If you’re considering renting out a property you own, you’re probably aiming to earn income from that source. You may have a second home or you may decide to rent out part of your main home, if you have rooms to spare. Either way, you become a landlord with all the legal requirements and other responsibilities that go with it. So your first consideration should be – is this a good time to become a landlord with the uncertainty of COVID19 still driving the economy?
The pandemic has created a huge shift in where people want to live. Some cities are seeing large increases in rental demand (and therefore the cost of renting), other places - particularly London - are seeing demand from renters, and average monthly rents decreasing.
If the market in your area is strong, and you decide letting out your property is likely to get a good return, what next? This article covers everything you need to know to prepare your home for renting out for the first time.
First and most importantly, your property must be safe for tenants to occupy. This covers a number of obligations, some of them defined by law,
To meet current energy standards and comply with Health & Safety legislation, you need to fit certain alarms, prove that you have carried out a number of checks or arranged inspections, and provide tenants with any relevant certificates, including:
· * Energy performance certificate · * Gas safety certificate · * Electrical inspection certificate · * Smoke alarm certificate · * Carbon monoxide alarm certificate.
That’s in addition to any checks that your property is in a good state of repair and has no hazards like worn carpets or damaged fittings that could cause accidents.
Even if there’s a shortage of properties to rent, you may still face competition in your area. And, the more attractive your property, the higher the rent you can ask for.
Clean, tidy uncluttered rooms, reasonable furnishings, adequate appliances and fresh decoration can all add value to your property when you come to set rental levels and show prospective tenants around.
However, you need to balance the cost of bringing the property up to a certain standard against your forecast income to be confident that you are making a good investment.
Renting property is a business and that means you have to meet a number of general and landlord-specific legal requirements.
Depending on your local council’s position, you may have to have a license to rent out your property so you must let the council know of your intentions.
You will need to provide your tenants with an agreement that sets out the responsibilities of both parties and the terms of the tenancy. There are templates to help you create an agreement, but you should always ask a solicitor to check that the agreement meets legal guidelines.
You should also check that your prospective tenants have the right to rent. A government code of practice provides guidelines on people who may not be eligible. You must ask for proof of identity and right to reside in the UK.
When you have an agreed tenancy, you must provide your tenant with another government document – How to rent checklist – which sets out their rights and responsibilities.
If you have a mortgage, you’ll also have to check that it’s within the terms of your agreement to rent your property out. For more on this, read this advice guide.
Make sure you have adequate insurance cover. At a minimum, you will need:
· * Building insurance · * Contents insurance · * Legal liability insurance · * Rent guarantee insurance
You have a choice of marketing the property yourself or asking a letting agent do the work on your behalf.
If you do the work yourself, you will need to prepare a property description and take photographs for your own advertisements. You will also need to be available to answer enquiries and arrange viewings.
Asking an agent to do the work will incur fees, which will add to your costs, but will give you access to a wider market. High street agents’ fees cost 8 percent or more of the rental price for advertising, interviewing and credit checks. Online agents’ charges for a similar service attract an average set fee of around £50. Some online letting service providers even allow private landlords to advertise on Rightmove and Zoopla for a short amount of time for £1.
Related: How Online Agents Work
As a landlord, you are handing occupation of your property to strangers so it’s important to know that your tenants will be able to pay their rent and keep your property in reasonable condition.
Ask your tenant for verification of their employment status. A credit check is essential to identify any potential payment problems. County court judgements, payment arrears and poor credit ratings are all warning signs.
You should also ask for references from previous landlords or other sources to ensure that you are not inheriting a problem tenant.
When you have carried out all the necessary checks and given the new tenant the legally required documentation, you should jointly sign the tenancy agreement and provide the tenant with a detailed property inventory. If a dispute arises at the end of the tenancy, you will need the inventory as evidence to determine the amount of deposit you have to return.
You must ask your tenant for a deposit, hold the deposit in one of three recognised Tenancy Deposit Schemes and give your tenants written confirmation within 30 days.
It’s a great day when your first tenants move in, but your responsibilities - and challenges – as a landlord don’t end there.
You will need to agree to regular inspections to make sure the tenants are keeping the property in good repair. You will also have to agree to the method of collecting rent, either in person or through an arranged online or postal payment system.
If you find that tenants are not paying rent on time or damaging the property, you must understand your legal rights to get payment back on track or evict tenants if necessary through court procedures.
Becoming a landlord for the first time is not as simple as it might first seem. If you’re considering taking the leap, make sure to get independent advice first.
For more information about deciding whether renting out or selling up is the best option for you check out our blog. Head there now.
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