Letting for the First Time
There are many reasons why people want to let (rent out) a property for the first time. Letting your own home when moving away for work, or when you can’t sell, an inherited property, a second home such as a holiday cottage, or it may be you’ve bought a buy-to-let as an a long-term investment property.
Despite all the changes to the tax rules, and the many more rules and regulations surrounding the letting of residential property in England, and the other UK nations, property can still be a very sensible investment when compared to the alternatives.
But letting for the first time can be a steep learning curve, so you need to follow the rules diligently if you are to have a happy experience. You may then also realise the true long-term benefits of being a landlord.
Many successful landlords start out by accident and go on to become a long-term landlord. Some landlords go on to build-up a portfolio of investments which over time bring them more income and wealth than they ever dreamed possible.
Whether you are relocating and keeping your own home, or embarking on a new buy-to-let project, letting has become increasingly popular over the last 20 years. For many, investing in property is a viable alternative or a valuable addition to a conventional pension.
More to it Than You Might Think
The whole process of letting is not quite as simple as many people imagine. From the time you decide to rent out your property until when your tenant is securely settled in, there are a lot of details to think about and lots of opportunity for the unexpected to happen.
Experienced landlords begin by expecting the unexpected: they plan for the worst even though in 19 times out of 20 in never happens. The tow biggest risks in landlording is (1) being under insured, and (2) getting stuck with a really bad tenant.
Point one is easily remedied by having a landlord policy with a reputable insurance provider. See the LandlordZONE Directory here: https://www.landlordzone.co.uk/suppliers-directory/insurance
Point two is more difficult, but with a bit of care this risk can be reduced to almost zero with the right letting policy and procedures.
You Can be Too Trusting
If you want your landlording venture to be a success then you need to run the whole project in a businesslike manner. First do some reading and research, follow the advice you read from more experienced landlords and get yourself organised with the crucial documentation.
Most novice landlords are far too trusting of complete strangers, even in extreme cases to the point of allowing tenants into their property without signing an agreement or taking rent and deposits first. To avoid a complete disaster you need to think carefully about what’s involved and whether you are prepared to do the necessary preliminary homework. Or would you rather employ a professional agent to do the job for you?
There’s a lot to be said for using the services of a competent letting agent (a member of one of the professional associations), at least when you let for the first time. After that, you may decide to save on those letting and management fees and have a go yourself.
The starting point is getting your property ready to let is making sure it is clean and tidy, ideally newly decorated in neutral colours and with good modern facilities – cooker, fridge, shower etc.
You don’t necessarily have to fully furnish the property as many tenants want to bring along their own furniture, though you need to be flexible with this. Be prepared to remove or place items to secure a good tenant.
Next, you will need to find good tenants. This involves advertising, conducting viewings, interviewing, conducting credit checks and checking references, additional screening checks, negotiations over rent and making a final decision.
There’s quite a lot of paperwork to be completed nowadays and there’s a lot of legislation to comply with. Righ-to-Rent checks, Energy Performance legislation and certificates (EPC), Gas Safety Certificates, issuing the How to Rent Guide, electrical safety checks, legionella surveys, registering the tenants’ deposits and ensuring all furniture complies with current fire regulations are just the start.
A good inventory is very importasnt, ideally carried out by an independent inventory clerk, along with an up-to-date tenancy agreement. It is very important to make sure that all the relevant documents are provided to the tenant/s and that you have proof that they have received them.
Managing Your Tenants
Once you have your tenant nicely settled in there’s the ongoing management of the property. If you have done a good job of selecting the right tenants this should be a piece of cake.
Even so, for insurance purposes you should do regular inspections, giving adequate notice, and keeping an eye on what’s going on.
However, in a minority of cases, some tenancies will turn into a big headache for landlords, with rent payments missed or late, rent arrears buiding up, anti-social behaviour and damage to the property, especially if the tenants have debt problems themselves.
Most new landlords have a job to hold down and mortgages to pay. Living some distance from the rental property can also create problems – it takes a lot of time if you have to drive a few hours whenever there’s a minor problem to deal with at the property. It practice, problems, like buses, seem to come along in threes, and then you might have a long period which is problem free. However, if you intend to manage the property yourself, you need an understanding partner and a lot of patience.
Oftentimes, just as you feel things are running really smoothly, your tenant will come along with a notice to leave and the whole process starts over again.
These are the many issues that come with being a landlord, but experience shows that if you select tenants carefully you will find that 95% of them will be trouble free – they pay their rent on time each month and they will look after your property as if it were their own. The trick is to avoid the other 5%. If you develop a systematic management process and develop an instinct for selecting the right tenants, then you will do just fine and your investment will pay off handsomely.
These guidelines apply primarily to England. Other regions and jurisdictions are similar but there may be important differences and this is becoming more so in the UK with devolution. This is not a definitive interpretation of the law, every case is different and only a court can decide. You are advised to seek professional advice.
Here’s the main stages to go through when letting your property:
- A Prepare the property to let, including cleaning, decorating, furnishing, completing safety checks and complying with the necessary legislation. It’s not all that difficult, just needs a bit of effort on your part. This will all be worth it when your see those rent payments popping into your bank account every month.
- Making sure the property meets minimum energy efficiency standards, health and safety standards including gas, electric, has had legionella checks, and the furniture and funishings meet the fire safety standards
- Deciding whether to handle it yourself or use a professional letting agent. Doing it yourself will save you a lot of expense, but you need to develop the necessary skills, have the spare time to do it, and be prepared for a bit of hassle now and then
- Advertising the property: the Internet, Letting Boards, Local Paper, Newsagents, Local Employers etc
- Dealing with enquiries, conducting viewings, interviews and negotiations
- Dealing with the tenant checks – credit checks and referencing, application forms and tenancy agreements, and security deposits
- Protecting the deposit in a tenancy deposit scheme, as the law requires
- Carrying out a thorough Check-In with all necessary checks and documentation: application forms, inventory, tenancy agreement, safety checks documents etc.
- Issuing all the correct documenation and having proof that you have done this.
- Ongoing management of the property: maintenance items, necessary repairs, regular inspections etc.
- Collecting the rent
- Ending the tenancy correctly (the Check-Out) and if necessary dealing with any problems such as rent arrears, damage and repairs.
- Releasing the deposit.
- Dealing with evictions in the unlikely event this becomes necessary
Landlords and Tenants Have Obligations
As a landlord you have various legal obligations to fulfill, as does your tenant.
For example, your tenant is entitled to “quiet enjoyment” of the property during the rental term as if it were their own. You must not harass or pester your tenants and you are not allowed to enter their home without notice and permission.