Thinking of becoming a landlord? Check out these top tips on how to get started.
by Rizwan Osman on 2nd September 2019
If you’re thinking about investing in London’s buy-to-let property market, the buzzy and popular south west London neighbourhoods of Tooting, Balham, Streatham and Clapham could be your best bet. With great transport links to central London, amazing amenities and night life, plenty of green spaces and good schools, there’s a lot to recommend them.
Why invest now?
Despite uncertainty over Brexit, many commentators believe that the slump in London house prices may be over. As prices begin to edge up in some areas, now might be the time to invest in the London buy-to-let market.
With 20% of people now living in the private rented sector, demand for decent properties is high – meaning that in spite of changes to tax and stamp duty rules, buy-to-let is still a solid investment. The crucial thing is to do your research, understand the sector and keep on top of the ever-changing legislation.
Whether you’re looking for a buy-to-let property to boost your income, increase your pension pot or give you a good, long-term investment, read our top tips for buy-to-let landlords in London.
Your rental home must be safe, fit and legal for tenants
As a landlord you must fulfil certain legal and health and safety obligations and comply with a range of regulations.
Landlords are responsible for most repairs and maintenance in a rental home. This includes the electrical wiring, plumbing and sanitation, heating and hot water and the external structure of the building.
Since a change in the law in March 2019, landlords must ensure that the property is fit to live in throughout the tenancy. If the tenant believes you haven’t fulfilled your responsibilities, they can take you to court. Issues, which might make the property unfit for habitation, include damp and rodent infestation.
You need to make sure that the gas supply and all gas appliances in the property are in a safe condition. They should be fitted, repaired and checked every year by a GasSafe-registered engineer. This applies to gas pipework, cookers, boilers, fires and water heaters.
You need to make sure that all electrical wiring and plug sockets are safe. You should organise an inspection by a qualified electrician, followed by regular basic safety checks. Any appliances, which you provide, should be checked and have a portable appliance test (PAT) sticker on the plug, showing the date tested and when the next test is due.
There should be working smoke alarms on each floor and carbon monoxide detectors in any room heated by solid fuel. Landlords can be fined and sent to prison if they don’t follow fire safety regulations.
Your tenants must be provided with an energy performance certificate.
You are required to protect your tenant’s deposit in a government-approved scheme.
The rent landlords receive must be declared on an end-of-year tax return. If you are currently in employment, and are taxed by PAYE, you will need to register for self assessment by 5 October following the tax year in which you received rental income.
The first £1,000 of your income from property rental is tax-free. If your rental income is between £2,500 and £9,999, after allowable expenses, or £10,000 or more before allowable expenses, you must declare it on a self assessment tax return. You should also contact HMRC for advice if your income from property rental is between £1,000 and £2,500 a year.
As a landlord you will pay tax on the profit you make after allowable expenses have been deducted. Allowable expenses include buildings and contents insurance, repairs and maintenance (not improvements), interest on property loans and utility bills.
You may also be able to claim tax relief on the replacement of domestic items such as beds, sofas and white goods. Read more about tax, self assessment and allowances for landlords on the gov.uk website.
If you are unsure about tax and self assessment, get advice from an accountant with experience in property and tax. This could save you from making expensive mistakes later on.
How hands-on will you be?
You will need to decide how you are going to advertise, find good tenants and manage the property throughout the tenancy. You have three main options:
- You could appoint a letting agent to look after everything for you, including repairs and maintenance.
- You could appoint a letting agent to advertise and source tenants. They will screen your potential tenants and conduct reference and credit checks, arrange the viewings and negotiate the rent. They may also collect the security deposit and first month’s rent, before stepping away to let you manage the ongoing relationship.
- Alternatively, you can undertake the whole process yourself.
The option you choose depends on how much of your life you want to devote to your new role of landlord. The third option will mean savings on fees but will be time-consuming; leaving you with sole responsibility for finding the right tenants and filling an empty property quickly enough to avoid losing money.
How to choose a letting agent
If you decide to use an agent, choose wisely – you shouldn’t necessarily go with the cheapest. Look for a member of the Association of Letting Agents ARLA Propertymark, the National Association of Estate Agents (NAEA) or the Royal Institution of Chartered Surveyors RICS.
They should also be signed up to the Property Ombudsman Scheme – an independent service, which resolves disputes between tenants and agents or the National Approved Letting Scheme NALS. Membership of these schemes gives reassurance that the agent is regulated by leading industry bodies.
Get your property tenant-ready
Find a great tenant in record time by sprucing up your property to make it as appealing as possible. Deal with any outstanding DIY jobs and make sure that the property is decorated to a good standard in neutral shades. White and other pale colours reflecting light to make your rooms appear, not just bright and airy but bigger. Replace patterned or dingy carpets with light floor coverings too.
The most common type of dispute between landlord and tenant involves claims for damage. Drawing up a full inventory can help you avoid this issue – make sure you take photos or videos of your property itself and any items included. Your tenants should sign the inventory to confirm that everything it lists is both present and in the stated condition.
If you are considering dipping your toes into the buy-to-let market, in south west London, we’d be happy to help. Contact us to find out more today.