New Landlord? Read this first!

Welcome to the world of being a Landlord! Despite the bad press you may see, the majority of us are actually nice people, just trying to live our lives and make an honest living.

Whether you’ve chosen to enter this world by buying a rental property, or have stumbled across this article because you’ve found yourself with an unexpected property (think inheritance or moving in with a partner) don’t worry – we’ve got you!

So you have your property, house, flat, bungalow – now what? Here’s the questions I’d first ask:

-        Does the property have a mortgage on it?

-        What is the current condition of the property?

-        Are you going to have someone manage your property or manage it yourself?

-        Are there any local council/ government restrictions?

-        What’s your 5-year plan for the property?

Does the property have a mortgage on it?

It’s important to know this so you can work out your figures! You need to make sure that the rental income each month will cover all of your expenses:

-        The monthly mortgage repayment

-        The management fees (if you are opting for a manager)

-        Insurance

-        Council tax payments (when the property is empty)

-        Utility costs (when the property is empty)

If your property has a mortgage on it, you need to make sure it is the right product. Either you need a buy-to-let mortgage, or if your mortgage is a residential one, you will need to seek ‘permission to let’ from your provider BEFORE you let the property. It varies from provider to provider but generally you can find instructions on their website, usually there is a small fee to pay. It’s usually a painless exercise.

Please DO NOT rent out your property without the correct insurance product – it’s vital that you are protects in case the worse happens, don’t skimp!

What is the current condition of the property?

Many people fall into the trap of spending a lot of money on the property to renovate prior to letting, and thus running up a ton of debt, meaning that they won’t turn a profit for years!

Of course, your property has to be in a reasonable condition – it needs to be safe and warm, but it doesn’t need to follow the latest trends, have the most expensive carpets or decked out in the latest tech. It’s a house, which will become someone’s home. I’ve always thought that its nice to present your tenant with a clean canvas on which they can make their own marks – so long as they return the property in the original condition when they leave, I really don’t mind if they paint a wall or put up some shelves.

Legally, here are the things you MUST do to prep the property:

-        Ensure there is an up-to-date Electrical Safety Certificate on the property, this has to be completed by a registered electrician and needs to be repeated every 5 years.

-        Ensure there is an up-to-date Gas Safety Certificate on the property, this has to be completed by a Gas-safe engineer and needs to be repeated yearly.

You also need to make sure the property (including any outside space) is safe and well kept e.g. no black mould, no pot-holes in the garden etc.

Are you going to have someone manage your property or manage it yourself?

There are pros and cons to both approaches, if you manage the property yourself then you save money on agency fees, but you do need to make sure you are available to address any problems when they crop up – this could be a simply leaky tap or something more serious like a broken boiler on Christmas Day. If you are self-managing then it’ll be your responsibility to fix these issues asap, so it can be a drain on your time.

Another benefit of managing the property yourself is that you’ll be able to keep closer tabs on what’s going on with it.

If you choose to go with an agent, then they offer different levels of service ranging from tenant find only to fully managed. They can take the hassle out of the day-to-day management of the property, can advise you on what you need to do to meet the legal requirements, and have access to reliable trades-people. For their services they will charge anything between 8-14 % of the monthly income. There will also be initial set-up fees for example referencing checks.

Are there any local council/ government restrictions or covenants on the land?

So, if you’ve bought a property to let out, hopefully you’ve already considered this and done your own research!

Usually, you can rent out a family home with no difficulty so long as you’ve got the right mortgage and insurance products in place. However, if you’re hoping to rent your property out as an HMO (House of Multiple Occupancy) or even an AirBnB, then there may be local council restriction which you’ll need to research. Most councils require the property to undergo an inspection and assessment prior to being granted an HMO licence. Check with your local council for more information.

Restrictions on Airbnb properties are less common but are starting to emerge in some areas, particularly in favourite holiday spots, so best to check with your local council before making any firm plans.

Something people often forget to check is covenants – if you’ve bought the property then these, if there are any, should have already been raised with you. If you’ve inherited a property then you may wish to check with your solicitor.

What’s your 5-year plan for the property?

Ok so this isn’t an essential thing to know right away, but it’s good to keep perspective and you may want to have a think about the following:

-        Is this property in your portfolio there to bring you a monthly passive income, or are you more interested in the equity growing over time? Or is it both? Could this change over time?

-        Do you have any significant events (like retirement) on the horizon? How does this relate to your property?

-        What will happen to the property in the future? Will you sell it – if so, have you thought about Capital Gains Tax. If you plan to pass on the property to someone else have you considered the implications of Inheritance Tax?

Tax may seem scary, but it’s a simple fact of life. Get advice from a good accountant, and have read of this article to get you started.