With first time buyers finding it more difficult than ever to get onto the property ladder, the rental market is starting to see a rise. More people than ever are considering investing their money in property, with the expectation of receiving a return monthly. Offering more benefits than keeping the money in a savings account.
If you are considering becoming a landlord, first of all its important to consider the responsibility that comes with it – learning by trial and error is only going to become a frustration for you, its better to do your research first and consider how getting on the investment ladder best suits you.
Here are a few top tips to start your studying before taking the plunge in becoming a landlord:
- Live near your rental property – If you plan on managing the property yourself it is recommended you live close by, before you go about buying your first property choose an area which will provide you the return and keep your properties in a similar location. If you do not live near a prime rental location, you can still invest in one and hire a management company to take care of the day to day details for you.
- Self-assessments with HMRC – You will need to set yourself up as a business owner to avoid getting in trouble with the taxman, this process is simple if experienced but will require time. This is a service offered within the Sidekick support.
- Understand this is not a get rich quick scheme – A single property will not return a wad of cash monthly. Before you rent the property, you will need to get the property ‘rental ready’ with cosmetic updates. You will also pay landlords insurance, accounting costs, acquire a buy-to-let mortgage if you will not be paying in cash and pay property taxes. If you decide to hire a management company, this will also be an additional cost for you. Ideally you want to be purchasing a property in a location where you can charge enough rent to still offer you a profit once all expenses have been accounted for.
- Costs of being a landlord could include:
- Repairs if something happens to go wrong
- Mortgage repayments if you don’t own your property outright you still need to pay your mortgage
- The property needs to be up to standards including fire safety precautions, electrical upgrades and more such as refurbishment
- If you decide to rent out as furnished you will need to include a fully furnished property, which will include replacements should anything become damaged or unsafe
- Agency fees could be between 10 – 15% of the rent if you decide to have your daily responsibilities handled elsewhere
- It’s a legal requirement for your property to have an EPC (Energy Performance Certificate. However these are renewal every 10 years therefore will not be a regular expense
- As the landlord, you’ll be responsible for sorting out insurance to protect your property against accidental damage, such as fire and flooding. Your tenant will need to arrange their own contents insurance if they want to protect their possessions
- Finding the right tenant for your property is going to be extremely important, to protect yourself and your property, therefore you must specify the ideal tenant, whilst staying on the right side of the law. You can choose to advertise yourself which will restrict where you can advertise, or choose to advertise with a letting agent where your background checks on tenants and advertising costs will be covered.
Background checks will include looking at the applicants:
- Current history
- Current debts
- Criminal records
- Public records
- References (Work and Living history)
To avoid any discrimination charges, it is important to be aware of The Equality Act 2010 which protects applicants against unlawful discrimination, including refusing rental based on disability, race, religion, gender reassignment, sex and sexuality. This may also include having to make adjustments for disabilities, for example ramps in the property or an audio version of the tenancy agreement.
- Learn more about ‘allowable expenses’ as a landlord contact the Sidekick team for advice on what you are able to deduct and how to go about achieving this.
This could include:
- Letting agent fees
- Legal fees
- Accountant fees
- Buildings and contents insurance
- Maintenance and repair costs
- Utility bills
- Cleaning services
- Direct costs such as stationery, phone calls, and advertising
In summary, becoming a landlord can provide a profitable future and long-term security. It enables you to make decisions as a business owner, whilst managing your own investment. It is not a responsibility to be taken lightly however once you take the leap the rewards are excellent.
For more advice contact the Sidekick team.