Becoming a landlord can be a lucrative means of making an additional income or, with a large enough property portfolio, it could become your main earner. However, the legal requirements alone can seem baffling at first glance. You need safety checks on appliances and even furnishings, will be faced with a wide selection of insurance options, and although you don’t necessarily need a written tenancy agreement in place, it is highly likely that you will want one.
Many of these certificates and additional safety checks need to be carried out on an ongoing basis too, but if you really want to become a landlord and attempt to make an income from property rental yield, then don’t be deterred. Once you know what is required, and have a better understanding of your legal requirements as well as some of the extras and additional policies and checks that you should also give serious consideration to, the process will seem easier. You should also consider using a letting agent; they will manage most of the process for you, and ensure that you don’t fall foul to any regulations or rules.
Mortgages – Have You Checked Your Current Mortgage Allows You To Let?
Most personal mortgages do not allow the property owner to rent their property out, which means , if you are looking to rent out your existing property, then you may need to arrange for a new mortgage. Buy-to- let mortgages are popular and commonly available from most lenders, but they do have certain stipulations and requirements that must be met before your application will be granted.
It is worth contacting your existing mortgage provider and asking whether you are permitted to rent out your property. They may be able to offer you a competitive mortgage that will allow you to become a landlord on your existing property, but it is always worth shopping around for the best deal. Even 1% or 0.5% can make a big difference to your rental yield and, therefore, your annual profits.
Insurance – Do You Legally Require Landlords’ Insurance?
You are not legally required to get landlords’ insurance when you start leasing property, but it is one of the most convenient and beneficial means of protecting your financial investment and ensuring that you don’t lose out on income in the future. As well as landlords’ insurance packages, that include a number of different types of policy, you can also consider taking out rental protection insurance, deposit protection insurance, landlords’ liability insurance, and landlords’ content insurance, among others. Public liability insurance is also strongly recommended.
Check with your mortgage provider to determine whether they require any specific types of insurance before they will accept your buy-to- let mortgage application. Many will require that you have rental protection insurance, while it is commonplace for mortgage companies to demand that you have buildings insurance to protect the value of the property itself should the worst happen.
Tenant Checks – Is It Safe To Do It Yourself?
Some elements of a tenant check are not a legal requirement, but it has been regulation that you conduct an identity check to ensure that any potential tenant has the right to reside in the UK. This law was passed to ensure that properties were not being rented by illegal immigrants, and while it might seem like an unnecessary step to a lot of landlords, it is still a legal step that must be adhered to.
Other potential tenant checks include credit checks, rental payment checks, and reference checks.
These do take time, even if you know exactly what you are doing, and if you get some elements wrong, it could end up costing you a lot of money. Use a tenant checking service, or choose a letting agent like Home and Abroad Rentals Limited that will manage these elements of your tenancy and landlord management, to be sure that you meet all the necessary requirements.
Deposits – Do You Need To Use A Tenancy Deposit Scheme?
One element of tenancy agreements that has changed in the past few years is that of tenant deposits. Every deposit you accept must be placed in a Tenancy Deposit Scheme. These accredited schemes protect the deposit on behalf of your tenants, but they also serve to protect your investment because any dispute over deposit and deposit returns needs to be resolved before the deposit is repaid to the tenant at the end of the tenancy.
Both parties need to agree to the deposit repayment at the end of the tenancy, which means that you are likely to need to discuss damage and any other influences that impact the amount of deposit that is returned. There is protection so that if the tenant disappears without contacting the scheme, you will eventually gain access to the deposit.
Tenancy Agreements – Written Or Verbal?
You do need to have a tenancy agreement in place with any tenant in your properties, but, surprisingly, the agreement does not need to be a written agreement. In England and Wales, at least, it is usually only necessary for a verbal agreement to be in place. While this might sound like an easier alternative to a legally drawn up written agreement, having a written agreement can help protect your investment and your income, and it can also prevent disputes between you, as the landlord, and your tenants.
Other Requirements – Other Factors To Consider Before Letting Your Property
Before embarking as a landlord you should consider all of the benefits, but also all of the potential pitfalls. If you intend to take a hands on approach to being landlord, you should expect it to take up as lot of your time, and you may not be comfortable conducting all of the work that is needed.
- Are you comfortable chasing up late payments?
- Do you know how to find and attract your target market as potential tenants?
- Do you have the financial backup to protect you if you lose a tenant?
- Are you prepared to arrange for annual safety checks for all of your properties?
If you aren’t comfortable researching, marketing, maintaining, and ensuring that you at least meet the legal requirements of being a landlord in the UK, then you should either consider another means of investing your capital, or you should use a reliable and reputable letting agent that will take on many aspects of this work on your behalf.