Business Advice

How To Become A Landlord In The UK

Allison S Robinson | 12 August 2022 | 2 years ago

How to Become a Landlord UK

Ever wondered how to become a landlord in the UK? To become a landlord, you will need to follow 5 simple steps.

  1. If you don’t already have a property that you can rent out to others, you will need to purchase a buy-to-let property. This can be either residential premises like a house or flat, or a type of commercial premises such as a warehouse, retail unit, or office building. Land can also be rented out to others.
  2. Unless you can afford to buy the property or land outright, you will need to obtain a buy-to-let mortgage from a lender. You will typically need to have a good credit score and a steady income to do this.
  3. Once financing is agreed upon, you will then need to find tenants for your property. You can do this by advertising it yourself online or in the newspaper, or through a local Estate Agent. When screening potential tenants, it is important to check their credit history and references.
  4. Once you have found suitable tenants, you will then need to sign a tenancy agreement with them. This agreement should outline the rights and responsibilities of both parties and will help to prevent any problems down the road.
  5. Finally, you’ll need to keep your property in a good habitable condition that complies with necessary safety legislation to meet your responsibilities as a Landlord and make sure that your tenants are happy. You can do this yourself or work with a management company to act on your behalf. By following these steps, you can become a landlord in the UK.
Read on for more detail on each of these points, plus guidance on the responsibilities that you will have as a landlord. By the end of this article, you should have a good understanding of what a landlord is and all the things you need to know about becoming a landlord.

What Is A Landlord?

First things first, to become a landlord, you need to know what one is, so let’s start there. A landlord is a person who owns and leases land or buildings to another person. The leasing arrangement gives the tenant the right to use the property for a specific period, usually in return for a rental fee. The landlord is responsible for maintaining the property and paying any taxes or other fees associated with ownership. In some cases, the landlord may also be responsible for providing utilities, such as water or electricity.

Landlords typically lease their properties to tenants for residential or commercial purposes. Residential landlords generally lease their properties to tenants on a month-to-month basis, while commercial landlords may lease their properties for longer periods, such as a year or more.

Why Become A Landlord?

Being a landlord can be hard work but for many people, owning rental property is a great way to earn extra passive income on top of their regular jobs. With the right property and tenants, you can enjoy a steady stream of rent payments that can help to cover the mortgage or even provide a lucrative return on investment.

Being a landlord may also appeal to people who like the idea of being their own boss. As a landlord, you can choose when and how to make repairs, set your own rental rates, screen tenants carefully to minimise the risk of problems down the road, and choose when to sell the property to hopefully make a profit on the price you originally paid.

Whilst these benefits are attractive, it’s important to remember that being a landlord also comes with a certain amount of responsibility. You’ll need to stay on top of maintenance issues and be available to handle any tenant issues that arise. But if you’re up for the challenge, being a landlord can be a great way to achieve financial independence and success.

5 Steps To Becoming A Landlord

Purchasing A Buy-To-Let Property

To be a landlord, you will need a commercial or residential property or land to rent out to others and you have the choice of whether to make your purchase via the open market or at an auction house. Whichever route you take to build your property portfolio, you need to make sure that you know the maximum price you are willing to pay, as well as the potential rental income and running costs of the property.

With this information in hand, you will be in a much better position to find a buy-to-let property that meets your needs and budget. Properties purchased at auction must complete within 30 days, so this purchasing route is only really suitable for cash buyers that don’t need to arrange a mortgage.

Get A Buy-To-Let Mortgage

Coloured post-its with buy to let wording on

If you want to buy a property to rent out, you’ll need to get a buy-to-let mortgage. This is a mortgage that’s specifically designed for people who want to purchase a property to rent it out.

The process of getting a buy-to-let mortgage is similar to getting a mortgage for your own home. You’ll need to find a mortgage broker or lender, and you’ll need to provide information about your income and financial situation. You should be aware that buy-to-let mortgage interest rates are usually higher than standard mortgage rates. This is because lenders view buy-to-let mortgages as being riskier than standard mortgages. Secondly, you’ll usually need to make a larger deposit when taking out a buy-to-let mortgage. And finally, your mortgage payments will be based on the rental income of the property rather than your own personal income.

When getting a buy-to-let mortgage, it’s important to do your research and compare different deals before making a decision.

Find Tenants & Market The Property

To find reliable tenants, you will need to market the property and screen applicants to ensure the right fit which usually involves conducting a credit check and criminal background check. Start by setting the annual rental income that you want to achieve, this will set the price range that the property will be listed at when you market the property.

Marketing the property can be done in several ways. Consider marketing it yourself via property listing websites and marketplaces or newspapers, or you can work with high street or online letting agents that do this for you. If using an agent, you will need to pay a fee for the service, which is usually set as a percentage of the agreed rental price.

Finally, you need to screen the potential tenants. Once you have found the right tenant, you need to check references, take a deposit from the tenant and sign a lease agreement. The deposit acts as security against any damage to the property or rent arrears. In England and Wales, the deposit must be protected in an approved tenancy deposit scheme which ensures that tenants get their deposit back at the end of the tenancy, provided they have met the terms of their tenancy agreement.

Tenancy Agreements

Before your tenants move in, you will need to provide a tenancy agreement that both parties sign that outlines the terms of the tenancy, including the length of the lease, the amount of rent, and any special rules or regulations that apply to the property. In England and Wales, most tenancy agreements are assured shorthold tenancies (ASTs). This type of agreement gives you the right to live in the property for a set period, typically six to twelve months. You may want to include a clause that means you can evict the tenant if they fail to pay rent or damage the property. Commercial tenancy agreements can be more complex documents, so it is important to seek legal advice before signing one.

Decide how you want to manage your property

There are two choices. Initially, you should manage everything by your own standards. Build rapport with tenants thereby cutting the costs of the agency services. Obviously, it could be very labour-intensive. It means finding and paying the tenants and having an emergency response team ready for a quick response. You have got to keep your hands free when fixing your washing machine. Landlords have 24 hours to give the owner written notice of the visits to the premises. The second possibility would be hiring a landlord. It makes you feel pretty hands-off but sometimes works amazingly well if you don’t have a place near your rental property.

Meet Your Obligations As A Landlord

folder with landlord-tenant law title

Finally, you’ll need to keep your property in a good habitable condition that complies with necessary safety legislation to meet your responsibilities as a Landlord and make sure that your tenants are happy. This includes taking out adequate insurance and meeting your obligations under Landlord and Tenant law which we’ve covered in more detail below.

Insurance For Landlords

Don’t make the mistake of thinking that a standard home insurance policy will cover you against unexpected damage or repairs as a landlord. Specialist Landlord insurance cover can help to give you peace of mind, knowing that your property is protected. These policies typically cover damage caused by tenants, such as accidental fires or water leaks. It can also cover theft and malicious damage and can even cover loss of rent and unoccupied cover if your tenants are forced to move out due to damage to the property. With landlord insurance in place, you can relax knowing that your investment is protected.

Legislation Governing Landlords

As a landlord, you have the responsibility of keeping your rental property in good condition, sticking to fair housing laws, complying with health and safety regulations including regular fire and electrical safety inspections, fully insuring your property, as well as responding to tenant needs in a timely manner. This all means that one of the most important aspects of being a landlord is understanding the Landlord and Tenant legislation that governs renting property.

If you’re a landlord in the United Kingdom, there are several resources available to help you rent out property smoothly. The first step is to join a professional organisation such as the National Landlords Association (NLA) or the Residential Landlords Association (RLA).

These organisations provide support and advice on all aspects of being a landlord, from tenancy agreements and legislation to property maintenance and rent collection. In addition, they offer a wide range of resources, including online forums, helplines, and publications. You can also find helpful advice on the government’s website, which includes guidance on your rights and responsibilities as a landlord.

By taking advantage of these resources, you can ensure that your rental property is safe, compliant, and profitable and that you and your tenants are protected as far as possible from legal issues arising.

Costs Involved In Being A Landlord

Owning a property that you rent to others isn’t a cheap venture. There are plenty of upfront and ongoing costs that you must factor into your decision on whether becoming a landlord is right for you or not. Some, but not all of these costs may be covered by the rental income you are generating from renting your property to tenants.

Have you considered and budgeted for the following costs

  • The purchase price plus any stamp duty land tax, solicitor, surveyor, and estate agent fees due
  • Fees & charges when selling which can include any capital gains tax due, solicitor, surveyor, and estate agent fees due
  • Accountant fees for managing your rental income and preparing self-assessment returns
  • Fees for managing agents if you don’t want to manage the property yourself
  • The cost of marketing the property via an estate agent.
  • Repairs & maintenance costs quickly add up. Budget for annual running and repair costs, ad-hoc maintenance, and emergency jobs
  • End of tenancy cleans & repairs
  • Statutory safety inspections & certificates for rental property – EPC/Gas & Electrical safety
When submitting a tax return, Landlords can deduct a variety of allowable expenses from their taxable income, including mortgage interest, property taxes, and repairs. Note that insurance premiums and utility bills are not tax-deductible. You should keep documentation of all expenses in case of an audit. By understanding what expenses are deductible, landlords can minimise their tax liability and maximise their profits.

How To Work Out Your Rental Yield

If you are thinking of buying an investment property, one of the most important things to consider is the rental yield. This is the amount of money that the property will earn you in rent as a landlord compared to its purchase value. Knowing this information enables you to see if the property is a good investment.

To work out the rental yield, take the annual rent and divide it by the purchase price of the property. For example, if you’re looking at a property that costs £200,000 and has an annual rent of £10,000, the rental yield would be 5%

You should remember that rental yield will change over time as the price of the property goes up or down, and you will also need to factor in expenses related to owning and maintaining the property to get a full overview of the value and profitability of your investment.

Summary

We hope this article has given you a simple overview of the five main steps needed to become a landlord in the UK. As you can see, it can be a profitable and rewarding experience, but it is important to be aware of the costs and responsibilities involved. There are a variety of resources available to help landlords stay compliant with legislation and protect their interests, and by taking advantage of these resources, landlords can maximise their profits while keeping their tenants safe and comfortable.

 

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