which require a significant amount of work in order to remedy the position. However, this might be an opportunity for landlords because it may well mean that there is relatively little competition for the property and that might make its price much more attractive.
Note that in some areas, if you are converting a dilapidated commercial property into a residential one for letting purposes, there may be still certain grants available to help with the cost.
A word of warning though – do be careful to avoid biting off more than you can chew with property renovations. Unless you are very experienced, they can easily run over time and heavily over budget, leading to severe financial difficulties for the landlords concerned.
Read our Guide to Renovating for more information.
It is not unusual to see landlords that are in property acquisition mode, frequenting this type of venue in the hope of finding a bargain.
Bargains are indeed there to be had. Typically properties offered at auction have either proven to be very difficult for the owners to sell or they are repossessions that the organisation concerned wishes to move off of their books as quickly as possible.
In order to participate, you will typically need to have evidence that you have the funds available. Make sure that you have had a professional valuation and do not go over the maximum amount you have set for your purchase.
Make certain also that you have inspected the property thoroughly yourself beforehand, and if you are serious about it, have a survey carried out. While this may cost you more money in the long run, overall it could alert you to unseen problems (such as subsidence) which could cost thousands of pounds to put right.
Buying blind at an auction is exceptionally risky and it is worth remembering that many properties are only being offered on this basis because there is something fundamentally wrong that needs attention.
Match your property to your target market place
Finally, remember that certain tenant market segments may be more attracted to some types of property than others.
For example, corporate lets or lets to single young professionals, might be better suited if the property is a newer flat and without a substantial garden.
By contrast, some young couples and certainly families may place a very great degree of importance on having a garden and perhaps a little bit of extra privacy that might come with a semi-detached or fully detached property.
Market research should play a significant part in identifying the type of property you are interested in.
Buying a property at Auction – as seen on the BBC’s popular Homes Under The Hammer TV series – can be one way of quickly snapping up a bargain, as well as avoiding the long and often drawn out process of buying a property the more traditional way.
Here we share some tips and hints on preparing to buy a property at Auction…
- request a catalogue from the Auction House several weeks before the Auction, and subscribe to their email newsletters if they have one;
- once you’ve found a property – or properties – that you are interested in, arrange a viewing, just as you would any other property;
- if you like the property, carry out a second viewing and inspect it closely. If you are looking to renovate the property, take along a trusted tradesperson with you, to get an idea of refurbishment costs;
- If the property is a contender, then carry out all the usual searches you’d normally do (yes, this will cost you money, but it is better to be aware of any problems / pitfalls that could cost you more in the long run, before you bid);
- don’t forget to thoroughly research property values in the area so you can set yourself a realistic budget;
- check the legal pack that comes with the ‘lot’ (ie. the property) carefully. This will highlight things such as covenants or things that could influence the price the property going forward. Take advice from relevant professionals (eg. solicitors, chartered surveyors etc.) where necessary;
- get finance arranged. Typically, you’ll need to pay a 10% deposit on Auction day and the remaining balance within 28 days. Failure to meet these terms could see you lose the deposit and the ‘lot’;
- attend a few Auctions as a dummy run – so you fully understand how the process works.
Finally, on the day itself, keep calm – buying at Auction can be fun and exciting, but don’t get carried away. Never lose sight of the fact of why you are there and how much you are prepared to spend!
How to find property
Anyone can find property. A few minutes on your PC or a casual stroll along the high street looking in estate agents’ windows, will show you hundreds if not thousands that are for sale.
However, the one thing that the typical landlord will not want to do is end up in competition with potential owner-occupiers for a given property. Typically those economic dynamics might not work in your favour.
It goes without by saying that the estate agent is not on your side and nor are they your friend. However, they are typically keen to shift properties on their books and that may mean that keeping an eye on them over a period of time might yield some valuable clues.
For example, a property that has been sitting in their advertisement section for a lengthy period of time might indicate a situation where both the vendor and agent will be able to deliver some price flexibility. You may be able to ascertain that by trying to build a relationship with the estate agents concerned or by simply looking at photographs and trying to spot when they were obviously taken a long time ago.
Although this source is perhaps declining as the internet increasingly takes over, it is still worthwhile keeping an eye on the local newspapers etc.
You might also find some properties that are specifically stated as being existing letting operations where the owner is effectively trying to sell the business. A good source of information of that type might be some of the various landlords’ trade publications.
This area requires no particular introduction, as the technology and advantages are now almost universally appreciated.
Even so, it is worth stressing just how powerful and flexible hunting for property through the net can be. There may be sites that specialise in buy-to-let type deals and you may even find special categories covered under headings such as bargains or big reductions for cash sale etc.
Significant numbers of people looking to sell their houses quickly and to obtain the associated income, may choose this route in order to avoid estate agents’ fees. For both vendors and potential landlord purchasers, this could be a win-win scenario.
Whether you are an experienced landlord or a first-time investor, being a landlord is a business, and common-sense dictates that for your business to work, spending wisely is key. One way to keep expenses realistic may be at ground level, where you look for cheap, or low-cost investment properties. This may not be as easy as it sounds though.
Making such a large purchase is such an important decision, that it makes sense to do it right. So, how do you find low cost investments?
- firstly, build relationships with estate agents in the area/s you are hoping to buy. Be clear on your requirements (for example, you are looking to invest in a property suitable for families, so it needs to be near to schools etc.) and make sure you keep in touch with them. It may be something as simple as sending the estate agents an email every now and again, to remind them that you are still looking;
- join a Property Investors’ Club – you get to meet like-minded business people who maybe also have access to properties and opportunities that they cannot take advantage of at this time, but that you can;
- use the internet – obviously, you can look at estate agents’ sites, but also scour those websites that are set up for private house sales, as well as those that offer discounted properties for sale;
- bargains can be sometimes snapped up at Auction – provided you have done your research first and know exactly what you are buying! Don’t just turn up on the day – get a catalogue several weeks before from the Auction House and do all the normal land / property searches that you’d normally do etc;
- finally, if you find a property that appears to be a real bargain, don’t be blinded by the price. While it is exciting to find just the investment you are looking for at a knock down price, do make sure you investigate fully just why it is so cheap before you buy. Purchase with your head – and not your heart!
There comes a time for many landlords when they have found their feet in the business and are becoming increasingly successful through both organic growth and property acquisition.
They may then be facing the challenges and opportunities associated with growth and the building of a property portfolio.
Recognise that things change
There is a huge difference between managing a property portfolio consisting of a single premises and one where you have a number of properties under management.
For a start, your administrative overheads will increase:
- you will have several properties that need to be insured – we at Cover4LetProperty can help you identify ways of making that easier;
- you will typically be travelling a lot more between your properties;
- there will be potentially a significant increase in the number of tenants you need to deal with and issues you need to resolve;
- your cash flow income will increase but then again, so will your outgoings and very possibly your taxation liabilities; etc.
Considering a letting agent
If you find the thought of increased tenant liaison overheads and administrative paperwork to be intimidating, you may wish to consider using a letting agent.
These act as intermediaries between you and your tenants and they may also be able to deal with certain elements of your administrative bureaucracy for you.
However, be careful when selecting your letting agent (this is a useful resource: https://www.propertymark.co.uk) and ensure:
- you understand exactly how much experience in lettings they have;
- you try to take up other landlord references relating to their services;
- you understand exactly what their fees are – both for you and your tenants;
- you are even clearer that you understand exactly what they will be doing for the money you will be paying them.
Watch property prices carefully
Space doesn’t permit a full discussion about the business techniques to be used when managing larger scale property investments.
Suffice it to say that things such as relatively minor property price movements against you may put at risk significant amounts of your capital and equity in situations where they are spread across a number of different properties rather than just one.
It would be sensible to spend some time researching these issues and be sure you understand the capital utilisation differences between running a single-property landlord business and one which has a substantial property portfolio within it.
Use an experienced accountant
This is important even if you only have a single property but it becomes critically so when you have a portfolio.
You will need to be careful that you both maximise your allowances and expenses, whilst at the same time look to pay a fair and just amount in taxation.
Things such as inheritances can become complicated where property portfolios are concerned and you may need to consider things such as trust funds etc.
Being realistic, if you are running a busy business involving a number of tenants and a number of properties, you may be unlikely to be able to develop the necessary in-depth technical understanding of these issues to do it all yourself. So, be prepared to pay for an experienced accountant.
If you are considering letting to students, here are some of the main considerations…
- most cities have student hotspots, so if your property is in one of these areas, then the good news is that you should have a steady stream of tenants. On the downside, these areas tend to attract higher property insurance premiums due to higher crime rates – so make sure that you shop around for the most cost-effective, appropriate, cover. Don’t forget to check that your insurer is happy for you to let to students – some will exclude certain tenant types (at Cover4LetProperty, we cover all tenant types, plus we rate by postcode – meaning that if your property is in a “better” part of town, your premiums will reflect the lesser crime risk);
- when furnishing your property, buying flimsy furniture will be a false economy. Investing in well-built, sturdier furniture that will withstand the test of time may make sense. Keep the decor neutral and avoid ‘fussy’ lampshades and furnishings etc – robust, simple and attractive will give your students the basics that they need, without the worry of fragile items being easily damaged;
- as with all tenanted properties, regular safety checks need to be carried out, with documentary evidence. These include periodical electrical, water and gas safety checks. Plus, you are obliged to ensure that any soft furnishings you supply (eg. sofas, armchairs, mattresses etc) are covered by the Fire Safety Regulations. These are a legal requirement, so make sure you know what your obligations are (you can find some useful guides here: http://www.firesafe.org.uk/furniture-and-furnishings-fire-safety-regulations-19881989-and-1993/);
- draw up a Tenancy Agreement, with an inventory (supported by photographs if necessary) and make sure both you and your tenant go through it together and sign a copy each. Don’t forget to make it clear, in writing, who is responsible for broken items such as cups and glasses as well as payment of bills (eg. utilities, telephone, water etc);
- deposits and guarantors – landlords tend to either take a (refundable) deposit from a tenant at the start of a letting and / or have details of a guarantor. This is someone (usually a parent) who usually owns their own property and guarantees to pay the rent if your tenant does not. It is important that you carry out the usual credit checks, even on the guarantor;
- see if you can get a reference from a prospective tenant’s university – this makes them more accountable and means that their placement could be in jeopardy if they don’t fulfil their obligations to you;
- if you are planning to have a HMO a property rented out by at least 3 people who are not from one ‘household’ (for example a family) but share facilities like the bathroom and kitchen – then it will need to be licensed. The idea is to compel landlords to offer better living standards – https://www.gov.uk/house-in-multiple-occupation-licence;
- maintenance and inspection – legally, you have to give notice to your tenant as to when you wish to visit your property for routine inspections, so don’t assume you can turn up as and when you want to.
As you might imagine, for us at Cover4LetProperty, this subject is one that is close to our hearts.
The basic principle
It would be irresponsible and very possibly in breach of the terms of any buy-to-let mortgage, to own a property without making sure that it is adequately insured.
If you are obtaining rental income from a property, owner-occupier cover will typically be invalid. In order to be sure that you have buildings and contents cover in place, you will need one form of landlords’ insurance or another.
You should take note that some policies will provide elements of cover in addition to those simply associated with buildings and contents protection.
It would be a mistake to listen to those who tell you that you will be able to make do with owner-occupier cover, as in the event of a problem the insurance provider would never know that the property was being used for letting purposes.
In practice, this is inaccurate and insurance companies have a number of sophisticated means at their disposal that would help them to spot such an irregularity. The result might be the rejection of your claim and in some cases, possibly your prosecution for making false declarations in support of an insurance claim.
Once your property stands unoccupied for more than a number of days specified in the policy documentation, you may find that elements of your cover or the entire policy will become null and void.
That’s because the risks to your property are higher when nobody is actually living in it. As such, insurance providers typically require you to have specific unoccupied property cover in such situations.
If this sounds an unlikely set of circumstances, it might pay you to remember that there may be a number of reasons why your property might stand unoccupied against your expectations. Examples might include building work overrunning, redecoration taking longer than anticipated or new tenants simply failing to arrive to take up a tenancy when you expected them to.
Keeping your cover in force
There are a number of things that a landlord will need to keep in mind if they are to avoid putting elements of their cover at risk:
- complying with all legal provisions relating to things such as the safety of tenants and the property;
- notifying your insurance provider of any material changes in your circumstances that might affect the policy – examples might include situations where you were converting a property from single to multiple tenancies;
- letting to groups of tenants that are specifically excluded from an existing policy’s protection. For example, although some policies may cover any category of tenant, other policies might exclude DSS tenants or students etc.