Becoming a buy-to-let landlord
Find out what your responsibilities are as a buy-to-let landlord
Landlords spend their evenings rolling around in piles of cash while tenants cluster around a single candle for warmth, light and entertainment. Everybody knows that, right?
Of course the true picture is rather more complicated and although a healthy income can be earned from renting out a property there is more to being a landlord than just moving tenants in and collecting the rent.
Perhaps you have just bought a property and are planning to rent it out, start your property empire and amass a fortune. Or maybe you’ve fallen into the landlording life by accident after a job move or change in circumstances. Either way there is a lot you need to know.
Whatever the circumstances, you need to ensure your investment is protected and that you comply with all the relevant regulations. If you plan to rent out your property yourself, without the input of a property manager, it is especially important to know the intricacies of being a landlord. Even if you do involve a professional property manager, understanding what is involved will help you to plan for the costs involved and ensure that you understand your responsibilities.
Making your property safe
Before taking the rent and treating yourself to gold taps and a diamond-encrusted back scratcher you need to make your building safe for your tenants. And there are a few extra regulations you must follow when renting a home to someone else rather than living in it yourself.
You must obtain a Gas Safety Certificate before renting out the property and issue a copy to each existing tenant within 28 days of the check being completed. What’s more you need to issue a copy to any new tenants before they move in. You are also required to have a smoke alarm installed on each floor. A carbon monoxide alarm is a must in any room where there is a solid fuel appliance such as a fire or wood-burning stove even if the appliance is not in use.
Protecting yourself and your investment
Having the right insurance in place is vital to ensure that you aren’t left out of pocket. A recent survey suggested that UK landlords lose a combined £5 billion every year thanks to damage and unpaid rent.
Broken appliances, spoiled carpets and cigarette burns are major causes of damage, and although you can claim tax breaks for wear and tear on your buy-to-let properties, this is not likely to cover major issues.
Specialist landlord insurance will ensure that you are covered for this damage, while many good policies will cover you for loss of rent as well. Many landlord insurers cover both buildings and contents insurance in a single policy, as you must have both in place.
Comparison sites Moneysupermarket.com and Comparethemarket.com are good places to look for landlord insurance.
Deciding to rent out your former home could be a good way to transition into being a landlord. Just be sure to check with your mortgage company whether you can rent it out under the terms of your current mortgage deal, or whether you will need a new deal that allows you to let your property out. Some lenders will increase interest rates while you rent the property, while others will not allow it at all. If you do not inform the company you will be in breach of your mortgage conditions and your mortgage could be invalid.
Protecting your tenants’ deposits
Most landlords choose to rent out their properties on what is called an assured shorthold tenancy and unless you are renting your property out for a very short time it is likely that this will be the case with your property. These contracts must be for at least six months and guarantee that you will get your property back at the end of the agreement.
This is where the contentious issue of a tenant’s security deposit comes in. Now that you are on the other side of rental fence you should know there are certain rules and regulations. If you use a shorthold contract then you must ensure that any deposit paid to you by the tenant is dealt with correctly. You are not allowed to hold onto the deposit yourself unless it is protected.
Instead you must hand it over to a government-backed TDS (Tenancy Deposit Scheme). There are three of these in England and Wales, with separate schemes in Northern Ireland and Scotland.
There is more information and links to the scheme on the government website. These schemes ensure that deposits are held safely and all schemes offer a free option, called a custodial option, and an insured option where you can keep the deposit, but must pay a fee to protect it.
Where to get further information
If you need more support, the NLA (National Landlords Association) runs online courses and has information for members. We wish you the best of luck in your new career as a landlord.
Before making financial decisions always do research, or talk to a financial adviser. Views are those of our mentors and customers and do not constitute financial advice.