Introduction to letting
People like property. It’s solid, lasting and often offers higher growth potential than traditional bank accounts or pension plans. Becoming a landlord puts you firmly in control of your investment. There are, naturally, responsibilities and some risks. So, if you’re thinking of a buy-to-let investment, whether as an extra source of income, capital growth for a retirement plan or something you’ve always wanted to do, this useful guide on how to become a landlord will take you through the process.
Last updated: 4th October 2019
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What you need to know:
Getting started with lettings
Before you become a landlord, there are many things to think about. What capital do you have to invest? Will you need a mortgage? What are the tax implications of buying to let? Will you manage the property yourself or use an agent? What are your responsibilities as a landlord? The NLA offers advice on all these questions.
Creating a business plan
A business plan is the best way to start. A buy-to-let property is a small business after all – your product is your property and your tenants are your customers. You earn money through the payment of rent and you pay tax on your earnings. You have a contract with your tenant and this is governed by rules and regulations. You should make a profit every month, as property is a safe long-term investment, but there are no guarantees.
Your five-year business plan should include details of your deposit and planned mortgage rate; the expenditure involved in buying a property (the solicitor’s fees, stamp duty, decoration and repairs, for example); letting agents’ fees; predicted rental income; an annual budget for repairs, improvements and voids (when there is no rental income coming in), and of course, tax.
Buying to let
Finding the perfect property – location, location, location. Do your research and work out the most important factors for your selection. Letting and estate agents can give useful guidance as to local demand and likely rental prices. Think about your tenants. Who would you choose to rent to? Families; students; older households; professionals; Universal Credit recipients, and relocation companies are all possibilities. Location and distance from travel links and local amenities are important factors. Do you want freehold or leasehold properties? Will you need to renovate or make repairs? What is the rental income of similar properties in the area?
Book an Introduction to Letting Course
If you are unsure about any of this, join the NLA, come to a local NLA meeting to meet other landlord investors and sign up for our Introduction to Lettings Course. NLA Members get discounts on all our courses.See more benefits
Responsibilities for a letting landlord
Your responsibilities as a landlord to your tenant
A friendly, professional relationship with your tenants is highly recommended. Your tenants are more likely to stay for longer and to look after your property. Clear communication from the start of the tenancy is vital. Rules of the house should be established, any plans for repairs or redecoration should be discussed, tenant requests should be dealt with promptly. If rent is late, contact them – it may be a banking mistake. Make your tenants feel at home and valued – they are your customers, after all.
Your legal and other responsibilities
- Insurance – let your tenants know what is covered by your landlord’s insurance and what they need to provide (eg personal insurance)
- Health and safety – you must ensure all electrical installation and equipment is safe, with a regular independent inspection; an annual gas safety inspection is a legal requirement. Don’t forget to check fire safety, asbestos issues and any damp problems
- EPC – a free energy performance certificate (EPC) must be provided to prospective and confirmed tenants
- Licensing and registration – depending on the location of your property, you may need to be registered or apply for a licence
- Tenancy – you should use an approved tenancy agreement and any tenancy deposit must be officially protected
- Inventory – a comprehensive inventory should be completed on, or before, check-in day
Join the NLA
The NLA works with companies who provide products and services specifically for landlords and membership of the NLA will give you access to their contact details.See more benefits
Frequently asked questions
My circumstances have changed - can I live in my buy-to-let property?
No, you will need to refinance to a residential mortgage as you would probably be breaking the terms of a buy-to-let mortgage if you moved into that property. While you’re not breaking the law, your lender could ask you to repay your mortgage in full. Check the small print with your mortgage lender and ask for their advice. It may be quite straightforward to switch your mortgage.
What is a letting fee?
Letting fees are an upfront cost at the start of a tenancy to cover costs such as referencing, inventories and tenancy agreements. It became illegal to charge tenants fees in England from 1 June 2019 and in Wales from 1 September 2019. Letting agents can still charge landlords fees for services.
What services does a letting agent provide to landlords?
You can use a letting agent solely to find you a tenant, including referencing, and you then manage the tenancy yourself. Alternatively, a letting agent can manage your property and the tenant relationship completely, from viewings to tenancy agreement to provision of safety certificates and an inventory, through routine visits and repairs to managing the end of a tenancy. This is known as ‘full management’. The landlord pays a fee to the letting agent, usually a percentage of the monthly rent with additional services such as advertising, repairs or decoration on top. Good agents know their area well, advise on the expected rent, know where to advertise the property and liaise between the tenant and the landlord.
How quickly does a landlord have to respond to tenants’ requests?
The sooner the better! This is all part of maintaining a friendly, positive relationship with your tenant. If it’s a repair issue, you need to act quickly. Having a list of NLA approved suppliers will avoid expensive costs if you have to find a plumber, builder or electrician at short notice.
A request for a new item of furniture or redecoration is always worth discussing. Agreeing to fund a desk and chair for a student means that when that tenant leaves, the flat will be more appealing to another student. Buying a shoe-rack might mean that tenants leave their shoes at the front door which will reduce wear and tear. If you’re planning to paint, discuss the colour with the tenant – being involved may well encourage them to stay long term.
As a landlord, when can I increase the rent?
It is common practice to have an annual rent review and the tenancy agreement should include details of how and when you can review the rent.
What happens if a tenant doesn’t pay their rent?
It’s important to communicate clearly and calmly with the tenant – perhaps it’s just a late payment or a bank error. Perhaps there’s an unforeseen family expense. Ask why the rent is late and when it will be paid – be helpful and professional. Keep records of your communications, such as rent arrears reminder notifications, because, in the worst-case scenario, you may need these if you end up in court. If you use a letting agent, they will deal with issues of rent arrears. There are strict guidelines for landlords if you want to evict a tenant for non-payment – in general they have to fall two months in arrears before the eviction process can begin. So, it’s always worth having some ballast in the bank so that your mortgage payments aren’t affected. Again, professional advice from the NLA is available, and joining the NLA Rent on Time scheme will remove any risk of non-payment.