Are you starting your journey into the world of property letting? Or have you got some burning questions that you need answering? Then we have the perfect slice of advice for you! Stepping on to the Letting ladder can be an incredibly rewarding move, but here are 15 things that YOU need to know before you start!
- DO YOU HAVE THE CORRECT MORTGAGE?
You need to find out whether or not you have the right to let your property! Maybe you’ve bought a shiny new house and want to make some extra money from Letting out the previous property, the first thing you need to do is call your mortgage provider and find out whether they allow you to LET under your current policy. IF YOU HAVE A RESIDENTIAL POLICY THIS WILL NOT COVER YOU.
You can easily solve this problem by popping into a mortgage adviser. Many banks and building societies as well as mortgage brokers can get you a great price on a BUY TO LET MORTGAGE. Like any mortgage they do consider a number of factors before providing a lender with a policy but WITHOUT you cannot LET!
2. DECLARE YOUR SECOND INCOME
You MUST pay tax on any profit you make from renting out a property, but how much you pay depends on a couple of factors such as how much income you generate from your properties.
You MUST declare this income on a Self Assessment tax return every year. Recently, it was announced that landlords will no longer be able to deduct the cost of their mortgage interest from their rental income when they calculate a profit on which to pay tax.
You can find out more about declaring you second income and what tax you will have to pay on the GOV.UK website.
If you want help with declaring your income and dealing with your finances then head over to our partners here in Kidderminster, My Mortgage Finance. They can help and guide you through the processes and provide a free tax health check for your properties!
Make sure that you are insured! As a landlord you will have a lot of responsibilities as part of your contract with your tenant. It’s not just the tenant you need to look after but you want to look after your investment too!
Landlord insurance should cover:
- BUILDINGS INSURANCE: Including accidental damage and subsidence.
- CONTENTS INSURANCE: Which includes accidental damage.
- LOSS OF RENT: In case of fire etc. it will keep your investment protected.
- PROPERTY OWNERS LIABILITY INSURANCE: If a tenant were to have an accident and deem it your fault, this will cover your legal defence and costs.
- EMPLOYERS’ LIABILITY INSURANCE: If you employ someone to look after the property and they were to get injured then this will cover your legal costs!
If you need help getting financial information about this, our partners here in Kidderminster offer fantastic information and services to help you get the right insurance! Visit My Mortgage Finance Kidderminster
As a landlord you have a legal obligation to ensure that the safety of the property is up to the required standards. ELECTRICAL: You must ensure that the electrical elements of the property are safe when the tenants move in and that they are maintained throughout a tenancy agreement. These include plug sockets and light fixtures and any electrical appliances like a cooker or kettle if you furnish the property. The best way to ensure that you are meeting safety standards is to get all electrical elements reviewed every 12 months and that all electrical appliances are PAT tested.
FIRE: Ensure you have the correct amount of smoke alarms in the property. Government regulations require you to install at least one smoke alarm on each story of the property and a carbon monoxide alarm in any room containing solid fuel burning appliances e.g a coal fire. FAILURE TO COMPLY CAN RESULT IN A FINE IN EXCESS OF £5000.
5. GAS SAFETY
This leads us on to gas safety! This is the heaviest regulated part of any property safety. Before you let your property you need to ensure that any gas equipment is installed safely and is maintained by a GAS SAFE ENGINEER. If the property contains a Combi boiler this will need to be serviced every 12 months. The gas safety engineer will then present you with a copy of the gas certificate which ALSO has to be presented to the tenant before you can LET to them.
6. EPC- WHAT IS IT?
So, before you let your safety certified property you will need an Energy Performance Certificate which does what it says on the tin!- It tells you how energy efficient the property is. This is another government required item and MUST also be presented to the tenant before you let to them.
A letting agent can arrange one of these for you and they are not expensive but they are a must! They last 10 years and there is a fixed penalty if you fail or an agency fails to produce an EPC to your tenants.
7. IS YOUR PROPERTY HEALTHY AND READY TO LET?
Lets face it, if you wouldn’t live in the property you can’t expect other people to pay to live there! Any work that needs to be done should be done before the property goes on the market as any bad press may deter potential tenants which is bad for business! Therefore, it is a good idea to brush up on the 29 HEALTH HAZARDS set out by the government to give you a guideline of what condition your property needs to be in!
These hazards range from noise to excess cold however the most common one is most likely damp! Anything that is a threat to mental or physical well being is classed as a health hazard and it is your responsibility as a landlord to ensure the well being of your tenant! Click here to see all 29 Health Hazards!
8. TENANT DEPOSIT- HOW MUCH AND WHAT DO I DO?
A tenants deposit is usually no more than 5 weeks rental amount. So if the rental amount is £100 p/w then the deposit should be around £500! Once you’ve got the go ahead from the tenant and the deposit you need to protect that money. The deposit must be placed into a government back protection account such as TDS or DPS .
If you don’t, then you will be fined and face legal action from the tenant! It must be placed in a protection scheme 30 DAYS WITHIN TAKING ON THE TENANT. You must return a tenants deposit within 10 days after agreeing the amount after an inspection has taken place.
9. WHAT IS THE RIGHT TO RENT CHECK AND WHAT DO I NEED TO CHECK?
In England you have to do your own Right To Rent check. You need to be clear that the prospective tenant has the right to rent in this country. For this you will need ascertain certain documents that provide evidence that the prospective tenants have the right to rent. For more information on the documents required CLICK HERE FOR A EASY TO READ GUIDE ON THE RIGHT TO RENT.
The most common documents taken are usually a passport and a driving licence that can prove a tenants identity and their address. When you carry out a right to rent check you should make a copy of these documents for future reference. YOU COULD GET AN UNLIMITED FINE OR BE SENT TO PRISON IF YOU LET TO THOSE WHO DO NOT HAVE A RIGHT TO RENT OR FAIL TO CARRY ONE OUT.
10. A HOW TO RENT GUIDE
This is helpful for landlords and tenants. A landlord or agency must present a tenant with this before the start of their tenancy and is a useful guide to help you to understand your rights and responsibilities and what the process involves. It also includes information on:
- what to look out for before renting
- living in a rented home
- what happens at the end of a tenancy
- what to do if things go wrong
For a more in depth look at this visit GOV.UK or click on the link.
11. SET UP A STANDING ORDER
By now you will have found the tenants you are looking for and have all
the paperwork and certificates in place. However you now want to make sure that everything runs smoothly from here on out! Part of this is to ensure that the rent comes in every month without fail! The best way to do this is to set up a standing order with your tenants, it;s a way of setting up a regular, fixed payment from a bank account and can be scheduled for a certain day each month for a set amount.
12. ASSURED SHORTHOLD TENANCY AGREEMENT
Here at Norgrove Sales and Lettings we offer a 6 month tenancy agreement which outlines the tenant an landlord obligations during the contracted period. It will ensure that your tenant is contractually obliged to pay their rent for the entire 6 months and that their tenancy is protected. After 6 months the contact can then be rolled over onto a rolling contract which will continue to outline all parties obligations after the first 6 months. With a tenancy agreement you outline everything so there will be no problems down the line!
13. WHAT TO DO IF A TENANT WANTS TO BREAK THEIR AGREEMENT
As outlined in the contract you as a landlord presented to them in at the beginning of the tenancy, the tenants are liable for the entire 6 months once they sign the agreement. After the agreement expires they can then serve their 1 months notice. If YOU want the tenants out of the property before the contract has ended then you need a really good reason!
But after the contract has expired you can ask your tenants to leave by serving them a SECTION 21 notice which provides the tenant with 2 months notice to vacate the property.
If YOU DON’T KNOW WHICH ONE TO SERVE OR WOULD LIKE SOME ADVICE CALL US AT NORGROVES AND WE CAN HELP YOU.
14. GET AN INVENTORY CHECKLIST!
This is so IMPORTANT so make sure you get as much detail as possible! So it comes to the day where the tenant is moving in, you as a landlord need to be aware of exactly what condition the property is in (remember it should already comply with the above standards) and what if anything is already in the property. You should take pictures and make detailed notes on the conditions of things like the carpets and curtains so that when the tenant comes to check out you can ascertain what is fair wear and tear and what isn’t!
If you do not have a detailed inventory then you will not be able to claim for repairs or damages from the tenants deposit. It should take roughly around 1 hour AND should be done both times with the tenant present so they can sign any documents and are made aware on the condition or what needs to be replaced/fixed.
When the tenant has left the property and the agreement has come to an end, try to get a forwarding address. We all know the frustration of receiving post for someone else 200 hundred times a week! By getting a forwarding address you can forward any of this post and if you need to get in contact with them regarding their deposit or anything else then you know how to contact them!
SO NOW YOU KNOW! Staring your journey into the world of lettings can be a daunting but exciting time! Be sure to follow the checklist above to make sure that everything runs smoothly and you’ll be an expert landlord in no time!
OR CALL US ON 01562 822004, Or email us at: email@example.com