Beginner's Guide to Letting
If you’re entering the buy-to-let market, read our helpful guide with hints and tips to get you started.
If you’re entering the buy-to-let market, read our helpful guide with hints and tips to get you started.
- How to make buy-to-let work for you
- What are the pros and cons of letting and selling?
- Do I need a buy-to-let mortgage to let out my property?
- Is my property suitable for letting?
- Types of tenants
- What are my costs?
- Do I need a letting agent?
Considering becoming a landlord? Maybe you’re thinking of purchasing a buy to let property or you’ve recently inherited a second home and you’re not sure what your next steps should be. We have great news; becoming a landlord can offer the potential for exciting financial opportunities, but it’s a good idea to do a little research first.
This guide is designed to help you understand:
If you’re thinking about the long-term, think twice before you sell. When it comes to growing a financial nest egg, bricks and mortar could be an ideal solution. Property has traditionally been a reliable way to make money:
The first step in determining the viability of letting or selling is to compare the pros and cons of each. We picked out the most pertinent points to help you understand what letting or selling could mean for you.
Yes – if you’re on a residential mortgage, the majority of lenders will require that you switch to a buy-to-let mortgage. Moving to a buy-to-let mortgage is not uncommon, but acceptance does depend on a number of factors, including:
As a short term solution, you may be able to get something called a Consent to Let policy, which allows you to let your property for a certain period of time (typically up to 12 months) while maintaining your current mortgage.
Properties must be brought to a certain standard before you can let them out, and once you have found a tenant, you need to maintain the property to ensure it’s safe and legal for someone to live in.
A comprehensive list of your legal obligations is set out in our Terms of Business.
Landlords (and sellers) also need to commission an Energy Performance Certificate (EPC) for their properties – a rental property must have minimum rating of E or it will be illegal to let it out. Breaches can result in substantial fines.
Making sure that your property meets compliance standards will keep you and your tenants safe and legal.
You will reduce the potential for any issues at the outset or later on such as tenant complaints, fines or prosecution. Saving your time and money is key to being a successful landlord.
The Housing Act 2004 states that a property that is let to three or more unrelated sharers, who share a kitchen and/ or a bathroom, is a House in Multiple Occupation (HMO). If there are less than five sharers the property may not be subject to mandatory licensing, although some local authorities implement selective and additional licensing and you should familiarise yourself with their policy.
You need to decide whether your rental property will be furnished, part-furnished or unfurnished. A furnished property will usually include every necessity, e.g. beds, curtains and light shades. Some properties even include cutlery, towels and appliances, like ironing boards and toasters. Upholstered furniture must comply with the relevant safety standards.
Whatever furnishing approach you decide to take for your property, you should be able to demonstrate the condition of it at the beginning and end of the tenancy.
The type of approach you take with furnishings could depend on factors such as location and type of tenant you are aiming to attract, a good letting agent can help you decide on the approach.
You will need to think carefully about what type of tenant your property will best cater for. If you market your property to the wrong audience, you may struggle to attract interest or waste time dealing with unsuitable tenants.
Knowing your audience is also crucial when it comes to setting the rental value and understanding how long someone may stay for. Here are examples of different tenants, all of which have the potential to be ideal for the right property.
May comprise, single tenants, couples and sharers.The typical property associated with these tenants tends to be a modern apartment with all mod cons. Space is less of an issue than having somewhere that looks good, with parking and good online connectivity. Probably more of a short let (c 1 year) potential but more likely to pay a higher level of rent.
There is high demand for student accommodation as numbers have grown significantly over recent years, with an increase in the size of educational hubs. Students can be less fussy but still look for certain features such as proximity to campus, good transport links and easy access to bars, cafés and other social facilities. Landlords can be added to a list of approved accommodation as long as certain standards are met making it easier to let a property, but students are shorter term renters, with a year being fairly standard.
As you might expect, space is a significant factor for audience. The key feature include the property’s number of rooms, storage, space and outdoor area. Proximity to schools and colleges is also very Important in their search for a suitable property. A family rental could be for the long term – several years – because stability can be very important.
Tenants paying some or all rent using Housing Benefit are commonplace. These tenants cover a broad range, from families to single individuals.
A good letting agent can help landlords to understand their prospective tenant own unique set of circumstances, including how such tenants might be accommodated and supported.
We understand that your property may be worth as much sentimentally as it is financially, so it’s vital you have tenants that you feel comfortable with.
Letting agents can undertake checks on tenant suitability, including their likely ability to make rental payments and their right to rent in the UK. It’s really important that these checks are carried out, to ensure that tenants are going to be reliable and able to meet rent payments.
There are also rules regarding deposit payments, which must be protected in a Government authorised Tenancy Deposit Protection scheme.
Here are some handy tips to ensure you get off to the best start with your tenants:
Carrying out all of this work on your own is not easy and can be time-consuming, especially if you’re new to lettings. To ensure you’re following all the required steps, you should seek advice from a letting agent, even if it’s just for peace of mind.
Alternatively, you could wish to offer your tenants the option to use a Zero Deposit Guarantee, which offers cover equivalent to 6 weeks rent. Details available through your local branch.
Before your tenant moves in, you are advised to take a 5 week deposit from them. Deposits must be protected by a government-approved Tenancy Deposit scheme.
It is important to remember that there are costs associated with being a landlord, so it’s critical you have an understanding of what needs to be paid, although a letting agent can help with this.
It’s important that you consider your insurance needs as a landlord. You’ll need a policy specially designed for landlords – a standard home insurance policy will not cover a property that is to be rented out. Your local branch can help provide more information on our 5* Defaqto rated landlord insurance policy which is underwritten by AXA Insurance. As well as covering the building and its contents, we also offer specialist rent and legal protection insurance, which covers rent arrears should your tenants default and legal services should you need to gain possession of your property.
From initial property purchase through to ongoing landlord charges to final release of a property, every stage carries a tax obligation. For instance, it’s possible you could have to pay a higher rate of income tax from letting the property out. Equally, there are expenses that are eligible for tax relief.
Letting agents can offer assurance that everything is being done to the highest standard and with the best possible outcome in mind. Letting agents can also give peace of mind that the all-important quality of tenant you need is provided.
The benefits of using a letting agent include:
We work with landlords at all different stages in their lettings journeys to help make lettings work for them. We have the experience and the knowledge to help you too.
