Becoming a landlord can be an extremely financially rewarding endeavour which is why it comes as no surprise that over the last few years, there has been a surge in the number of landlords in the UK, especially those who are investing in buy-to-let properties.
Today the UK has nearly 2.6 million landlords – a 2.4% increase over the last three years. With the largest concentration of them based in London (463,200). London has also seen the largest increase in the number of landlords since 2016/17 – up by 8.4%. This just shows how hot the London rental market is.
With London open for business again, after two years of pandemic lockdowns and recovery, renters have flooded back to the capital causing a rental market boom. Renters are looking to live in all parts of London – Northwest London being a popular choice due to its proximity to the city centre and excellent transport links. Rents are growing higher, creating better market conditions to become a first-time landlord now, than ever.
CAN ANYONE BECOME A LANDLORD?
Firstly, a landlord of course must have a property to let out. If you do not own a property, you can’t be a landlord. If you already own a property on a mortgage you should speak to your lender before you rent it out. And if you don’t own a property, of course, you need to get one.
Secondly, It’s equally important to understand the responsibilities of a landlord and the costs involved. The former include:
- Mortgage payments (unless the property is 100% yours and you don’t have a mortgage.)
- Stamp Duty (applicable when purchasing the property)
- Set-up costs (Property fixes, required certificates)
- Property Maintenance Costs
- Letting Agency Fees
- Rental Income Tax
- Rent Gaps (worth considering when the property will be vacant, or tenants might miss a payment.)
TIPS FOR FIRST-TIME LANDLORDS LOOKING TO LET OUT A PROPERTY
Get a landlord license
This isn’t always a requirement, but it pays to check with your local authority before going ahead. The licensing exists to ensure rental properties are well-maintained and kept in good condition for their tenants. If you plan to let out an HMO (House of Multiple Occupancy) properties, you will need to apply for an HMO license – it’s a mandatory legal requirement for houses with shared facilities that are occupied by 5 or more people forming two or more households since 2006. (Read more on HMO licensing on the government website.)
There are different legal implications to consider depending on whether you own a leasehold or freehold. Also, different regional locations could influence the way in which you rent. Please make sure you’re following all the laws in your local area.
Get landlord Insurance
It’s not a legal requirement, but most of the buy-to-let mortgage lenders will have it as part of the agreement.
Before renting out your property you must inform your current buildings insurer, or you may risk invalidating your current policy. A conventional home insurance policy is unlikely to protect you if you will rent out your property. You need to find a new insurer that would include landlord liability insurance, damage to your property, legal expenses, loss of rent and more.
Find a Deposit Protection Scheme
By law, you must place your tenant’s deposit in a government-authorised Tenancy Deposit Scheme within 30 days of receipt. There are three to choose from – Tenancy Deposit Scheme (TDS), Deposit Protection Service (DPS) and mydeposits. At Regal Estates, we use mydeposits.
Make sure your property is up to date with property safety regulations
Keep your property and tenants safe by installing fire alarms on all floors. This is a legal requirement, as are carbon monoxide detectors in every room where solid fuels are burnt. Ensure they are all tested before the tenant moves. Yearly Gas Safety Certificate (CP12) checks are required by law. Since the 1st of July 2022, all new and existing tenancy agreements must include Electrical Installation Condition Report (EICR). (For more information on EICR click here.)
Pro tip: you should carry out regular inspections to ensure no unwarranted damage has been caused. Although this must only be done with the tenant’s permission. Give them 24-48 hours’ written notice before you arrive.
Get an Energy Performance Certificate (EPC)
All tenants must receive an Energy Performance Certificate before they move in. This tells them about the energy efficiency of the property. It must be at least EPC band E before being let, and if not, you’ll need to make the relevant changes to improve the rating, as large fines can be handed out if standards aren’t met.
EPCs must be carried out by an accredited domestic energy assessor which you can find in the local area government’s official EPC register. EPCs report pricing varies from £35 to £120, but if your property is managed by a letting agency, they should be able to provide the EPC certificate for you.
Managing your property
You can, of course, manage your property yourself, but please note that managing everything yourself might be demanding. This means that you are responsible for finding tenants, chasing rent, and any potential property or home appliance fixes. It also might come in a bit challenging because to fix something you can’t just pop in whenever is convenient for you. You need to schedule the visits with your tenants at least 24 hours before any visit.
Alternatively, you can hire lettings agents like ourselves, to ensure that your property and the tenants are cared for up to the highest standard with minimal personal input. This is an important one as it can make all the difference to your experience as a landlord.
Always meet the agents in person and ensure they are ARLA Propertymark protected, as it means they work to a regulated industry standard. Also, check that they offer client money protection, so you know you’re in safe hands.
At Regal Estates, we are members of ARLA Propertymark, Client Money Protection and Safe Agent, meaning we work to the highest standards in the industry.
Pick the right tenants
Consider the type of tenants you’d like in your property. This will affect how much you charge. If you’re renting out an unfurnished property you might lower the rental price. For example, students will likely need furniture, while families probably will not.
Decide whether you will let tenants who own pets live in your building. As pets potentially can have an impact on the wear and tear of the property. Allowing pet owners can encourage people to settle and stay for longer.
Tenant references and notice
A key part of vetting tenants involves detailed reference checks to ensure they do not fall into rent arrears. There are usually three kinds of references: credit checks, employment verification and previous landlord checks. Many first-time landlords choose to use a professional letting agent to ensure these checks are performed to the required standard. If you choose to let your property with us, we will carry these checks out for you as part of our letting service.
Giving notice is something you will likely have to do at some point if you are a landlord. Make sure the terms are clearly stated in the tenancy agreement and that you follow the correct procedure. Alternatively, a letting agent can handle this process on your behalf as part of their property management service.
Calculate your rental yields
Obviously one of the main goals of renting out a property is earning money. A great way to determine your investment potential is to calculate its rental yield.
We strongly advise calculating your rental yield before you buy your property. You would of course need to do some research on current rent trends in the area and the purchase price of your property.
Let’s assume your tenants pay £1,000 pounds per month, giving you a total of £12,000 per year. The property cost you £100,000. You can calculate your rental yield using this formula:
‘Rent per Year: Property Price* 100 = % rental yield’
£12,000: £100,000 * 100 = 12%
So in this case your rental yield is 12%.
The average rental yield in London in 2022 varies from 4% to 5% depending on the district. So, achieving anything above 5% could be considered a high-yield investment.
Please note that the numbers used do not represent the current London rental and housing market prices, we are simply just using easy-to-understand numbers for informational purposes.
Prepare your property for viewings
This part of renting process is often overlooked. If you want to take your property off the market quickly the presentation goes a long. It can also help attract the right tenants. The general rule is that less is more, and you should remove anything personal or valuable – tenants want to feel the space is their own and not someone else’s. Also, ensure upholstered furnishings comply with current Furniture and Furnishings Regulations.
TO BECOME A GOOD FIRST-TIME LANDLORD YOU MUST ASK QUESTIONS
As you can see, becoming a landlord is not as simple as owning and letting out a property. There are a lot of things to consider and a lot of questions to answer. If you still have any other questions, you can always refer to our landlord FAQs. If you’re interested in how to maximise your rental yields, read our HMO case studies.
Letting Property in North West London
Whether you’re a seasoned landlord or a first-time landlord, Regal Estates can help you successfully let your property in North West London. We have over 25 years of experience helping landlords across Willesden Green, Neasden, Dollis Hill and the surrounding areas. Contact our professional lettings team today at 020 8459 2530 or email email@example.com to find out more about our lettings and property management services.
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