10 Tips for Accidental Landlords
by Rizwan Osman on 4th January 2021
Not every landlord is a wealthy entrepreneur with an extensive portfolio of properties. Many have become ‘accidental landlords’ perhaps because they inherited a property, needed to move but couldn’t sell their property or are working abroad for a fixed period of time.
Renting a property can be complex and time-consuming. There are approximately 150 laws surrounding residential lettings, how does somebody who never intended to become a landlord navigate this minefield – and the others that lurk in its shadow?
To help, we have compiled our tips for any landlords who did not expect to have that job title.
What is an accidental landlord?
An accidental landlord is anyone who hasn’t intended to become a landlord but finds themselves needing to rent out a property they own.
If this is you, read on for our tips to making a success of letting your property.
1. Inform your mortgage lender
If your property has a mortgage, you will need to inform your lender that you wish to rent it out. Your lender may grant you a Consent to Let, which allows you to let your property for a maximum of 12 months while maintaining your current mortgage. Otherwise, you will need to switch your residential mortgage to a buy to let mortgage. In this case, you will incur an arrangement fee, and the rate of the mortgage may differ from your current rate.
2. Check your lease
For leasehold properties, check your lease to make sure you can sublet. You may need to seek permission from your leaseholder. Some leases don’t permit subletting at all.
3. Make sure you are insured
Landlord buildings and contents insurance isn’t a legal requirement but you would be well advised to have it in place, mortgage companies will require you to have buildings insurance.
Your standard home insurance policy will not cover your property when you are renting it out.
4. Do the maths
Talk to local letting agents in your area and research similar properties to yours on Rightmove and Zoopla to understand the demographic of tenants in your area and the monthly rental you can expect.
Don’t be tempted to overprice your property, receiving a slightly lower rent regularly each month is better than demanding a high rent which puts off tenants and could result in long void periods.
Look at the rent you expect to achieve and deduct all your costs to get an idea of the return you can realistically achieve. Include your mortgage costs, running costs such as letting agent fees, maintenance costs and insurance. You should also factor in potential void periods.
5. Decide on letting furnished or unfurnished
As a landlord, the decision to rent a property furnished or unfurnished is entirely yours to make. It will depend on your needs and priorities, local tenant demand, and what type of tenant you are hoping to attract.
Most tenants expect white goods to be provided so at the very least you will need to provide a washing machine, fridge-freezer, hob and oven.
Remember that, as a landlord, you’re responsible for all repairs and maintenance, this includes any furniture you provide.
6. Safety and certificates
The bottom line in dealing with tenants is that you must comply with the legislation
All gas appliances and chimneys/flues must be safety checked annually by a qualified Gas Safe registered engineer.
Landlords must have the electrical installations in their rented properties inspected and tested by a qualified and competent person at least every 5 years.
Private sector landlords are required to have at least one smoke alarm installed on every storey of their properties and a carbon monoxide alarm in any room containing a solid fuel burning appliance (e.g. a coal fire or wood burning stove).
All upholstered furniture and furnishings provided by the landlord must meet fire safety standards; this means that any sofas, cushions, chairs, or mattresses must carry the fire-resistant symbol.
Tenants must be able to escape quickly in the case of a fire. Landlords must make repairs to ensure that, where possible, fire-resistant materials are used in the structure of the building to stop fire spreading quickly through the property.
7. Tenant checks
Reference and credit checks
Always obtain references for your tenants, including from previous landlords. Ask for copies of bank statements and proof of income, as a rule of thumb only rent to tenants whose monthly income is roughly three times the rent. It is also worth investing in credit checks to be sure of their past payment history. Credit referencing agencies such as Experian can do this for a fee.
Right to rent check
By law you must check that your tenants can legally rent your residential property. This includes all tenants aged 18 regardless of whether they are named on the tenancy agreement. It is against the law to only check people you think are not British citizens. You must ask your tenants for the original documents that prove they can live in the UK, read more here about the right to rent documents you can accept.
8. Check if you need a local license or HMO permit
All landlords who rent property to five or more people from more than one household require an HMO (House in Multiple Occupation) license. Some councils in England also operate ‘additional’ or ‘selective’ landlord licensing schemes.
You should check with your local council before letting your property.
9. Protect your tenants’ deposit
All landlords should take a security deposit from their tenants. Legally, this is capped at five weeks’ rent for properties where the annual rent is below £50,000, or six weeks rent for properties with annual rents above this.
You must place your tenants’ deposit in a government-backed tenancy deposit protection (TDP) scheme within 30 days of receiving it. You can use any of the following schemes if your property is in England or Wales:
10. Declare tax on your income
You must pay income tax on any profit you earn from the rental property you own. This is the rental income you receive less any allowable expenses.
You should inform HMRC when you start renting a property as you will probably need to complete a tax return (even if you are making very little profit or even a loss). Keep a record of how much rental income you receive and allowable expenses you incur in each tax year. Click here for a list of allowable expenses, from 2020 none of the interest on your mortgage payments can be considered an allowable expense.
Get a letting agent
If being an accidental landlord feels like just too much, consult letting agents. They’ll gladly advise you as you start out, but you can also delegate your landlord duties completely to them through their property management services. Their years of experience and constant exposure to the area means they’ll do a great job and you’ll be relieved of a lot of stress and hassle.