First Time Landlords Guide

published on 25/11/2021  

Are you considering becoming a landlord?

Investing in property can be a fantastic way to make the most of the money you have to invest. Renting out a property can provide an ongoing income and provide you with a flexible lifestyle which can be very rewarding. Just like managing your own business, you get to make the decisions on costs, contracts, terms and ultimately have control over who lives in the property.

Why is now a great time to get into property?

The latest stats* from 2021 show that the number of prospective tenants looking for housing is continuing to increase. Demand is high, and the number of properties to fulfill the need is low. Low mortgage rates and rising rents offer a boost to landlords, in fact, the pandemic has had a significant effect on what renters want from a house, with time spent away from the office and the prospect of more remote working landlords are seeing a trend of home movers looking for bigger properties with gardens or access to outside space.

So, with the number of available rental properties decreasing and tenants competing for bigger homes, it may be that rent prices rise more substantially in the next 12 months.

If you’re considering becoming a landlord, it’s crucial to research first, especially if you’re new to the game. To help you, here at Kings Lettings, we’ve put together a guide advising on the key things to look out for before investing.

As a multi-award-winning agency with over 50 years experience you can depend on us to fully understand the extent of your legal responsibilities and help you explore the relevant legislation you need to get your head around.

How to become a landlord


1/ Ensure you’re legally allowed to become a landlord

If you own your property outright you can skip this section.

If your property has a mortgage you need to check with your mortgage lender. You may need to get a specific buy-to-let mortgage.

You will also need to check whether your property is a leasehold or a freehold.

A leasehold will mean you need to get permission from the freeholder to sub-let the property.

2/ Choose your buy-to-let property

Here is what you need to consider when choosing your property:

  • Location (Good transport links, schools, GPs, Hospitals)
  • The age of the property
  • The state of repair (Think about the costs involved for any renovations and repairs)
  • Accessibility (Should you need to make reasonable adjustments for tenants with a disability)

3/ Apply for buy-to-let mortgage

You will need to apply for a buy-to-let mortgage. To be eligible you need to:

  • Already be homeowner
  • Have a good credit rating
  • Earn 25,000 or more per year
  • Be under 70 years of age
Top tip: Your rental income from the property should be around 30% higher than your mortgage repayments.

4/ Meet building and fire safety regulations 

Once you have your mortgage accepted it’s crucial you meet all landlord regulations. This can vary depending on the location of your property, however, these are critical factors you must have:

  • A valid gas safety record and annual check carried out by a certified Gas Safe-registered engineer.
  • Ensure all electricals and electrical appliances are safe to use and comply with Government Legislation.
  • Fitted smoke alarms on each floor.
  • Accessible escape routes.
  • Install fire extinguishers if you’re renting a house in Multiple Occupation (HMO).
  • Comply to any Government standards regarding furnishings.

5/ Get landlord insurance

While you aren’t legally obliged to take out landlord insurance, most buy-to-let mortgage lenders will need you to have it as part of an agreement.

Landlord insurance will protect your investment in the case of a fire, floor or subsidence.

You can also add on some handy extras which will cover things such as broken pipes or boilers.

6/ Decide how to manage your property

You have two options:

  1. Manage everything yourself.
  1. Use a letting agent.
A letting agent can take the stress away by handling tenants, collecting rent and inspecting the property.

7/ Attract some tenants

In order to attract tenants you must advertise your property as if you were selling it.

If you’re letting in England you will need to then check that your prospect tenants have a right to rent. This will check they are who they say they are, and give you reassurance that they can pay their rent on time.

Costs vs potential returns


Buy-to-let opens up two potential income streams:

  1. Rent
  2. Capital growth of property value

However, the property market fluctuates, your outgoings can exceed rental yield and your property could remain vacant for a period of time, so it’s important you fully understand the costs vs potential returns.

What is rental yield?

Rental yield is how much you earn in proportion to the property value.

If you earn £750 a month = £9,000 a year.

If the house is worth £180,000 then the rental yield is £9,000 divided by £180,000 then multiplied by 100.

Meaning the rental yield is 5%

Expenses

Fees associated with property purchase:

  • Valuations
  • Stamp duty
  • Property surveys
  • Legal costs
  • Mortgage arrangement fees
  • Income tax
  • National insurance

Potential day to day costs

Here are some of the main costs associated with landlords:

  • Letting agent’s fees
  • Landlords insurance
  • Redecorating and repairs
  • Annual safety checks
  • Rent insurance
  • General maintenance
  • Mortgage interest

How much tax do landlords pay?

When you rent out a property you may need to pay tax.

If you run a property business you will need to pay Class 2 National Insurance if your profits are £6,515 a year or more.

You will be counted as running a business if:

  • Being a landlord is your main job
  • You rent more than one property
  • You’re buying new properties to rent out
If you personally own the property you’re renting out the first £1,000 from your rental is tax-free as it is your property allowance.

You must report on a Self Assessment tax return if you earn:

  • £2,500 to £9,999 after expenses
  • £10,000 or more before expenses
Please note: You need to register your tax return by 5th October following the tax year you had rental income.

Landlord legal responsibilities

Meeting safety standards

  • A smoke alarm on each floor of building
  • Carbon monoxide detectors in rooms with coal fire or stove
  • Gas safety certificate for every appliance in property
  • All furniture meeting safety standards with appropriate labels
  • Electrical items safe for use (Portable Appliance Testing (PAT) can be sure you are compliant)
  • Correct working water supply.

Energy Performance Certificate

You must purchase an EPC for your property before you let it.

You must have a minimum rating of an E. Any property that breaches this requirement will be hit with a penalty of up to £4,000.

Right to rent

It is the landlords responsibility to restrict illegal immigrants accessing the private sector so therefore must have solid evidence their tenants are legally allowed to reside in the UK.

Failure to do so can result in an unlimited fine and up to 5 years in prison.

For your tenant

Your tenant must be supplied with your full name and address, or details of letting agent along with a copy of the Government’s How to Rent guide.
  

Tenants deposits

You must protect your tenants deposit with a UK Government approved deposit protection scheme.  Deposits must be returned at the end of tenancy, unless there is a dispute regarding damage or unpaid rent.

Repairs and access to property

Landlords are responsible for repairs to the internal and exterior of the property, from leaking roofs to faulty boilers.

When you choose to manage your property through a letting agent, they can take care of all these maintenance issues on your behalf.

It is inevitable, as a landlord, you will need access to your property from time to time to carry out repairs and inspections, however this should not interfere with your tenant. You need to provide plenty of notice and arrange a suitable time.

Letting to tenants with pets


When considering a tenant's request to let a pet on your property it’s crucial you think about your protection options as well as doing some background work.

First, you need to check the deeds of your property. If your property is on a leasehold basis you may have restrictions on accepting tenants with pets.

The positives

  • Demand is high
  • Tenants may be willing to pay a higher rate to secure a property that allows pets
  • Could act a deterrent to vandals, burglars and rodents
  • Careful long-term tenants with limited options 

Protection

Tenancy agreement updates - Include a pet clause in your tenancy agreement to ensure any damage is paid and that the property is left clean.

Pet policy - Clearly set out your expectations to avoid any problems.

References - Ask for pet references as well as tenant ones. You could even request meeting the pet or assessing their records of vaccinations and flea protection.

Preparing for tenants

Here is a checklist to ensure you ready for your tenants:

  • The property is clean and presentable
  • Prior resident mail has been redirected
  • Utility bills have been moved into the name of new tenant
  • Council tax has been arranged to be paid by new tenant
  • All appliances and plug sockets are working properly
  • Instructions have been left for all  appliances
  • All relevant equipment and appliances are labelled correctly
  • Each tenant has a set of keys in good working order
Ensure you provide your tenants with:

  • An inventory of the property
  • Smoke alarm checkline
  • Standing order
  • How to rent guide
  • Energy Performance Certificate
  • A Schedule 2 Ground 2 Mortgage Notice
  • An Assured Shorthold Tenancy Agreement
One the day your tenant moves in, be sure to:

  • Take final metre readings and leave them with tenants
  • Conduct and sign inventory
  • Demonstrate relevant equipment such as boilers, alarms and locks
  • Explain safety measures and escape routes
  • Provide emergency contact details
  • Allow tenants to raise any questions or concerns
If you’re looking for further advice related to renting or letting your property then please don’t hesitate to get in touch. Whether you’re a first time landlord, taking on a new property, or simply looking to encourage tenant interest, we’re always happy to share our expertise here at Kings Lettings.

KINGS LETTINGS, 103 HIGH STREET, MAIDENHEAD, BERKSHIRE, SL6 1JX
T: +44 (0)16 2863 2188 | E: MAIDENHEAD@KINGS-LETTINGS.CO.UK Tags: Landlords, Letting Agents, Property Management, Renting Out Property, Renting My Home,