So, you want to be a landlord? Investing in property can be a smart choice – everyone needs somewhere to live after all – if you want to earn yourself a little extra money. But, before you purchase a property and get the tenants in there are a fair few things to understand. Our mini guide for first time landlords should point you in the direction of some of the key factors that need to be weighed up as you enter the market.
Firstly, and most importantly, it’s time to get serious about the money. You need to plan properly to work out the full cost of purchasing a property – and a realistic estimate of the amount of rent you can wish to charge.
Don’t just focus on the price either, you need to calculate the yield – a measurement that expresses the annual rental income as a percentage of the total purchase price – as this will help you to determine where you are getting the best value for money with a rent property.
You also need to research buy to let mortgages – which have tougher requirements for applicants than standard mortgages – and factor in the recent changes to Stamp Duty and the rules surrounding tax relief.
The trick to making the most of your investment as a landlord relies as much on location as it does the property you choose and it’s important to bear this in mind. Picking an area close to a good school, with good transport links or close to plenty of shops and amenities, will ensure that you have the right level of demand and should never be short of potential tenants.
Don’t just look for a home that you want to live in yourself – search out a property in a place where your target tenants are looking for accommodation.
Being a landlord puts you in a position of responsibility and so you need to be clear about the duties you must perform. You need to:
- Check that a tenant has a ‘right to rent’ in this country by checking their immigration status
- Provide an Energy Performance Certificate and gas safety certificate
- Protect your tenant’s money with the Deposit Protection Scheme
- Ensure that homes are inspected and carry out necessary repairs, with a close eye on fire safety and electricity
With this in mind, you need to make yourself aware of the law and protect yourself with an insurance policy especially designed for landlords.
You also need to decide how hands on you want to be. Some people manage properties themselves, but this relies on you having the time to do this around your job and family life.
The alternative is to call on a letting agent to manage this for you. They will take 10-20 per cent of your rental income to do this but the right agent will take much of the burden of managing a property off your shoulders – fixing issues, fielding calls and queries and carrying out inspections for you. They’ll also reach out and find tenants for you.
Do you rent out a property? Share your experiences in the comments below.0