20 Steps to Successful Landlording
Updated October 2016
- Buy the right type of property for the market you are targeting and present it to your tenants in good, clean condition with modern facilities.
- Spend some time reading up on your obligations as a landlord and make sure you are complying with the current regulations – remember legislation changes frequently, so keep up-dated.
- Maintain your property and make sure it meets all the letting safety and energy efficiency standards.
- Be very careful when selecting your tenants – tenant screening is the most important job that landlords or agents do!
- Have a comprehensive application form to give you full back-ground information on your tenants – it’s the most important document after the letting agreement.
- Always do credit checks, identity checks and take up references – remember, Right-to-Rent checks now apply.
- Always have a proper written tenancy agreement which incorporates a guarantor if necessary.
- Then, there’s a few more – read on…
Success for the DIY landlord demands a certain amount of discipline, a good working knowledge of the rules and regulations and a systematic approach.
Following these steps will save you time and trouble – if you do it properly you’ll wonder why you even considered paying an agent to do it for you!
Follow these guidelines and you should be on your way…!
1. Be clear about your Landlording Strategy – have a plan!
Are you in the bottom, middle or upper part of the lettings market?
If you are in the DSS, Houses in Multiple Occupation (HMO) and/or the student sector, expect more problems. You will need more management time, a good knowledge of the Housing Benefits system, the HMO rules and the student market in your area. Financial returns, though, should be quite a lot higher!
If you go for the middle (working and professional) or upper end (professionals and company lets) you should have fewer problems, providing you select your tenants carefully, and these lettings will provide you with a very good return if you manage your tenants well.
Make sure your property matches your target market in terms of type, location, condition and facilities and ask a competitive but not an excessive rent.
2. Do your Homework first – know the rules and regulations!
Think of your lettings investments as a business, even if you’re doing it as a side-line to your main job. It requires a certain amount of method, discipline and commitment.
Have you got the time to manage your lettings and the commitment to learn the regulations that go with it, or do you need to pay someone to do it for you? Distance is a factor, because travel time added to management time can become excessive.
However, rental property can be efficiently managed using a surprisingly small amount of time – just follow these steps and take the time to read the information available on the LandlordZONE® web site.
Just like any other business, at the start it’s a good idea to have a Business Plan. Include financial projections, especially if you are using some form of loan or mortgage finance to purchase your investment properties.
Remember, you may need certain permissions for your landlording operation from:
- The local authority planning, building and environmental health departments, depending on the type of letting and whether alterations are involved.
- Your mortgage company.
- Your Insurers.
- Your landlord or freeholder if you are yourself a leaseholder or shared freeholder.
You also need to master the paperwork and the basic letting rules and regulations, the landlord and tenant’s legal obligations and some of the laws that governing lettings – there are plenty of inexpensive books on the market which are well worth reading – see Amazon.
Letting property successfully is not rocket science. Basically it’s about managing people, so if you have people skills from other areas of your life, such as customer service or management skills, then you can adapt them to this occupation quite easily.
It’s also a good idea to join your local Landlord’s Association. You will learn a lot by attending meetings and speaking to other landlords with similar problems to yours.
3. Develop your own Operating Philosophy!
The old saying, “honesty is the best policy” applies to landlording as much as to any other business, but perhaps even more so. For a start landlording has a bad image in some quarters (though it’s improving) and this has to be overcome.
You are under the scrutiny (not that you will come into every-day contact) of your tenants and so may other agencies; your local authority, The Fire Officer, The Environmental Health Officer, The Health & Safety Executive, Rent Officers, The Inland Revenue, the Town Planners and Building Controllers, and the courts, to name a few. So, successful landlords tend to be those that operate within the rules and with some integrity.
Treat tenants with respect, while setting out to provide value for money and a professional standard of service in safe accommodation – this is an approach that the authorities will generally support and your tenants will generally appreciate.
If you can show that you are a good landlord and follow the rules you are likely to get more support from the authorities if things go wrong. This often comes down to the all-important documentation that you have to prove that you are meeting the requirements – evidence is key in this business.
Many local authorities now have Accredited Landlord Schemes. These are worth participating in as they give you good guidance as to letting standards and act as a kite mark of good landlording practise.
4. Do your Research Thoroughly – know the local market!
Don’t buy a property just because you like it, you think you could live in it yourself, or you just plain fall in love with it! You should never by a property that you have not seen and inspected personally, or researched the location properly.
“The market rules” every time, and you must make sure that what you buy will let. Get to know the area well, speak to residents and local estate agents, and keep an eye on the local papers to see what’s letting locally. A few hours spent doing your research (due diligence), before you go investing in a rental property, can save you a whole lot of heartache and expense later.
Location, location, location are said to be the three most important factors when investing in a commercial property. Residential lettings are no exception.
Is there a healthy demand for letting in the area? What type of property lets best? Which type is most profitable? Is the property near large employers, a college or a university? Are there good public transport links? Are there shops, fast food outlets and restaurants, laundry facilities, tourism and entertainment venues which your target tenants will appreciate?
What are the long-term trends? Is the area improving, or declining? Are there any potential problems, trouble spots – flooding, riots, radon gas, subsidence? Are there any future developments in the pipeline like shopping centres, major industry changes, roads or transport links which could improve the area or make it decline?
If it’s a town or city, is there a trend to more urban or city centre living? What will be the long-term effects that these and other factors have on rental demand and property values?
5. Have a Comprehensive Application Form!
A Tenant’s Application Form (Tenancy Proposal Form) is crucial and the most important document after the lease agreement – see LandlordZONE® Documents
The application form records the tenant’s background, a declaration as to identity, accommodation and employment histories, income status, references, and personal details – Smoker? Pets? Disabled? Other Occupants, Children etc. It is very important for Right-to-rent Checks.
It also confirms the tenant’s understanding of the property to be let, the type and length of tenancy and the basic terms, the likely costs and expenses to be paid and the rent and deposit required.
This form is an important legal document which forms the basis of your contract and the tenant screening process. It should provide sufficient information to enable the landlord to contact the tenant, or his relatives, even if he or she absconds.
The form also provides valuable evidence for Ground 17 – Grounds for Possession under the Housing Act 1988. A false statement knowingly having been made by the tenant, or someone acting on her behalf. In other words, this document gives you the basis for regaining possession fairly quickly if you have been duped.
6. Screen your Tenants very Carefully!
Always remember this: no tenant at all is 100 times better than a problem tenant! Landlords are always anxious when they have a vacant property, but don’t be too hasty in taking on the first person that comes along.
Always do a property tenant check. It is not an absolute guarantee but a basic check is quick and quite inexpensive, and it’s a good safeguard against real problem debtors.
Be thorough in taking up references etc, but don’t waste too much time about it because you may lose an excellent tenant. See TenantVERIFY®
This is one aspect where DIY landlords have the advantage over letting agents – they can generally deal with applications more quickly, often at week-ends and outside normal working hours and also make quick letting decisions.
7. Always have a Written Tenancy Agreement
All new tenancies, since 28 February 1997, are automatically Assured Shorthold Tenancies (ASTs), unless specified otherwise, so landlords are now on much safer ground than pre 1997.
It is possible to create such a tenancy legally by oral agreement (must be confirmed in writing within 6 months if the tenant requests it) and the conduct of both parties.
But any landlord doing this is asking for trouble, and most tenants would prefer to know where they stand by having their tenancy agreement in writing.
You will find a very comprehensive range of legal documents, Tenant Agreements and Commercial Property leases here: www.landlordzone.co.uk/documents
Never, ever, under any circumstances allow a tenant into premises (handing over keys) without them signing an agreement, paying the first month’s rent and paying the security deposit, if you have opted to take one. If you accept a cheque, ideally you should allow time for clearance.
The agreement forms the basis of the landlord-tenant relationship specific to your property, as opposed to the statutory rules, which will always override any contractual terms you agree. For example, you may want to bar pets, to insist on payment by banker’s standing order and insist on notice if the property is to be left empty more than 14 days etc.
Without the agreement you will find it difficult to prove even the obvious points – when the tenancy actually started, how long it lasts and what the rent should be.
No written agreement will also cause real problems if court action is taken later for eviction etc.
Good agreements are easy to understand (plain English), up-to-date with current legislation and have taken into account almost all eventualities. Good modern agreements comply with the Office of Fair Trading guidelines.
Use a good quality “off the shelf” agreement or have one prepared by an experienced solicitor – not all solicitors though have expert knowledge of landlord-tenant matters – see www.landlordzone.co.uk/documents
Any new Assured Shorthold Tenancy (AST) in England starting on or after the 1st October 2015 will require the new Standardised Section 21 (A6) form and the landlord or agent MUST conform to the new requirements, the main ones being:
- Provide the tenant/s with a current copy of the 10 year Energy Performance Certificate (EPC) for the rental property, when letting information is given or at the viewing whichever is sooner.
- Provide the tenant/s with a current copy of the annual Gas Safety Certificate for the rental property before the tenant enters the property.
- Provide the tenant with a current copy of the Government Booklet: How to rent: the checklist for renting in England This MUST be the latest available version at the time of letting and on a tenancy renewal.
- Protect any Tenancy Deposit taken, plus serve the statutory information (s213 notice) and the scheme’s information leaflet within 30 days of receiving the deposit. Always get proof of service and remember that the statutory notice must provide reference to the clause in the tenancy agreement which spells out the circumstances under which monies can be withheld, e.g., rent arrears, service changes, damage etc.
You must be able to prove you did all this by having some sort of proof of service, or signed documents from your tenant/s.
8. Deal Fairly with Security Deposits
A security deposit, which is usually equivalent to one month’s rent, though most landlords take 6 weeks rent equivalent, provides some security in the case of damage, cleaning or rent arrears. Handle this with integrity. The new rules on deposits introduced on the 6th April 2007 mean that, if you take a deposit, you must participate in one of the tenancy deposit schemes. See Tenancy Deposit Documenation
You must now inform your tenant/s which deposit scheme you are using within 30 days of taking it. Failure to comply with this legislation means you can be fined up to 3 times the deposit and you will be prevented from using the statutory possession procedure allowed under section 21 of the Housing Act 1988.
To discourage tenants from using the security deposit as their last month’s rent payment you may decide to use a different amount than the monthly rental – 6 weeks for example.
Don’t make the deposit too high though – no more than two months – as it may be seen legally as a premium. This would imply a long-leasehold and could in theory allow a tenant to assign the lease to another tenant without your consent.
The tenant may need the deposit back for his next tenancy so always repay it promptly if everything is in order.
Your Tenancy Application Form and the Tenancy Agreement should deal with and fully explain the procedures and circumstances for deductions with deposits – always give your tenant, and the guarantor if there is one, ample time to read and understand the agreement before signing.
Deposits are always a source of potential disagreement between landlord & tenant. If you take a deposit always have a detailed inventory, preferably prepared by an independent inventory clerk – you will need good evidence if there is a dispute involving the Tenancy Deposit Scheme. See our Directory – Inventory Services for Independent Inventory Clerks.
9. Keep the Rent near Market Levels
Always try to keep the rent at or near market levels – you owe it to yourself, your financiers and your potential heirs. Your research of the local market (section 4 above) should give you this.
Ultimately the rent received determines the value of your investment so if you had to sell the property with a sitting tenant, on a below market rent, the property value could be adversely affected.
Short-term lets don’t warrant the hassle of rent reviews and increases, but longer term residential lets, say over 2/3 years, should have their rents reviewed and the agreement should provide for this.
Rent Reviews are particularly important when letting commercial properties which tend to have much longer leases.
Some landlords feel that good long-term tenants should have the reward of staying on the same rent, but this becomes a dangerous philosophy as time goes by. The rent is no longer a fair return on the investment, the property value is affected and the rental amount may not cover repair costs. Eventually the tenant is faced with a big rise, which usually then triggers a move.
Don’t try for too high a rent though. This usually results in longer void periods and you lose out more in the end.
10. Use Banker’s Standing Order Rent Payments!
Banker’s standing orders are the best thing ever invented for landlords!
Without the standing order most DIY landlords just would not have the time to manage their properties as a side-line to a normal day-job.
Standing order payments have several advantages besides saving time – they are regular, there’s no anxious waiting for cheques coming through the post and you know straight away if there’s a problem.
No landlord should spend time traveling to collect rents, only do it in emergencies. Some tenants will delight in giving you the run-around in this situation!
If a payment fails to materialise it means one of two things: the tenant has ordered the bank to stop the payment, or there are no funds. You can then act immediately – see standing order mandate
11. Be Safety Conscious – you are responsible
Landlords have a serious obligation to provide safe premises, installations and appliances for their tenants. They must also ensure safe use of equipment by providing clear operating instructions.
Safety is potentially one of the greatest risks a landlord faces, but it need not be a problem if it’s managed properly.
There are severe penalties for non-compliance – both criminal sanctions and civil law damages apply.
You are obliged to meet safety regulations regarding furniture and fittings, gas appliances need an annual Gas Check Certificate and it’s a very good idea to have electrical appliances and systems checked.
You should now consider Legionella risks – you should complete a risk assessment on safety and Legionella between every tenancy.
Due diligence (taking all reasonable steps) is essential – see General Safety and Safety Checklist.
12. Bear in mind the Discrimination Laws
Remember the discrimination laws. You are not allowed to discriminate (and nor would any reasonable landlord want to) on the basis of race, religion, gender or disability etc.
This is particularly a pertinent issue when doing Right-to-Rent immigration checks. Read the article on Discrimination and Immigration Checks here
To avoid being caught out if someone should bring a complaint about you:
- Treat everyone the same, with respect, and be fair in the way you select. Choose the first qualified tenant that comes along.
- Give everyone the same information and ask them the same questions – keep paper evidence of this.
However, you are allowed to discriminate on the merits of the individual/s as qualifying tenants, financial standing, credit checks etc. See Discrimination
13. Have Adequate Insurance Cover
Landlords have many potential liabilities and it is vital that they carry sufficient insurance cover. Landlords are responsible for insuring the property itself (the building) and should also insure their own contents.
Landlords are strongly advised to take out specific landlord insurance covering tenant and third party risks (public liability) cover.
The biggest risk you face as a landlord is not damage to your property, it’s the possibility of being sued for negligence for injury to tenants, visitors or the general public – claims can be enormous.
Only landlord’s insurance will cover these risks – normal household cover is simply inadequate.
Other types of insurance include loss of rent, rent guarantees and deposit guarantee insurance.
Tenants should be advised to insure their own contents. Tenant’s policies also cover a range of other basic risks.
There are specific policies available for landlords with student lets and HMOs, and for the tenant.
14. Keep the Property in Good Repair
The old saying, a stitch in time saves nine, was never truer than with property. A small thing like a leaking gutter or a blocked drain, if left unattended, can result in horrendous damage.
Landlords with the inclination and good DIY skills have an advantage as the cost of repairs is high, and good tradesmen are hard to come by, especially at short notice.
If you use tradesmen on a regular basis you are more likely to get them to come when you need them in an emergency, but it pays to look after good people when you find them. It’s handy if you have a few friends in various trades.
The starting point is buying in good condition. Have the property surveyed and don’t forget the wood survey – a nasty case of rot can be very expensive to eradicate.
You may be able to buy property cheaper if you are willing to renovate or develop it, but this requires a fair amount of experience and skill and usually, lots of money.
Good, well maintained property will attract good tenants and will enable you to set a certain standard. Aim to keep the property maintained and always respond to problems promptly.
Mid-tenancy inspections (normally 6-monthly, and preferably done by an independent person) are a good idea, to monitor the way the tenant/s is keeping the property. A report should be completed using the original inventory/schedule of condition as a basis. Bear in mind that insurance policies may require you to do inspections and monitor the property throughout the tenancy.
However, if you are called in for any sort of repairs, it’s a good idea to use the opportunity to observe how the tenant/s are living and it then does away with the need for a formal inspection, and the tenant/s are none the wiser!
If problems are arising the tenant should be alerted in writing, warning that additional costs may be being incurred for damage or cleaning beyond normal wear and tear.
Landlords should keep a journal which keeps a record of all contact and communications with tenant/s, promises made and work carried out. This can become an invaluable resource should relations deteriorate, and especially if anti-social behaviour, neighbour complaints and police reports are involved.
15. Act Quickly if Problems Arise
If problems arise, act quickly and always carry out what you have said you will do. Take action immediately so that tenants know you mean business:
- If rent payments are missed – find out why and set out a course of action. Put it in writing. There may be good reasons, in which case allowances can be made, but don’t let the situation last long – you may have to go for repossession – See: My Rent Arrears Plan of Action
- If tenants damage your property – you need to inspect the premises from time to time. Providing a basic cleaning or care taking service keeps things in order.
- If the tenant reports repair work – not responding to tenants’ maintenance problems within 14 days will not only affect your property, it could bring on problems with rent payment, and with the “retaliatory eviction” rules you could be prevented from seeking possession using a Section 21 notice. Never give tenants an excuse not to pay rent! Having access for maintenance is also a good opportunity to inspect the premises.
- If your tenants are causing problems with the neighbours – again, act quickly so that they can see you are doing something about it – keep your journal updated with every report, complaint and incident, and if the police get involved get police reports and crime numbers. You may have to take it up with the local authority and possession proceedings may be in order.
16. Watch out for Harassment Claims – respect tenants’ privacy
Tenants have an “estate in land”, an interest in their home, “their” property, and a right to quiet enjoyment; to treat the property as their own (within the terms of their agreement).
Landlords turning up and making demands, without warning, could be deemed to be acting unreasonably. Making threats, withdrawing services or making life otherwise difficult for tenants and their guests is even worse – it’s a criminal offence which could result in a criminal record for the landlord.
Always give tenants a minimum of 24 hours’ notice for access to the property for whatever reason, unless it’s an emergency where property and lives are at risk.
If a tenant refuses you entry or even changes the locks, there’s not a great deal you can do about it in the short term, apart from court action which will take weeks and months.
If you do have an unreasonable tenant, where relations have become strained or broken down completely, carefully document your every contact with them, or your attempts to carry out your own duties such as Gas Checks, inspections etc., and take a witness when you see them – see Harassment
17. Security – Tenant and Landlord
The property needs to be secure for the benefit of your tenants. If tenants’ possessions are lost due to lack of a reasonable level of security then they may bring a claim against their landlord.
Your insurance company and your local Police Crime Prevention Officer will specify and advise on door and window locks etc.
For personal security, dark allies and walk-ways should be well lit and doors and gates fitted with secure locks.
If you are meeting strangers to show them around your properties:
- Make sure you have recorded all their contact details and leave a copy at home or at the office.
- Take someone with you if you feel vulnerable on your own.
- Carry a mobile telephone, also hand for taking “mug shot” photos of tenants and their ID documents.
- Be ready to make a quick exit if you sense danger.
18. If you Use Agents, Select them Carefully
If you use an agent to let and/or manage your property be careful. Not all agents have the necessary skills and experience, and some have excessive charges.
Agents who are members of RICS, NAEA, ARLA or NALS are more likely to do a professional job – see Letting Agents
The agent’s contract is an important document and is binding on the landlord. Be prepared to read the contract carefully and to negotiate hard for fair terms at the outset, particularly commission charges, fees and re-letting charges. Beware of hidden conditions, such as commission due to the agent if the rental property is sold – be prepared to strike these clauses out.
19. Put Everything in Writing and Create an Audit Trail
Have a file for every property & every tenant. It’s important to have this information on file, particularly for HM Revenue & Customs (HMRC) purposes. All files should be kept after the tenancy is over, bearing in mind the HMRC and Data Protection rules.
The property file should include everything to do with that property:
- Purchase details, date and price
- Copies of all solicitor’s and agent’s correspondence and invoices during purchase.
- Property Survey details
- Land Registration details
- Mortgage/Finance details
- Insurance details
- Permissions for letting from freeholder, mortgagor, insurers.
- Plans, Planning approvals, any permissions from local authority and copies of all correspondence.
- Record of all repairs, alterations and improvements
- Annual Income and expenses – accounts
Tenants’ files should include everything to do with that tenancy:
- The Tenancy Application and Tenancy Agreement or counterpart lease.
- References and approvals.
- Copies of all correspondence with the tenants and authorities.
- Annual Safety Check Lists
- Gas Safety Checks and CORGI Certificates
- Electrical Checks
- Record of Entry and Exit meter readings
- Deposit details and receipts
- Write on the outside of the file for easy reference:
- Date Entered/Agreement Date
- Length and Type of Tenancy
- Deposit Paid
- Rental Amount and due date
- Tenant’s Contact Details.
Use a good accounting system, preferably one of the computerised ones. If you manage large numbers of properties you may need to consider one of the specialised Property Management Packages – see Software in our Directory section.
20. Avoid Expensive Litigation
Litigation (going to court) can be very expensive and should be avoided if at all possible. Following the rules and guidelines here should keep you out of trouble.
If disputes arise with tenants try very hard to discuss, negotiate and settle in an amicable way. Prefer the Section 21 mandatory possession route to Section 8. The latter means proving breach of contract which, if defended can result in an expensive legal wrangle,
If you have cause to re-possess a property, this should be a reasonably straightforward process, if you have followed these guidelines and you carefully follow the possession procedures – see Possession
If you have money owing, and you want to avoid the costs of going to a solicitor, you can use the Small Claims Court, which again should be reasonably straightforward.
In both cases it is possible for a private landlord to process these, but if you don’t feel confident, and some cases can be complex and beyond the competence of an amateur, see your solicitor – see Small Claims Court
By Tom Entwistle,
If you have any questions about any of the issues here, post your question to the LandlordZONE® Forums – these are the busiest Rental Property Forums in the UK – you will have an answer in no time at all.