Are you looking to become a UK landlord? You have your work cut out for you!
Some picture landlords as being able to sit back, roll in the dough and let tenants take care of themselves. Unfortunately, this is easily one of the biggest misconceptions about property management.
You have been warned!
While the demand for properties to rent is certainly there, and definitely growing, landlords still have a lot to deal with when it comes to organisation, safety, advertising and ongoing maintenance - and that’s even before finding tenants!
Do you have the right documentation? The right licences? Landlord insurance? Are your properties 100% safe? Can you run things yourself, or do you need the help of a property manager? A good landlord needs to have all of this and more down to a tee if they want to be successful at what they do.
Of course, there will always be landlords who flout the rules and focus purely on brass tacks. Unfortunately for them, the property market is changing. Organisations like Shelter are working tirelessly to educate tenants on their rights, while the widespread use of camera phones has made it easy for tenants to document issues as soon as they appear.
So, what do you need to know about becoming a successful UK landlord? It will certainly help to have a checklist for your first property let, as well as a clear understanding of your responsibilities as a landlord going forward.
As you gain experience in managing properties and screen prospective tenants, you will soon learn the value of having a solid framework in place. While it will be a good idea to do as much research as you can, a successful landlord also knows that some of the most important lessons can only be learned through experience.
So, let’s have a look at what it takes to become a successful UK landlord!
The first point on your checklist should be to find out what the rules are for landlords in your local area. Regulations can vary considerably not just between the countries in Great Britain but also local constituencies.
For example, in most areas you would only need a landlord licence if you were operating a large HMO. However, many councils now require all HMO landlords to purchase licenses. Others have introduced ‘additional’ and ‘selective’ licences, designed to hold all landlords accountable.
The second point on your list should be securing all the necessary documentation. In order to successfully let a property, there are a few key certificates which a landlord cannot do without:
There is additional documentation when it comes to your tenants, but we’ll get to that later on.
While it will be a good idea to do as much research as you can, a successful landlord also knows that some of the most important lessons can only be learned through experience.
When a landlord lets a property, they are responsible for ensuring that it is sufficiently safe for tenants. A negligent landlord can receive substantial fines or even jail time for putting their tenants in danger.
The Housing Health and Safety Rating System (HHSRS) outlines 29 ‘property hazards’ which can be used to gauge whether tenants are in danger. It is worth familiarising yourself with these in order to make sure that your property is completely safe.
By this point, you’ve probably realised that working as a landlord requires a great deal or organisation, even before you have tenants! Luckily, if it seems like too much then you always have the option of hiring a residential property manager.
A ‘property manager’ is a mix between a landlord and an estate agent. In addition to helping to advertise your property and find tenants, they can also take care of rent collection, maintenance and everything else going forward once a tenancy begins.
However, these services do not come cheaply. Depending on where your property is located and the extent of the services you require, hiring a property manager could cost up to 15% of your monthly rental income!
So, do you need a property manager? It ultimately comes down to time and experience. The majority of landlords only own one or two rental properties - certainly not enough to make a living off of their lets. Indeed, most landlords will also have their own day jobs or businesses to run.
Because most landlords do not make a career of what they do, they will often lack the time to manage their properties, along with the experience to know what needs to be done. You may even be a first time buyer yourself!
In short, the question of whether or not you need a property manager will depend on whether or not you are happy to do everything yourself. When you are first starting out and learning the ropes, hiring a bit of help could be exactly what you need.
Now that your property is safe and certified, it’s time to think about how to find the best tenants. Let’s take a second to consider what makes a property attractive:
A lot of things can go wrong when letting a property. You may suddenly find yourself with a bill for major repair or maintenance work, or problem tenants could start falling behind on the rent.
When disaster strikes, landlord insurance can keep your most important asset, your property, safe. This may seem like an unnecessary expense, but the golden rule of insurance is to be ready for the worst!
It is also worth pointing out that most buy-to-let mortgage providers will require policyholders to take out landlord insurance. After all, lenders do not want to risk putting their repayments in danger!
A typical landlord insurance policy will cover:
Remember, if you want to find the most appropriate insurance policy for you it will be a good idea to speak to an independent insurance broker. Unlike a bank or an estate agency, an independent agent can give you an unbiased view of the market and find a deal to suit your circumstances.
When disaster strikes, landlord insurance can keep your most important asset, your property, safe.
It looks like you are finally ready to start finding tenants! However, at this point it is worth bringing up property managers once again. Why? Because finding top notch tenants is one of the main reasons landlords hire them!
Having a professional on hand at this point offers several advantages:
When the time comes to actually screen your tenants, it will be important to have a clear tenant interview checklist. The very best tenants will not only pay rent on time, but also keep your property clean, inform you of any maintenance issues and, ideally, stay for a number of years. If you do not take the time to screen your tenants now, you could seriously regret it later on!
The most important thing to check will be your candidate’s ‘right to rent’. This essentially means that your tenants can legally rent property in the UK. Failing to check this is considered a criminal offence worth up to five years in prison!
This rule applies to all renters, not just immigrants. For tenants born in the UK, a passport, birth certificate or any other proof of identity should be sufficient. Other tenants will need to provide their immigration documentation (and that of anyone over the age of 18 who will be living with them).
Once you have chosen your tenants, it’s finally time to make things official. To do this, you will need two key documents:
When it comes to creating either document, we strongly recommend hiring a professional estate agent or property manager. Not only will they be thorough, they will also be able to create the documents in an appropriate format.
Crucially, they should also have systems already in place for creating these documents, allowing them to have them finished quickly so that your tenants can move in (and you can start making money!)
Remember, your tenants will need to be given their own copies of any signed documentation. You can make this easier by keeping digital records, as this will allow you and your tenants to access the documents at any time.
Let’s make one thing clear: a tenant deposit does not become the property of a landlord once it is paid! Instead, a deposit is a nest egg that can cover the cost any necessary repair or maintenance work once a tenancy comes to an end.
All deposits must go into a government-approved deposit protection scheme:
It does not matter if you keep the entire deposit safe in your own account: you would still be breaking the law and opening yourself up to serious financial penalties.
Once the deposit is correctly stored, you must deliver details about the scheme to your new tenants.
The scheme will not only keep the deposit safe, it will also act as an adjudicator if there are any disagreements about deductions.