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Renting Out a House for the First Time

 

There are lots of reasons why you might be thinking of renting your property, and sometimes setting up a rental property can be a surprisingly complex endeavour. First time landlords need to tick off a few things before finding a tenant, with a variety of logistical, legal and financial issues to take care of before your property hits the rental market.

Here are our 5 top tips on what you need to think about when renting out a house for the first time.

 

1. Weigh the costs against potential returns

Before you decide to let your property, you should analyse the returns alongside the expenses of becoming a landlord. You should assess the property’s rental yield and capital growth. Rental yield is the estimated annual return on investment from your rental property. Capital growth refers to the rate by which the property value increases/decreases.
While the rental yield and capital growth income may be appealing, you must also consider the required expenses. These can include:

  • Your mortgage repayments

  • Maintenance and refurbishments

  • Compliance inspections and documentations (such as Gas Safety & Electrical Safety)

  • Tenancy services e.g. inventory inspections and professional cleaning

  • Landlord insurance

  • Agency fees

  • Tenancy void periods (i.e. when your property is vacant, this includes lost rent, Council Tax, and utilities)

  • Landlord income tax

 

2. Meeting Safety & Legal Requirements

Health and safety is paramount. You must ensure that the property complies with gas, fire, electrical and furniture regulations. You or your agent should carry out safety checks on a regular basis. If you are a private landlord, you should keep a checklist for all necessary inspections, along with their latest inspection date can help you stay organised. Safety compliance requirements include:

  • EPC – the Energy Performance Certificate provides information on your property’s energy usage as well as typical utility costs. This must be carried out every 10 years.

  • Gas safety certificate – this certificate acts as a gas safety record for all gas appliances present within the property. A gas safety certificate is required annually.

  • Fire safety – the property and all furniture included must meet the minimum safety requirements.

  • Smoke and carbon monoxide alarm installation.

  • Licensing – most common with HMO properties, but can apply to all rental accommodation in a local authority area.

  • EICR – Since new regulations of 2020, a valid Electrical Installation Condition Report is required, with every rental property due for inspection at least every five years.

  • Deposit registration – all assured shorthold tenancy deposits need to be registered with a government approved deposit scheme.

  • Right to Rent – Landlords must legally comply with the Right to Rent. These are mandated checks to ensure the potential tenant has the legal right to live in the UK.

  • How to Rent – By law, Landlords/Agents must provide a copy of the Government’s ‘How to Rent’ guide before they move into the property.

 

3. Ensure all financing and permissions to let are acquired


This focuses on the type of mortgage you have and whether you have permission to rent out your property. If you initially had a residential mortgage, you will need to gain permission from your mortgage lender for any letting purposes. Not informing your mortgage company about letting your property can result in the repossession of your property of immediate repayment of your entire mortgage.

If you are buying the property with the sole intention of letting, you will need a buy-to-let mortgage. Interest rates and deposits tend to be higher than the standard residential mortgage. A buy-to-let mortgage’s lending maximum is usually dependent on your rental income. Most lenders expect your rental income to be between 25%-45% higher than your mortgage payments. A standard buy-to-let mortgage deposit is around 25%.

Additionally, for Landlord’s that are not freeholders of their property, and are a leaseholder, permission will be required from the freeholder to let out the property. The lease agreement between the leaseholder and freeholder will have a clause obtaining the need for letting approval.

 

4. Will you be using an agency?


Letting specialists will help you with most aspects of the letting process. It is possible to carry out the process yourself, but agencies can help alleviate the workload of pre-tenancy, mid-tenancy and post-tenancy tasks. Some advantages of using a letting specialist are:

  • Stringent vetting and referencing procedures mean you’re more likely to attract reliable tenants,

  • The secure deposit protection scheme administration is taken care of for you,

  • Letting agents can handle all of the paperwork in relation to your property,

  • Rent can be collected and chased up on your behalf,

  • Letting agents can deal with all the day-to-day property management and maintenance issues,

  • As experts in their field, and with good knowledge of market conditions and demand. Letting agents are also up-to-date on current legislation affecting landlords,

  • If you need to evict a tenant, a letting agent knows the correct legal process.

 

5. Finding the right Tenants and arranging an inventory

We’ve all heard horror stories of nightmare tenants, and making sure you have a thorough referencing process in place can reduce your chances of having these types of tenants. Although you can do this yourself as a Landlord by paying a referencing agency, a letting specialist will have a referencing procedure to find the best tenants for your property and likely cheaper than a typical referencing agency.

Additionally, a robust written tenancy agreement will protect your rights and your property. Although a written tenancy agreement is not a legal requirement, it is strongly recommended to have one. Disputes a very difficult to settle if you do not have a written tenancy agreement.

Lastly, before tenant’s move in, it’s important to organise an inventory inspection and schedule of condition to be drawn up on the property. Again, although this is not a legal obligation, we highly recommend that landlords do have one. An inventory records the condition of your property at the start of the tenancy and is updated at the end of the tenancy. If you do not have an inventory report, it is almost impossible to sustain a claim from the deposit scheme if they’re unable to provide a report as evidence that damage occurred during the tenancy. It means you may be unable to recover any cost for damage from your deposit.

If you have any more questions regarding letting your property…

We understand that letting your property can seem daunting at first. Feel free to call HW Residential Lettings, and we will happily provide you with free advice you need.

Call us: 01484 680308

Email: Casey@hwlettings.co.uk