If the idea of renting out property sounds appealing to you, then youâ€™ll need to learn how to be a landlord. But what exactly is a landlord and how do you go about becoming one?
In this guide, weâ€™ll provide landlord advice concerning these key questions, as well as the practical steps you should take to create a property portfolio and start renting.
A landlord is a person or business who provides accommodation to another person or group of people for money on a contractual basis.
Rental properties are in demand in many areas of the UK. So whether you intend to get a buy-to-let mortgage or youâ€™re what is known as an â€˜accidental landlordâ€™ (through, for example, inheriting a property or renting out your home while waiting for a buyer), being a landlord could be ideal for you.
Note that this guide will focus on renting out a property that is ready for tenants to live in. If youâ€™re interested in acquiring and renovating properties, check out our guide on how to become a property developer first.
As a landlord, your responsibilities are likely to fall into the following themes: deposits, finances, property, safety and tenants.
Within each of these categories, the landlord responsibilities youâ€™ll need to adhere to in the UK are as follows:
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You can find further information on landlord responsibilities in England and Wales in the governmentâ€™s guide to renting out a property.
The registration and regulation processes youâ€™ll need to comply with will depend on where the property you rent out is located. There are different processes for England, Wales, Scotland and Northern Ireland.
In England,your regulations will be determined by your local council, whereas in Wales, Scotland and Northern Ireland itâ€™s the local parliament or assembly that governs this.
What remains the same across the UK is that youâ€™ll need to have specialist landlord insurance. These policies can protect your building and contents (if you have a furnished property) as well as provide emergency assistance.
Take a look at the below table to find out how youâ€™ll need to get set up as a landlord based on where your property is:
|England||Check with local council||Follow process as instructed by local council, if required|
|Wales||Yes||Register with RentSmart Wales
A licence is also required if youâ€™ll be involved in managing the property; if not, you must use a licenced letting agency
|Scotland||Yes||All private landlords are required to register
Letting agencies arenâ€™t legally required to do so but are encouraged
Landlord registration is in addition to a licence for a house of multiple occupation (HMO), if applicable
|Northern Ireland||Yes||All private landlords must register
The exception is if youâ€™re renting to someone who isnâ€™t classified as a tenant, for example renting out a room in your house to a lodger
While landlord registration in England isnâ€™t compulsory in all areas, you may consider voluntarily joining an organisation such as the National Landlords Association (NLA) or Residential Landlords Association (RLA).
They can provide advice and assistance, usually for an annual fee. Plus, being an NLA accredited landlord suggests professionalism, and tenants can search for you on the NLA website. This could be particularly useful is youâ€™re going to self-manage your property and want to show prospective tenants that youâ€™re credible.
Note that your landlord registration will need to be renewed. The length of time varies depending on where youâ€™re situated, however itâ€™s generally between three and five years.
Also, if your property is in an area that requires landlords to register and you havenâ€™t, you wonâ€™t be able to rent out the property. If you do so while unregistered, you can face fines and bans from renting.
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There are a few key points that landlords should be aware of in this wide-ranging piece of legislation. These include:
HMRC â€“ this stands for Her Majestyâ€™s Revenue and Customs; the tax department for the UK. Youâ€™ll need to contact them to find out more about completing tax returns and paying National Insurance contributions as a landlord.
Insurance providers â€“ when you rent a property out, youâ€™re required to have specialist landlord insurance so that the property, as well as your income and investment, are protected. Providers can offer cover for buildings, contents (for furnished rental properties) and loss of rent as well as legal protection.
Your local authority â€“ your local authority is responsible for key services such as council tax and rubbish collection, so you should inform them that your property will be rented out.
What is a House of Multiple Occupation (HMO)?
A property that is rented to three or more tenants that form one or more households and has shared bathroom and/or kitchen facilities is a HMO.
If this applies to your property â€“ or you intend to rent it out in this way â€“ then you must register and obtain a licence. The process and conditions differ for this depending on where you are in the UK. You can find out more about the requirements for HMOs in England and Wales, Scotland and Northern Ireland.
How much to charge for rent and the amount of potential income you can make are two key considerations for every landlord. Here, we offer a guide to some of the most common financial concerns youâ€™re likely to face.
Some of your main expenses are going to be mortgage repayments, insurance premiums and letting agency fees (if you choose to use one). Occasional repairs and a more extensive refurbishment of your property every few years should be factored into your budget as well.
In addition, itâ€™s wise to plan for periods of time when the property may be empty, such as in between tenancies or while undergoing repairs.
Once you have an idea of what your expenses are going to look like, you can factor this into the rent price. Youâ€™ll also need to compare your properties to other similar ones in your area.
Plus, be sure to factor in any additional features that make your property stand out, such as being recently renovated, or having a balcony or garden, to help ensure youâ€™re charging competitively.
Additionally, whether your property is offered on a furnished or unfurnished basis will also affect the price.
In time, you may consider increasing the rent as and when your expenses go up. You should balance the need for making a profit with retaining reliable tenants and the process of finding new tenants.
If youâ€™re renovating, choose plain, neutral colours for decoration, as well as fittings and furnishings (if applicable). These tend to work best as theyâ€™re likely to appeal to the most amount of people.
You may be required to pay tax on the profit you make from your property. This is whatâ€™s left from the rent after your allowable expenses (such as letting agency fees as well as insurance and repairs) have been deducted.
Property law and tax can be complicated, so itâ€™s wise to seek advice from a specialist legal professional.
You should consider how much profit youâ€™re left with and assess how you plan to manage it.
For example, if youâ€™re looking to build your property portfolio, you may want to reinvest this into other properties. Alternatively, you may plan to put it into a savings or pensions account.
Itâ€™s always wise to have a plan for worst case scenarios, such as tenants leaving or your property being damaged. Assess how you would deal with these situations and what their financial impact may be.
One of the key decisions youâ€™ll need to make is whether youâ€™ll manage the property yourself or use a letting agency to do it on your behalf. Generally, agentsâ€™ fees are around 10% of the rent. Usually, they offer three types of services:
|Whatâ€™s the type of service?||What does it include?||How much does it cost?|
|Letting only||The process of finding a tenant only. The rest of the process is managed by the landlord after this.||A one-time fee.|
|Letting and rent||The above, plus collecting the rent on your behalf. Repairs and maintenance are still the responsibility of the landlord.||A singular fee and a percentage of the monthly rent.|
|Full management||Finding a tenant, collecting rent and property maintenance.||A percentage of the rent on an ongoing basis.|
How you decide to manage your property will depend on what you value more â€“ your time or your money. Also, itâ€™ll depend on your circumstances â€“ will this be your main work activity or is becoming a landlord a side hustle?
Similarly, self-management may be possible with one property, however if you intend to have multiple properties then using a letting agency may be more viable.
Now that youâ€™ve learned more about the regulations you may need to comply with as a landlord, as well as how to budget and market your property accordingly, you now need to focus on finding people to live in it.
The first step is to ensure that your property is suitable for renting. You might opt for a buy-to-let mortgage specifically in an area where rental properties are in high demand.
Or, if youâ€™ve inherited a property or itâ€™s your own home, this means ensuring it meets health and safety requirements, as well as looking like a nice place to live in.
Next, you should focus on the local area â€“ what facilities and amenities does it have? If the property is situated in the city centre, youâ€™re likely to have public transport connections and shopping centres, whereas a suburban property may benefit from motorway links and green spaces.
After this, you need to consider who your target audience is â€“ different types of renters will require different elements from a property. Your property will often dictate which type of tenants youâ€™re likely to rent to.
For example, a house with a garden is likely to attract families. Other types of tenants include local housing authorities, professionals, students and workers.
If you rent your property to students or as a HMO, be sure to check which specific rules and regulations apply to these types of tenants.
Research your target audience to get to know them better. For example, websites such as RightMove and Zoopla can show you what other properties in your area and price bracket are like.
Similarly, speaking with letting agents and other landlords can offer insight into how to find the right tenants for the type of property you have.
Of the several types of tenancy, an assured shorthold tenancy (AST) is the most common. Whichever type of tenancy agreement you go for, you should also be aware of letting agency management contracts too.
Be sure to check exactly what you have to pay for and do, both in terms of finding tenants and managing the property more generally.
Where your property is located will also be crucial to finding tenants, both in terms of the type of tenant and what the supply will be like.
While major cities may have a higher number of prospective renters, tenants have more properties to choose from too. Alternatively, smaller towns and rural locations may have fewer potential tenants but a limited number of properties.
Renting to tenants on benefits: what do you need to know?
You may be familiar with seeing the phrase â€˜no DSSâ€™ on lettings adverts. DSS stands for the Department of Social Security, a government department that no longer exists. The phrase continues to be used, however, and now refers to tenants on benefits in general.
The same tenancy agreements are applicable for tenants receiving benefits. Similarly, your landlord insurance should still provide cover too, although be sure to check the details with each provider.
One point of difference is that if the tenant falls into rent arrears of eight weeks or more, then you can make a request to the local authority for the rent to paid to you directly instead. This request may be withheld in certain circumstances, such as if there are outstanding necessary repairs.
From reading this article, youâ€™ve learned more about what a landlord is and what landlord obligations in the UK are. Plus, weâ€™ve offered tips on making money and finding tenants.
So where do you go from here? The next step is to actually get going and market your property â€“ good luck!