This demand also offers those who own property and who perhaps might be looking for ways to top up their savings in the current climate of uncertain pensions, and volatile stock market, a opportunity to open up a fresh revenue stream as a landlord.
How Should I Go About Renting Out My House?
It sounds so easy on paper. You provide a home for people needing somewhere to live and they pay you rent for the privilege. Sadly nothing that involves human beings can ever be quite that simple, and while buying a home to let and becoming a landlord can be extremely lucrative if done professionally, all too often ill-informed dabblers can come dangerously unstuck.
There are three ways to become a landlord:
1. You can buy a property and then hand over the responsibility of letting it to a professional property management company.
2. You can buy a property then go it alone and be a hands on landlord seeing to the letting and maintenance of the property yourself.
3. You can rent out part of the property that you are currently living in.
Each approach has its plus points. If you delegate to a property management company you also delegate the day to day business of dealing with tenants, ensuring rent collection, and finding new/researching new tenants.
However, this will cost you.
We recommend you speak to any of the following agents for more information regarding costs.
If you decide to adopt the hands on approach then all the financial rewards are yours to keep, but you will probably, depending on the age/state of the property, quality of the tenant, and the state of the market, find yourself devoting far more time, energy and emotion on maintaining the property than you ever intended.
If you're going to rent out part of your home, however, then you don't have much choice but to be the hands on type. Again, with the right lodger/tenant this can be a very satisfactory arrangement. If it all goes wrong, however, you may find the trouble a little too close to home.
Is Your Home Worth Renting?
What's Popular With Renters?
New homes developments tend to be built as close to amenities and major transport facilities as they can to accommodate 21st century cash rich, time poor lifestyles. New homes also benefit from brand new, sometimes state-of-the-art fixtures and fittings, and 10 year structural guarantees.
Developments in the centre of towns and cities can be extremely popular with renters looking to be at the centre of things without necessarily having the funds for a deposit to purchase.
If after a couple of years as a rental property the market has changed or moved elsewhere, selling a relatively new property in a good area has its obvious benefits.
If you are thinking of renting out a property you need to consider a number of points:
Is The Property In A Popular Area?
In many ways you are looking for the same features in an area that you would look for in a property that you intended to live in yourself - good transport links, good vibe, signs of being upwardly mobile etc.
Is The Rental In That Area Normally Buoyant, Non Existent Or Saturated?
The only way to find this out is to visit a cross section of estate agents in that area. Find out who if anybody wants to live in that area. There's no sense for instance in buying a state-of-the-art yuppie pad to let in an area only really popular with students and backpackers on limited funds.
Is The Property Suitable?
Most buy to let loans will be calculated on achievable rental income taking into account things like location, rents achieved by similar properties in an area. For that reason almost any home will be considered for a loan - with the exception of corrugated metal houses. Traditionally, lenders don't discriminate between older and newer properties. A company's valuer will check whether the property is worth its selling price and whether it can achieve the proposed rental income. If it satisfies those requirements, most lenders will be happy to lend.
Some lenders won't, however, consider applications for homes destined to be broken up into multiple lets, and most will impose restrictions on any property that requires extensive refurbishment before it can be let out. Often the company will retain a portion of the loan until the necessary renovation work is completed.
This should be remembered if you intend to buy a property that isn't immediately suitable for letting because it may be some time before there are tenants to meet the mortgage repayments.
If your property has a gas supply, it is vital that you obtain gas safety certificates for all the relevant appliances (such as the boiler and gas oven) before any tenants move in. Most Gas Safe (formerly CORGI) registered heating engineers will be able to arrange this; they will check your gas appliances and issue you and your tenant with the correct paperwork, which must be updated annually.
Since October 2008, it has also been mandatory to provide tenants with an Energy Performance Certificate (EPC). To get one of these, you'll need to contact an accredited Domestic Energy Assessor (DEA). We recommend www.aldrocksurveyors.co.uk
Will your property by furnished or unfurnished? Depending on the area, it's usually easier to let an unfurnished property. But if you will be providing furniture, be aware that all soft furnishings, including beds, sofas, cushions and upholstered chairs, must be non-flammable - and they must have the 'Furniture and Furnishings (Fire) (Safety) Regulations 1988' labels to prove it.
You must also:
• Keep the structure and exterior of the property in a good state of repair.
• Ensure that hot water installations, water supply, washbasins, sinks, baths, showers, toilets etc are safe and fit for use.
• Provide adequate lighting, heating and ventilation.
• Treat any health-threatening damp.
• Repair and maintain any areas or installations, which you own or control.
• Ensure that all gas appliances are maintained in good order, and pay for an annual check/service from a CORGI approved tradesman.
• You must also ensure the tenant receives a copy of the safety certificate.
• Ensure that any and all electrical appliances provided with the property are safe to use.
• Be able to verify that all new furniture complies with regulatory levels of fire resistance as set down in Furniture and Furnishings (Fire Safety) Regulations 1988.
These regulations will apply whenever the primary use of the property is as a source of income. Failure to comply with these regulations in the past has resulted in death and severe injury with negligent landlords receiving jail sentences for manslaughter.
Tenants must pay rent according to the amount and frequency set out in the tenancy agreement signed by both parties. Tenants are also responsible for council tax payment except where a house is comprised of multiple homes (in this case council tax is usually recouped through rent increase) unless they belong to an exempted group - students, unemployed etc - where government assistance is provided.
Tenants in self-contained properties will usually be responsible for water rates and payment for utilities like gas, electricity, telephone and television unless otherwise stated in the rental agreement.
It is the landlord's responsibility to chase outstanding utility bills payments during a crossover of tenants. These debts should not be the responsibility of the new tenant.
You should never leave a tenants responsibilities to 'common sense'. They should be clearly stated in a tenancy agreement. For example a tenant should take care of the property and treat it with respect, allowing for reasonable wear and tear.
It should be stated clearly whose responsibility it is for the upkeep and day to day tidiness of communal areas within the property and also in terms of garden or outdoor space.
While your tenant has the right to peaceful enjoyment of their home during their tenancy, access must be granted to landlords or their agents upon receipt of suitable notice, by mutual agreement for the purposes of inspection, maintenance, or to show to prospective tenants. Usually 24 hours is sufficient, though in any reasonable relationship, this should be down to negotiation.
Should the worst come to the worst, the Rent Act of 1977 provides 17 legal grounds under which a landlord can take possession of their property. The notice you will be required to give under these grounds can vary from two weeks to two months.
For their part a tenant can claim harassment under a number of grounds, for example if a landlord enters without permission or prior arrangement, neglects the property being rented, interferes with supply of utilities and so on.
Although there are two types of tenancy - assured and assured shorthold - it is required by most lenders that you opt for the shorthold tenancy, which offers you the safeguard of being able to take possession of your home after a six month period if it becomes necessary.
In an assured shorthold tenancy, both landlord and tenant will agree the duration of the minimum term and the level of rent to be paid. The fixed term can only be terminated by mutual consent.
If you intend to rent out part of the home that you are living in as a resident landlord, different rules apply.
When preparing your tenancy or right to occupy agreement you need to consider a few additional lifestyle matters:
Should You Allow Tenants To Keep Pets?
A pedigree puss is one thing, but a boa constrictor or St Bernard quite another. Agree boundaries and wherever appropriate put them in writing.
Should You Allow Tenants To Change The Decor?
If you do you may want to ensure that a scheme is agreed between the two of you before decoration begins, or that the tenants is required to return the scheme to neutral before they move on.
Should You Allow Smokers?
Consider the safety issues - a large proportion of house fires are caused by carelessly discarded cigarettes. Smoking can cause health issues for other tenants. Also smoke will damage decor and furnishings - all of which may need remedial action before a new tenant takes over the property.
How do I fund it?
For a “Buy to Let” mortgage you will need a minimum of 20%, however most specialist lenders require a 25% deposit. Most of these types of mortgage are provided on an Interest Only basis. This helps keep the mortgage payments low, allowing the rent to cover the mortgage payments easily.
What are my tax liabilities?
If you earn an income in the UL you will have to pay Income Tax. Owning a rental property and earning income of a tenant is no different. You may also be liable for Capital Gains tax once you sell the property.
For more information on this matter we recommend you contact