How do I become a landlord?

0
841
Image of landlord
Canstock image

Becoming a landlord is easier than you think.  Following these steps will ensure that you get everything covered.

How to let my property?

Get your property up to scratch using the following steps:

  1. If you have a leaky tap, damp or exposed wiring, get a contractor in to put it right.  If you wouldn’t live with it, you shouldn’t expect your prospective tenant to.
  2. Ensure your safety responsibilities are in order.
  3. Arrange for a gas safe registered engineer to complete gas work and get a gas safety certificate in place and have these carried out yearly and/or at the start of each tenancy.
  4. Ensure that the electrical installation and all appliances are safe when the tenancy commences and stay in proper working order throughout the term of the tenancy.
  5. Ensure a periodic inspection is carried out by a registered electrician every five years (if the property is a house in multiple occupation.
  6. All appliances should have the CE marking.
  7. Fixtures and fittings you have supplied should be fire safe.
  8. Ensure all your windows and doors open freely so that tenants have access to an escape route at all times.
  9. Obtain an Energy Performance Certificate.  New government guidelines state that properties with a rating of F and G must be improved to an E or above before they can be placed on the market to a new tenant.  Improvements can cost on average £1,200.  You can be fined if you don’t get an EPC when you need one.
  10. PAT test appliances.
  11. Provide smoke alarm(s).
  12. Provide fire alarm(s).
  13. Provide carbon monoxide detector(s).
  14. You must adhere to The Smoke and Carbon Monoxide Alarm (England) Regulations 2015.
  15. Provide fire extinguisher(s) (if your property is a house with multiple occupation).
  16. Declare your income to the tax man.
  17. Notify your lender that you intend to let the property.
  18. Arrange landlords insurance (optional).
  19. Arrange buildings insurance and give a copy of the policy to your tenant.
  20. If the property is leasehold, check your lease (you may need to obtain permission from the freeholder).
  21. Check your local council to see whether you have a local licensing scheme.
  22. If the house is in multiple occupation you will need an MHO licence.
  23. Take photographs of each room including walls/floors/appliances etc in close detail.  You may need these if you end up in a dispute at the end of the tenancy.

How do I work out how much rent I should charge?

  • Check Zoopla to see how much your property is worth by signing up for a free estimate.
  • If you have carried out any home improvements, make sure you update this information to reflect the current condition of your home on the website.  You may find the estimate of your house value goes up.
  • Now go to Rightmove or Prime Location.  Search for similar properties on the same road that may be up for rent.  You should then be able to get a reasonable idea how much you could charge a tenant.

Get an estate agent to value and market your property:

  • Contact at least three estate agents and arrange for them to view your property.  Each will give you an estimate of its rental value and also a figure for their fees.

You have three options:

1: Engage the services of an estate agent to find you a tenant for a finders fee (usually one months rent plus VAT) and you manage the property yourself.

2: Engage the services of an estate agent to find you a tenant and manage your property for a monthly fee for the duration of the tenancy.

3: Engage the services of an online estate agent to find your a tenant and manage the property yourself.

Estate Agent:

If going down this route, you need to contact three estate agents to value the rental potential of your property.  Do you want the estate agent to manage the property for you for a fee or do you want them to just find you a tenant and you will pay them a finders fee?  Do you want a yearly tenancy or a six month tenancy.  If you choose a six month tenancy and the tenants keep leaving after six months, it can become quite costly having to pay the estate agent every six months.

  • Ask to see their standard tenancy agreement.  You have the right to make additions of your own within reason.
  • Confirm that someone from the estate agent will be with the potential tenants during the viewing.
  • Once you have decided which estate agents to market your property, you need to haggle the cost of their services.  If they want 3% you can offer 1.5% and you don’t have to stick with just one estate agent to advertise your property, you can have as many as you want.
  • If they are any good they should advertise your property on rightmove.
  • Make sure your property looks neat and tidy every time you get a viewer.

Online Lettings Estate agent:

Source one on google.

Choose one, pay a fee for the type of service you want, upload your property details by creating an advert and adding photos, floor plans and an EPC report. The company then advertises your property on the Rightmove, PrimeLocation etc .  They will handle the tenant enquiries and pass them to you to arrange viewings.  Once you find the right tenant, they reference them and can help you with the paperwork.

How to find the right tenant?

When you become a landlord you are effectively running a business.   When you meet a prospective tenant don’t let your emotions prevent you from making a very bad business decision.   A prospective tenant can have a good verbal background face to face but when you probe deeper, you may find a very unreliable future tenant on your hands.

  • Is the tenant presentable and speaks well?
  • If your property neat and tidy?
  • Advise the tenant that you expect the property to be returned in the same condition – see how they react to that.
  • Ask to see bank statements for the past three months, check income and expenses to see if they can afford the rent.
  • Ask for their last three months pay slips.
  • Ask for photo ID to ensure they are who they say they are.
  • Get a reference from their current employer and previous employer.
  • Get a reference from their previous and current landlords.
  • Ask for a guarantor – a parent will be fine.
  • Consider rental insurance cover – it should pay out if your tenants don’t.
  • Never be lured by “I can pay you two months up front”, if the facts don’t stack up, don’t do it.

When you have made your decision both parties will need to sign a tenancy agreement.

Tenancy Agreement

Should I have a yearly tenancy or six month tenancy?

If you choose a six months tenancy, you could be paying an estate agent a finders fee twice a year if the tenants keep moving on after the tenancy ends.  You could however have a break clause in a yearly tenancy that at six months either party can end the tenancy, but again unless there is an urgency to end the tenancy, who wants to keep looking for a tenant every six months?

You can add clauses to your tenancy agreement if you so wish but these must be agreed by the estate agent first and that may take some persuading especially if they are the ones drafting the tenancy agreement.

Agreement signed, now its time to protect the deposit and send the tenant certain information:

How do I protect a Deposit from a tenant?

When you rent your property to a tenant, you will need to protect the deposit on an assured shorthold tenancy that started after 6 April 2007.  Currently you must do this within 14 days of taking the deposit.

You can protect the deposit by way of a custodial scheme or an insurance based scheme.

The custodial scheme holds the funds for you, the insurance based scheme allows you to hold onto the deposit but register it for a fee with a company.

The schemes in England and Wales are:

Deposit Protection Service

MyDeposits

Tenancy Deposit Scheme

There are separate tenancy deposit protection schemes in Scotland and Northern Ireland.

If you receive a valuable item as a deposit instead of money (e.g. a car or watch), you don’t have to put it in a TDP Scheme.

For in-depth guidance here is the government website that gives you all the information you need to do this.

Holding deposits

  • You don’t have to protect a holding deposit before an agreement is signed.
  • Once the tenant enters into a tenancy agreement, you must then protect it.

Deposits made by a third party

If someone else has paid the deposit (rent deposit scheme or parents), you must use a TDP scheme.

What happens if I don’t protect my tenants deposit?

Your tenants can apply to a county court if you don’t use a tenancy deposit protection (TDP) scheme when you have to. They can do this at any time during the tenancy.

If the court finds you haven’t protected the deposit, it can order you to either:

  • repay it to your tenants.
  • pay it into a custodial TDP scheme’s bank account within 14 days.
  • The court may also order you to repay your tenants up to 3 times their original deposit within 14 days of making the order.

Click here to find out what information you MUST give to your tenant in writing as soon as they have signed the tenancy agreement.

What happens if the tenant wants to leave early?

If you have a good tenancy agreement, you should have a clause that covers this situation.  In any event, the tenant is responsible for paying the rent for the term of the tenancy unless you have a break clause in the agreement.  If no break clause is in place, they will need to pay their way out of the agreement – the cost of that is up to you.

What happens at the end of the tenancy?

  • Check the property carefully, make notes of any damages etc.
  • Liaise with the tenant, talk with them about any issues.
  • Once both parties are in agreement, you need to return the deposit to your tenant within 10 days.
  • If you are in a dispute with your tenant, you both need to agree on what amount is to be returned.
  • The deposit is protected in the TDP scheme until the issue is settled.
  • In a normal tenancy with no issues, the deposit must be returned within 10 days.

What can be deducted from deposit at end of tenancy?

Deductions can only be taken when there is physical damage to property (not wear and tear).

What is wear and tear?

Light marks on the carpet would be classed as wear and tear, however nail varnish, iron burns or damage caused through negligence would not.  If the carpet was cheap and flimsy, you cannot expect it to last the distance if you have let the property to a large family.  Consideration must be taken on whether the item was originally of a good quality when making a judgement.

Cleaning/repair at end of tenancy:

In considering whether cleaning/repair is necessary or complete replacement at the end of the tenancy, check your photographs to decide what condition everything was in.

How much can I deduct from a deposit?

The amount cannot be decided by anyone other than you, the landlord.  Check out the guide to deposits disputes and damages from the TDS.

Here is a great website to give you further advice and guidance on this.

Disputes

Use your tenancy deposit protection (TDP) scheme’s dispute resolution service if both parties cannot agree how much deposit is to be returned.

Contact your TDP scheme regarding their dispute resolution service.  The schemes are:

Deposit Protection Service

MyDeposits

Tenancy Deposit Scheme

Help and advice

You can get more help and advice from:

Landlord Insurance:

There is currently no legal requirement (as of Feb 2016) that you must have Landlords insurance.

A Landlords’ insurance policy would cover you for non payment of rent, loss of earnings, damages to your property and re-housing costs.  You could be covered for the building and/or contents that belong to the Landlord and if the tenant suffers an injury in the property, it covers liability for that too.

Some people opt to have just normal buildings insurance on the property and have the tenant take out their own contents insurance but to be sure, you should discuss exactly what you need with your insurer to make sure you get the cover you need.

How to evict a Tenant (Landlord Help)

Here is the government’s website that gives you all the information you need and what steps to take.

If you want to do this yourself, you may want to try Landlord Action.

Landlord Action’s three-step service: step one (serving notice), step two (instigating court proceedings) and step three (eviction).

Lastly and most importantly don’t forget you need to pay tax on your earnings.  Click here for details.