Are you considering renting out your own home, purchasing a buy to let or an investment property?
When renting properties out, you can manage the process yourself or pay a qualified letting agent. It is worth bearing in mind that nowadays there are many legalities and regulations involved with renting property out.
Here are a few helpful tips to enable you to decide which is the best route for you.
Make Sure You Have the Correct Mortgage – It Could Invalidate Your Insurance If You Don’t!
What is the difference between a residential mortgage and a buy-to-let mortgage?
A residential mortgage is for a property that you are buying to live in yourself, whereas a buy-to-let mortgage is for a property you are buying to let out to tenants.
A residential mortgage is generally cheaper than a buy-to-let. Interest rates are better and product fees are lower due to the risk associated with buy-to-let lending. However there could also be a greater risk for landlords who don’t have the correct mortgage in place:
Risks of not having the correct mortgage in place:
- You may be committing mortgage fraud.
- If you do not have a buy-to-let mortgage for your property your landlord insurance policy may be invalid.
Typical Penalties can include:-
- The lender can ask for the mortgage to be repaid in full immediately.
- The lender may transfer you onto a buy-to-let scheme at a higher interest rate.
- The lender may add financial penalties, either to your mortgage or to be paid as one off fees.
It’s not worth the risk of getting it wrong
Imagine this scenario: You have rented your property out to tenants, but you have not got a buy-to-let mortgage in place. There is an accident and the property suffers from thousands of pounds worth of damage - but you can’t claim on the insurance because you didn’t tell them you were renting it out; your insurance is invalid.
Don’t take the risk!
Make sure that you have the correct buy-to-let mortgage in place and the correct landlord insurance. A normal household insurance policy will not cover a rental property; so again, will be invalid if it comes to a claim.
Prepare Your Property and Ensure it Meets Regulations
To rent your property it must meet UK guidelines, you must make sure the property is both safe and healthy for any potential occupiers or visitors.
Consider these factors:
- Free from tripping and falling hazards.
- Free from significant disrepair and asbestos.
- Have adequate heating and insulation.
- Good lighting and ventilation.
- Good security.
- Good sanitation.
Get Your Certificates and Arrange Checks!
No, we don’t mean dust off your old swimming certificates, to rent out your property you will need to arrange various certificates and checks.
What Certificates Do I Need to Rent out my Property?
These include an Energy Performance Certificate, Gas Safety Record, ensure any Electrical Equipment provided is safe, carry out a Legionnaires Risk Assessment, and provide adequate smoke alarms and carbon monoxide alarms (if required).
You must also check any furnishings provided comply with fire safety regulations.
Decide How Much You Expect to Achieve and Find the Right Tenant for Your Property
What kind of tenant do you want for your property? How much monthly rent should you ask for?
This may depend on where your property is located, and what kind of house or apartment it is. Research websites such as Rightmove, Zoopla and local property newspapers to find a realistic rental amount.
Where to advertise? A lot depends on how much you want to spend, and how quickly you want to find a tenant. You can utilise free and low cost options such as local adverts or social media, but if you want to filter out unsuitable applicants and find a good tenant quickly, consider using an agent.
Credit Checks, Tenant References, Deposits and Rental Agreements
Great! You have found a potential tenant and they seem lovely.
Check Those References
But every experienced landlord has a story about terrible tenants, bad debts and evictions. It is better to be safe than sorry – check references thoroughly before signing agreements.
Tenancy Deposit Protection
It is now law to protect a tenancy deposit taken for an assured shorthold tenancy in England and Wales. You must put the deposit in a government-backed tenancy deposit scheme (TDP). Landlords must put deposits into the scheme within 30 days of receipt.
A tenancy agreement is a contract between a landlord and a tenant specifying the terms and conditions of their rental agreement. Agreements should be put in place before letting out property.
Or... Use a Reputable Letting Agent
There’s a lot to sort before renting your property out, but using a good letting agent can lighten the load tremendously. They can offer advice, handle much of the admin and help throughout the process. Plus, they can use their local knowledge and contacts to let your property quicker!
What other reasons are there to use a Property Management Agent?
- Discuss preparations in order to let, is the property in a fit/safe standard to be let out, advise on any hazards/issues that need rectifying.
- Achievable rent advice.
- Deposit regulation knowledge.
- Information regarding the rental market that best suits the property.
- Discuss your specifications ie what sort of let and tenant you are looking for.
- Help you meet your legal obligations, ie gas safety, electric safety, fire safety, insurance, mortgage, smoke alarms, carbon monoxide alarms, water.
What services should a Property Management Agent offer?
- Rental Valuation.
- Arrange Energy Performance Certificate.
- Comprehensive Marketing including Rightmove, Zoopla & prospective tenant waiting list.
- Accompanied Viewings.
- Find you the right tenant
- Full tenant referencing including credit checks.
- Tenancy Agreements.
- Lodge Tenants deposit with a government authorised deposit scheme.
- Arrange legal checks to include gas & electric safety Checks and water risk assessments.
- Written Inventory and date stamped photographs.
- Accompanied Tenant Check In and Check Out.
- Update utility suppliers with relevant meter readings.
- Update local authority re incoming/outgoing tenants.
- Rent collection.
- Regular property inspections.
- Organise routine repairs and maintenance.
- Provide a repairs/maintenance report for the landlord and tenant.
- Serve relevant notices.
What are the advantages of using a Property Management Agent?
- Security of finding reliable tenants – Agents have stringent vetting and referencing procedures.
- The secure deposit protection scheme administration is taken care of for you.
- Handle all of the paperwork in relation to your property.
- Rent can be collected and chased up on your behalf.
- Deal with all the day-to-day property management and maintenance issues.
- As experts in their field, and with good knowledge of market conditions and demand, letting agents can often get you a better rent.
- Up-to-date knowledge of current legislation affecting landlords.
- Act as an objective and impartial buffer between you and your tenants.
- Experienced in dispute resolutions.
- Know the correct legal process If you need to evict a tenant.
- Employing an agent should reduce your workload (and possible stress and anxiety).
- Lettings agents will help you meet your legal obligations.