How do I become a Landlord?

posted in: Property News | 0

The residential rental market has seen a huge upsurge over the last decade and it is expected that another 1.8 million houses will enter the rental market by 2025.

Becoming a landlord can seem a daunting task, but it could be one of the best things you ever do. Unless you belong to the entertainment industry most everybody that ever became rich has a property portfolio in their back pocket, and they all started where you are now. However becoming a landlord is not for the faint of heart and is not recommended for those looking to make fast money for minimal input, it takes commitment and hard work to build and maintain a successful portfolio, and here’s how it can be done with QuickBricksOnline.co.uk 

Why do you want to be a landlord?

 

Becoming a landlord entails certain responsibilities that affect not just you but any potential tenant(s) you might have. Before you venture in to the residential rental market make sure you are committed to being a responsible landlord, truth be told the legalities surrounding tenancies in the UK is stacked in the tenants favour, and although the vast majority of Landlord-Tenant relationships are good, productive, and equitable, we have all heard the horror stories of abuses of power (from either party), which ultimately comes down to a lack of understanding of law. This is something you must research in advanced detail before making a decision to go forward.

Is my property suitable for the rental market?

 

If you have previously lived in the property or inherited it then the chances are that it is suitable. If you have purchased the property at an auction, or privately then you need to make sure it is ready to become a rental property before you consider advertising for a tenant. Here are a few key factors to consider.

Condition:

 

Sometimes when dealing with your own home it’s hard to see it as anything other than perfectly adequate, or at the least what you (and therefore others) are willing to put up with, but each individual has their own views on what is acceptable. The first thing to do is to take a step back and ask ‘What would I change if I were going to live here?’ The best rental properties are kept minimal and modern, consider re-decorating to neutral colours, replacing carpets can seem like a big job, but depending on the age and colour scheme this can make all the difference. (See our guide on staging for more information).

 

Furnished VS Unfurnished:

 

This is a question that most new landlords struggle with. The answer all depends on who your property is targeted towards. If it is going to be a student house then furnished is the way to go. If it is for a family then the chances are they will have their own furniture so unfurnished is probably the better option (although this is always worth discussing with individual applicants).

On average furnished properties gain a slightly higher rental income but you have to remember that you will be liable for all the items you put in to the property, so if a bed breaks or a wardrobe door comes off you will have to replace it, this is an extra aspect of fair use, and reasonable wear and tear that you need to think about in depth, as unless damage is done due to the negligence of your tenant, the bill always falls to you.

There is of course some middle ground that most landlords sit inside, putting in white goods such as a washing machine or fridge freezer is usually a good idea as short-term renters tend not to own such large commodities. Adding basics like this can help you get a tenant in much faster and keep your rental price competitive.

Pets?:

 

A lot of rental properties don’t allow pets, this is usually because pets can cause damage to properties or leave it with an unpleasant smell. However there are an increasing number of landlords who will allow some pets such as Hamsters, Birds, Fish, Reptiles and Small dogs.

In the end it is entirely up to you if you are happy to accept pets or not, but not allowing them will reduce your market potential. To counter this you can always add a clause in your tenancy agreement specifically to cover repairs for damage done by pets, this prevents you excluding a significant portion of the rental market whilst allowing you peace of mind, and ultimately gets you closer to securing that all important tenant.

Smoking?:

 

Almost all rental properties do not allow smoking, however it is extremely difficult to police and renters may smoke regardless. Unfortunately even if your tenancy agreement states that no smoking is permitted it will usually not be enough grounds for an eviction if you find them smoking in the property.

Smoking is a fire risk and your best option if you do find your tenant(s) smoking inside the property if you have stated that it is not allowed is to provide them with an official warning and make sure your smoke alarms are up to date. You could also add a clause in the tenancy agreement that if the tenant does smoke inside the property then they must redecorate the property back to its original condition.

Setting your budget:

Once you become a landlord it doesn't mean that the money will just roll in whilst you sit back and watch, as they say you have to spend money to make money. Before you embark on your new property journey it’s best to make sure that you have sat down and gone over your financial situation to make sure it’s actually affordable and manageable for you in the long term, considering the following.

Repairs:

 

As landlords you are responsibility for making sure any damage is repaired quickly and efficiently. The leading reason for tenants withholding rent is due to defects not being repaired resulting in a lower standard of living. The main problems tend to be water leaks, electrical faults and mould/damp. A comprehensive inspection of your property is recommended before you put it on the rental market to minimise any avoidable problems down the road.

Mortgage repayments:

 

Unfortunately mortgage payment can no longer be deducted from the tax due on the property so you need to factor in how much you pay on your mortgage and how much profit you will make after taxes.

Furniture:

 

If you decide to furnish the property you will now need to decide which type of furnishings to install. Cheaper products might not withstand a lot of wear and tear so you may find you are replacing things more often. However putting in expensive furniture only for it to potentially be damaged might be too much for you to stomach. However furniture IS deductible from your tax.

Agency fees:

If you employ a letting agent (which we recommenced for first time landlords) then you will need to factor in their fees. However the bonus of a letting agent is a massive reduction in time spent dealing with the property, usually for just a modest fee. It is also tax deductible.

Insurance:

You will need specific landlord insurance to make sure the property is covered for every eventuality. This is a legal requirement which we DON’T recommend skipping under any circumstances.

 

 EPC (energy Performance Certificate):

An EPC is also a legal requirement but a certificate can be obtained for as little as £75, IF you have a letting agent they will be able to provide you with the EPC Certificate.

Membership of a landlord association:

 While this is not a requirement it is certainly advised. A landlord association can provide you with helpful advice, guidelines, and help resolving disputes or evictions. Most memberships cost in the area of £150 per year, in order to join you will need to provide evidence that you are a responsible landlord with supporting paperwork.

Legal fees:

If you are not employing a letting agent then it is good practice to have a solicitor experienced in property to look over your tenancy agreement and any other binding documents you sign with the tenant(s) to make sure they are actually legally actionable (Just because something is written down, and signed by mutual agreement does not ensure that the document is legally enforceable). If you end up with a difficult tenant and your tenancy agreement has illegal or incorrect information it can be very difficult to have them evicted, which can result in significant legal costs and rent arrears. This is one of the main reasons we strongly recommend using an agent to first time landlords.

Do your research:

 While this guide has most of the basic information you need, you must make sure to do plenty of additional research. Speak to other landlords about their properties and experiences, or speak with a letting agent who will be happy to provide you with advice.

Landlord responsibilities:

In the British legal system ignorance is not a defence. Make sure you are aware of your responsibly under law. See the gov website for more details

DPS:

If you intend to take a deposit (which we highly recommend you do) then legally it has to be secured with the Deposit Protection Service. Registering with the DPS is quite a lengthy process and requires you to be registered with several other organisations such as HMRC anti money-laundering system which can take up to 3 months to complete.

Know your paperwork:

 Getting to know the paperwork you will be using is essential. Some are legal documents and have to be completed correctly. It is best to get these documents done early so you don’t have delays in moving in your new tenant.

Tenancy agreements AST:

A tenancy agreement is probably the most important document you will use as a landlord. It lays out everything about the rental including term, pricing, assurances, responsibilities of both parties, and everything in-between.

The most common tenancy agreement is an Assured shorthold tenancy (AST). These are usually for terms of 3 or 6 months but can be longer if required, if you intend to rent out your property for less than 3 months then an AST is not suitable. The AST is a comprehensive document and makes things open and transparent when you rent out a property, but be aware that it protects the tenant much more than the landlord so a good understanding of the AST is key to forming a happy Landlord-Tenant relationship. Your letting agent will be able to show you the tenancy agreement and explain the finer points before your tenant moves in.

License agreements:

A license agreement is usually used for much shorter rentals which last less then 3 months. These are protected under the same laws as an AST but give the landlord much more freedom in regards to eviction and tenant control. However if your tenant stays longer than 3 months then they automatically fall under an AST and your licence agreement is void, even if you don’t draw up a new tenancy agreement.

Inventory:

The inventory is essentially a list of items in the property that belong to the landlord and what condition they are in. In order to draw money from a tenant deposit if there has been damage the DPS will usually require the original inventory showing the condition of contents when the tenant(s) moved in and another showing discrepancy upon them leaving. If you don’t have this document signed by the current tenant then you will find it almost impossible to enforce any deductions or damage repayments.

 

Electrical safety:

An electrical safety certificate is also essential to make sure the property is safe and fit for habitation. Getting a qualified electrician to provide a NEC Safety certificate before a tenant moves in is essential.

Gas certificate:

If your property is heated by a Gas boiler then as you likely know you will need to have the boiler inspected every year. This usually only costs around £50 and is a legal requirement.

HMO License:

If your property has more than one tenant who are not related but share common rooms within the property then you may need a HMO license. Your local council housing services will be able to provide you with the information you need as HMO requirements change dependant on the Local Authority.

How to rent guide:

When your tenant moves in you have to provide them with the government guide ‘How to rent’. If you cannot show that you have provided this document you may find it very difficult to remove the tenant using a section 21 or section 8. You can find the government document here.

Finding the right tenant:

 Now you have done all the hard work, your property is properly prepared and ready for a tenant(s) here’s what you need to know next.

The Equality Act 2010:

Forbids unlawful discrimination, including refusing rental based on a protected characteristic. This includes disability, race, religion, gender, sex, and sexuality.

In order to avoid discrimination, you may be required by a disabled tenant to make a few adjustments. For example, if the tenancy agreement includes one parking space, you may need to update it to include two spaces. If a tenant is deaf, they may ask for an audio version of the tenancy agreement. You're not required by law to make any changes that will irreversibly change the structure of your home, like widening walls or removing steps, but you may be asked to install a walk-in shower or a temporary ramp.

 

Staging your property:

Take a look at or guide "how to stage your property" ready for viewings.

Where to advertise:

Here’s the tough part. Studies have shown that over 90% of people start their property search online. The most popular places are the major property portals such as ZOOPLA, right move, Prime location etc. This is where most letting agents will advertise. If you employ a letting agent make sure they do this as standard practice, as not all can afford the cost of advertising on such large sites.

The downside is that as a private landlord you CAN’T advertise on any of these. You must be a registered lettings or estate agent to advertise on ZOOPLA and Right Move. Considering that over 85% of rented property is found through these platforms you will lose a sizable chunk of your target audience by not employing a letting agent.

However all is not lost. Places such as Facebook and Gumtree have seen a massive increase in private landlords advertising their properties online for free. This trend is expected to continue however it has shown some substantial problems early on.

Social media is a great way to get your property advertised however the huge influx of interested tenants which may fill your message inbox can make it seem that you will have no problem renting your property, however quite a few potential renters use social media to contact private landlords because they can’t get past letting agents standard procedure such as credit checks, due to poor payment history or a previous track record of causing problems in rental properties. Be sceptical of people that seem too good to be true; saying that they can move in straight away and are happy to pay the asking price and a deposit, it is an unfortunate state of affairs in that the chances are after the first month you won’t see another penny from tenants that are not adequately vetted, and it could take you months or even years to evict them.

 

Credit checks:

 Again as a private landlord you can’t have access to the systems that let you run a credit check on a potential tenant and signing a tenancy agreement with someone who hasn’t been credit checked is one of the worst mistakes you can make as a landlord. There are companies out there that will run a credit check for you for a fee, but legally under data protection laws you are not allowed access to that information. If a company is happy to hand over personal and private information to you regarding a potential tenant I would be extremely concerned, in the worst case scenario it may not even be a real credit report.

A letting agent will be able to run comprehensive credit and identity checks to make sure the tenant(s) is who they say they are and has a good credit history, as well as having met them in person and made an assessment of the individual.

Your Tenant:

Risk Assessments (Look for any areas that might need repairing), like:

  • Draughty windows
  • Leaky taps
  • Loose plug sockets
  • Tripping hazards
  • Holes in plaster/walls
  • Plumbing – switch on the heating and check every radiator for cold spots; flush the toilet; check that the shower is cycling through its full range of temperatures
  • Damp – check for mold particularly in the bathroom and kitchen, and make sure there is enough ventilation to prevent this becoming a recurring problem

 

Move in day:

The day your first tenant moves in is a day for celebration but don’t let your excitement distract you from the legal matters that need attending to. You and your tenant must set a date for “move in”. Once your tenant(s) arrive you must go through the inventory and tenancy agreement with them and any others named in your contract a final time

It is best to have a walk-through of the property with the tenant to make sure everything is how it should be and to ensure there won’t be any surprises after the first few days. Make sure everything works and if you do find a fault make sure it is on the inventory.

Make sure your tenant signs for the keys and has the “How to rent “guide mentioned above.

Make sure you both have a copy of the paper work before you leave.

 

Dealing with disputes:

 Nobody wants to argue with their tenants, but problems do happen. The key to solving issues is more often than not communication, so try arranging a time to chat about it over a cup of tea or coffee, emails and phone calls are of course sufficient, but can lack the personal edge of meeting in person and lead to unnecessary misunderstandings.

Your tenant(s) might be frustrated because they feel that you're not living up to your responsibilities as a landlord. Bring along copies of the tenancy agreement and the How to Rent booklet/Tenant Information Pack so that they understand what is and isn't your job.

It is important to stay calm, even if they become aggravated. Using strong language or raising your voice could be construed as harassment and could land you in hot water. If you feel your temper starting to boil over, calmly walk away and readdress the issues at a later time, or defer this responsibility to your agent.

If things get very serious and you think it could end up in court, it is worth trying alternative dispute resolution (ADR). This means using a professional mediator or staged arbitration provider, which is usually a more formal procedure. Both involve an impartial third party to help you come to an agreement.

How to end a tenancy:

Section 21:

Section 21 notice asks tenants to leave your property after the initial fixed-term rental period ends. It can only be served to short assured tenants. You'll need to give them at least two months’ notice so that they have reasonable time to find a new property and get their affairs in order. To get proceedings started, you’ll have to fill in government form 6a.

Section 8:

 

If your tenants aren’t meeting their obligations, you can serve a Section 8 notice. This gives tenants two weeks or two months to leave the property, regardless of whether the fixed term has ended or not. To serve Section 8, you need to fill in government form 3, including giving the full text of the grounds for eviction under Schedule 2 of the Housing Act 1988. For most landlords the grounds will generally be two months of late or unpaid rent, or damaged property.

A list of all government forms pertaining to AST can be found here.

To speak to one of our property experts fill in your details and a member of our landlord team will contact you within 24 hours.

If you want to speak to one of our experts on becoming a landlord call our dedicated number on 01706 413768 or visit QuickBricksOnline

Leave a Reply