FINDING & MANAGING TENANTS
Generally speaking, landlords divide into two camps: those who choose to self-manage once a letting agent has found them a tenant, and those who ask a managing agent to take care of everything.
The question ultimately comes down to whether you wish to be an active landlord, or one with a passive income. To help you decide which option is right for you, here’s a quick rundown of what’s involved.
Finding a tenant entails advertising your property, vetting enquiries for their suitability, attending viewings, negotiating offers and referencing prospective candidates. Creating a tenancy means getting your property professionally cleaned, preparing a tenancy agreement, collecting the first month’s rent and security deposit, drawing up a detailed inventory and then meeting the tenants to sign off on the paperwork and hand over the keys.
Ongoing management includes: organising gas and electrical safety checks; dealing with maintenance, repairs and emergencies; carrying out inspections during the tenancy; staying on top of lettings legislation; ensuring payment of rent; handling any issues that may arise with your tenants or their neighbours; meeting the tenants to collect the keys when they move out, and finally checking your property against the inventory to agree on any deductions from the security deposit.
If you live near your rental property and have the time and inclination to deal with all of the above, being a self-managing landlord could be for you. If you live further away, or you’re busy enough already, it could prove impractical to manage everything yourself.
PREPARING YOUR PROPERTY
As a legal requirement, you’ll need to comply with gas, electricity, and fire safety regulations by obtaining certificates and installing smoke alarms. But a successful rental property is also one that’s easy and enjoyable to live in.
If you’ve lived in your home for a long time, you’re probably used to its quirks, and you might not have remedied minor repairs. We’re all busy, and it’s easy to forget non-urgent tasks with a thousand other things to do.
For an inherited property, you may need to bring it up-to-date with modern standards and expectations. And if you’ve never lived there, you’re less likely to be fully aware of ongoing problems, overdue maintenance or outstanding repairs.
When a tenant moves in, they’ll experience all that’s good and all that’s bad in a very short space of time. This might prove overwhelming and upsetting for them while giving you a long and urgent to-do list.
Little things like leaky taps, wobbly handles, cupboards and doors that don’t close, or anything that requires a knack to function will almost certainly come back to haunt you. Fix them now to avoid them becoming a source of unnecessary friction.
For larger expenses like upgrading fittings and appliances, talk to us first. We’ll help you budget correctly and optimise your rental income by creating exactly the sort of home that tenants want to rent.
MORTGAGES AND TAX
Lending policies vary widely.
If you have a mortgage on your existing home, you’ll need to inform your lender that you intend to rent it out. Depending on the terms and conditions of your loan, you may be allowed to stay on the same arrangement, or they may switch you to a more expensive buy-to-let rate.
Before you commit to anything, explore other lenders to see whether you can remortgage with them on more flexible terms.
Talk to a financial adviser with experience in residential and buy-to-let mortgages to understand every option open to you. Rates and products are changing all the time, and you may even find a more competitive deal than your current one.
The rent you receive from your property is taxable, but there are various costs you can claim back. In general, maintenance, repairs and management are allowable expenses, but improvements are not.
As an example: if the oven breaks down and you need to replace it, you can take the cost off your income, but if you decide to upgrade the kitchen, that’s not an allowable expense. That said, you’ll undoubtedly increase the rent you achieve by keeping your property up to scratch and ahead of the competition.
INSURANCE & INVENTORIES
Most rentals are unfurnished. That’s partly down to the strict rules around fire safety and furniture, and also because tenancies are getting longer: tenants want to be surrounded by their own belongings to feel completely at home.
Yet even an unfurnished property has plenty inside that needs to be insured: kitchen cupboards & appliances; bathroom fittings; a heating system; floor coverings; electrical sockets & switches; maybe some light fittings, curtains or blinds. So, alongside your regular Building Insurance policy, you should take out Landlord Contents Insurance to provide you with sufficient cover in the event of damage.
An inventory is another essential component and can protect you and your tenants from unnecessary misunderstandings. The lack of one is why many landlords lose deposit disputes, because they need to prove loss or neglect to make a valid claim.
Preparing an inventory yourself can leave you vulnerable to dispute as it might be seen as subjective. You’re much better off instructing an experienced and independent third party to provide a comprehensive written and photographic account of your property’s fittings and condition.
STAYING WITHIN THE LAW
Depending on your mindset, landlord legislation is either a fascinating and forever-changing landscape that thrills at every turn, or a minefield of obstacles and paperwork that sends you running for the hills.
Whatever your view, it’s your responsibility as a landlord to ensure that your property complies with all current regulations around gas, electrical and fire safety, as well as habitation. It’s a non-negotiable requirement, and ignorance is not a defence. Fines can be heavy, so don’t leave anything to chance.
If you intend to be a self-managing landlord, the best way to stay fully informed about your responsibilities is either through online landlord forums or by regularly checking the government’s website for updates to the law. When you use a managing agent, you effectively shift the accountability for knowing the law to them: an attractive option when legislation isn’t your favourite read!
Becoming an accidental landlord can provide you with an income-producing asset for many years and into retirement. By preparing your home correctly, staying on top of maintenance, attending swiftly to repairs, and keeping abreast of legislation, you’ll lay the groundwork for a run of successful tenancies.
Do you have any questions about renting out your existing home or an inherited property in Liverpool? We’ve helped many people step into landlord life with minimal fuss and who now enjoy an extra income stream with many positive impacts on their lifestyle.