Becoming a landlord is becoming a popular move for those wanting to make a bit of passive income. That said, in order to go down this path, there are a lot of practicalities to think about.
Firstly, you have to find a house and decide whether to rent it out to a family or a group of people, like students. You’ll then need to put in an offer, get a quote from a conveyancing solicitor online, as well as get a surveyor to view the property. All this before you’ve even purchased the house!
The question is, is this the next investment for you? To discover what it takes to be a landlord, and how to join the club, you came to the right place…
Why Do People Choose To Become A Landlord?
Over recent decades, rent prices have sky rocketed. That said, with housing prices also continuing to increase with them, it’s made it difficult for young people to get on the property ladder.
Because of this, we are now witnessing a generation who continue to rent way above the age of 30. This means the market to become a landlord is rife.
For anyone who has some spare savings to invest in property, this is a sure-fire route to earn. Although there are estimated to be around 1.75 million private sector landlords in Britain already, demand continues to outstretch supply, so there’s always a market for it. Ultimately, there’s always someone looking to move, so tenants are never hard to come by.
With these high rent prices, landlord revenue streams are pretty high. So, they are able to pay off mortgages within years, whilst never being short of tenants. Sure, being a landlord is something you need to commit to. However, this is something that you can easily make money from, without having to put in the usual 9 ‘til 5.
What Should I Know Before Becoming A Landlord?
From this, it might seem as though getting into the landlord business is ideal for you. That said, you must go into this with open eyes before committing. With this in mind, here is a list of some of the issues you might have to face along the way:
• You might get a dodgy tenant who you’ll have to chase for rent, and might not take care of the property. This might put you out of pocket due to unforeseen repairs and other expenses.
• Evicting a rogue tenant isn’t as easy as serving an eviction notice; it can take months, meaning you’ll have to deal with them in your house through this whole ordeal.
• Laws for landlords frequently change, so there’s a lot to keep up with.
• Even with an agency, all responsibility falls on the landlord.
• You always need to keep an extra pot of cash aside for any unforeseen damages, repairs, maintenance, and more.
• There’s more to it than just mortgage payments outgoing and rent payments incoming. There are so many more hidden costs you didn’t even know existed.
• There are a huge number of rules, responsibilities and regulations to keep up with, which we’ll dive into more a little later.
• You might find that void periods - when the property is vacant - are quite common. This can set you back thousands at a time, but you’ll still have to keep up with council tax and mortgage payments.
What Safety Regulations Do Landlords Have To Adhere to?
We’ve already mentioned the many responsibilities of a landlord. That said, it’s best that we go into them in more detail here so you can be ready for what’s to come:
The Home Must Be Fit For Human Habitation
This pointer should go without saying. That said, for anyone who’s ever lived in student rentals, you’ll know that there are landlords who definitely don’t always adhere to the rules. Any property unfit for inhabitation might have the following characteristics:
• Unstable
• Neglected and in bad condition
• Serious dampness throughout the property
• Not enough ventilation
• The property layout is unsafe
• Not enough natural light can get into the property
• The water supply isn’t working properly
• Drainage systems or lavatories are problematic
• Preparing food and washing up dishes is difficult
These are just some of the living conditions that must be adhered to, alongside the 29 hazards set out in the Housing Health and Safety Regulations 2005.
Annual Gas Safety Checks
In order to ensure the house complies with all regulations, gas safety checks must be annually carried out. A Gas Safety Engineer should be hired to ensure that all the piping and flues throughout the property are maintained and safe. Without this average yearly cost of around £60, it could end up causing housefires.
Smoke And Carbon Monoxide Alarms
Similarly, the smoke and CO alarms must be regularly checked to ensure they’re working. This could be life-threatening to your tenants, if not. Smoke alarms should be fitted on all floors of the house, and CO alarm should be fitted in all rooms with a wood burner, fireplace or gas stove/cooker.
Electrics
All electric appliances and installation throughout the house must be safe to use. Although there aren’t any mandatory checks for this, like with gas safety, many landlords will choose to check these regularly, just in case.
Energy Performance Certificate (EPC)
Since 1st April 2018, it has been a legal requirement for all landlords to ensure their properties have a minimum EPC rating. This ensures that the energy use is efficient, helping to boost general sustainability efforts. To prove this, a certificate must be readily available.
Minimise Legionella Risks
Legionella is a bacterium that can cause a number of fatal diseases, including Legionnaires' disease or Pontiac fever. It’s transmitted through breathing in small water droplets containing the bacteria. In any property, it could therefore be transmitted through showerheads and taps.
As a landlord, the safety of your tenants should be a priority. In order to avoid this, there are some steps you can take, which are divulged in more detail here.
What Extra Costs Are Involved?
As you can see, there’s a lot to think about in terms of healthy and safety regulations. That said, these aren’t the only responsibilities you have; there are more where that came from, many of which will cost you money. So you know exactly what you’re required to do, and where this may set you back, landlords are required to pay for:
• A Landlord License: some local councils will require this before you can let a property out. It must be renewed every few years, and usually costs around £500.
• Maintenance And Repairs: if anything within the property breaks, this might make it unsafe. What’s more, any leaks, plumbing issues, broken appliances etc. must all be fixed; all the landlord’s responsibility.
• Mortgage: it’s unlikely you will have purchased the house outright, so you’ll need to be able to pay back mortgage payments monthly.
• Furniture: if the property is described as “furnished” when rented out, it must be furnished with couches, beds, cupboards, drawers, wardrobes etc. This furniture must be replaced as and when it becomes too worn out, or becomes damaged or unsafe.
What Other Jobs Does A Landlord Have To Do?
The responsibilities don’t end there. There are also other costs and regulations, bar health and safety and general upkeep, that must be known. These include:
• House In Multiple Occupation (HMO): the property falls in this category if there are three or more people living under the roof who are unrelated, for example a student house. In this case, there are certain obligations the landlord must adhere to.
• Secure Tenant Deposits: a deposit scheme isn’t compulsory, but will allow you to secure the deposit so it can be paid back when they leave.
• Immigration: you must be certain that your tenant has the right to rent in your country.
• Decide Whether To Use An Agent Or Not: letting agents can help a lot with getting your property out in the market. That said, you have to pay them a fair bit of the cut – usually around 10 to 15 percent of rent. When it comes to actually helping with the property, they often care little, and leave it to the landlord.
How To Become A Landlord
Now that you know what it takes to become a landlord, it’s time to learn how to become one…
1. Check If You’re Entitled To Let
There are restrictions over whether you can rent a property out or not. For example, if you aren’t the legal owner of the home and are leasing it, you will need the owner’s permission to rent it out. Some councils and licensing schemes might also have restrictions against this. Even if you do own the property, you need to be sure that renting it out is compatible with your mortgage. You might choose to move elsewhere but keep the property to rent out, but this will be at the mortgage lender’s discretion whether it’s permitted not.
2. Make Sure The Property Meets The Requirements Above
Once you’re sure the property can be rented out, you must do all the checks to ensure it’s liveable. Meeting these regulations is required by law, so don’t miss this step.
3. Agency Or Yourself?
As we’ve seen, agency fees can be expensive, and it might take up a huge chunk of your income without much reward. Deciding on whether you want to manage the property yourself or not is an important step to consider.
4. Find The Tenants
A good idea might be to use the agency for advertisement purposes only. This way, you can get out there into the market, without too many hidden costs. You could also advertise yourself, but this can be a little trickier.
The key is to make your property look the part. So, ensure it is good-looking and functioning inside and out, and you’ll be good to go.
Still Want To Become A Landlord?
Clearly, there’s more to being a landlord than it might seem at first glance. Although this is certainly a great way to make a bit of income on the side, you need to be aware of everything that’s required to comply by the law. So, is this your next financial move?
