With ever increasing house prices preventing millions of people getting on the property ladder, there is a growing demand for rental properties. With this in mind more and more people are jumping on the rental bandwagon and looking to make money through letting property.
If this is something you have been thinking about but are unsure where to start, then why not let me help you.
In theory letting a property should be the easiest thing in the world, however there are lots of pitfalls not to mention “horror” stories out there.
FACTORS TO TAKE INTO CONSIDERATION WHEN DECIDING
The first thing to decide is whether you want to advertise for a tenant yourself, contact an agency to find a tenant for you, or go to a management company who will handle everything from finding a tenant through to maintenance issues. The third option is stress-free, money well spent and in my humble opinion the best option! Why have all the hassle of organising everything yourself when you can pay someone to do it for you.
At this point you need to think about some of the regulations that are a legal requirement. These include having a valid gas safety certificate which must be renewed every 12 months, tenants must also have a copy of this when they start their tenancy. An EPC (Energy Performance Certificate) is also required. Both must be in place before you market your property.
Once you have decided to go ahead you need to think about what rental income you would want. To get the best rent your house needs to be in good condition and presented to a high standard. As I mentioned in last weeks blog on the “Do’s and don’ts of presenting your home” you need to make sure your outside space is neat and well presented. Inside any walls that might need a coat of paint or cracks that need filling in should be done etc. No one wants to move into a dirty untidy mess. Now is also a good time to decide if you want to let it furnished or unfurnished. If you go down the furnished route then all furniture must be in good condition and meet health and safety regulations.
Once all this has been done you can look at getting it valued and setting the rent. Remember if you’re paying a mortgage on the property you will need to ensure that the rent covers all your costs especially your mortgage. You will also need to think about management fees, legal fees, insurance and of course allowing money for any possible maintenance issues. Whilst I’m sure this seems like common sense, it’s all too easy to miss or forget something and why would you want to let your property if you end up making a loss through not being organised.
FINDING A TENANT
Now your property is ready to go all you need is a tenant! Whether you use an agency or not there are lots of ways to advertise from all the usual portals including Rightmove and Zoopla, through to websites such as Gumtree and not forgetting “good old” social media – Facebook is a great way, all you need is for your post to be shared a few times and before you know it you have a tenant. They will now need to go through all the referencing and legal checks to make sure they are eligible to rent. Providing they pass all the checks you are almost ready to set a moving in date.
Yes “inventory” is a scary word! Once your tenants are approved you will need to complete an inventory of the property. This should include a list of everything in the house with details and pictures of the condition and all meter readings. If you have decided to use a management company, they will do all this for you. You should also be doing a mid-term inspection and one at the end of the tenancy. Having the inventory in place is extremely important as it can prevent potential disagreements with tenants further down the line. Having someone else do these is worth the management fee alone!
IT’S TIME TO SIGN THE DOTTED LINE
I’m now going to contradict myself and say this step is THE most important – signing the tenant up. 9 times of 10 the most used form is an AST (Assured Shorthold Tenancy Agreement). The AST lays down what is required of both the tenant and landlord. The stand out point of the agreement is it clearly states the landlord has the right to repossess the property at the end of the agreed term. The landlord is obliged to provide the tenant with 2 months’ notice if they want to terminate the agreement.
It is at this point you will take the first month’s rent and the equivalent amount as a deposit. Taking a deposit is vital as you would need this should you have to repair any damage at the end of the tenancy etc. All deposits must be held in a secure location and I would recommend DPS (The deposit protection scheme).
INFORMING RELEVANT COMPANIES
Top of the list of companies to inform is your insurance provider, if you fail to notify them you have tenants and then something happened to the house i.e. fire you wouldn’t be covered. I can’t imagine there are many people out there who could swallow that kind of financial hit should the worst-case scenario happen. Don’t forget you will need to let your mortgage provider know as well, it also worth speaking to them before you even advertise your property as not all mortgage providers allow you to let.
Once everything has been signed you should notify all external companies such as utilities, gas and electric and finally council tax to send all future bills direct to the tenant. Again, the same rules apply when the tenant leaves. While I don’t want to sound like a broken record this would be another job that a management company would do for you, proving once again that it would be money well spent.
There is a lot to consider and even more to put into place and while on paper it might not appear to be too big or involved it really is! All it takes is for a boiler to break down and suddenly you are tearing your hair out in a world of maintenance issues, quotes and the thankless task of trying to organise access to the house.
That is why I would seriously consider going down the route of using a management company if you hadn’t already planned to. Just thinking about everything that is required gives me a headache, so why not save yourself that pain and pay someone to do it all for you – leaving you lots of time to plan your next holiday.
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