Investing in a property and renting it out can be a great way to make extra income. It can be a brilliant investment for your future, or even a way to maintain a sustainable income for yourself now, or indeed both.
However, as a first time landlord, there is a lot to learn and think about such as the law around lettings and financial considerations. With so much o understand there are many first time landlord mistakes that are all too easy to make as you learn the ropes.
So what are the mistakes you should avoid as a landlord? Read on to learn some of the things you shouldn't skip when letting out a property.
5 Mistakes to Avoid as a Landlord
If you want to be a landlord then you will need to keep up to date with current regulations and rising costs. There are a lot of things to consider before becoming a landlord. The buy to let market used to be very enticing a few years back, but the costs are always changing, making less profit for landlords. You need to be prepared and accept that things may not always stay the same as when you first let out a property. So long as you can adjust and adapt then renting out a property can still be a great investment. Obviously you will want to seek legal and financial advice to ensure it is the wisest option for you. But for now, here are five things you shouldn't avoid as a landlord.
1. Never skip background checks of potential tenants
Unfortunately you cannot take prospective tenants at face value. You will need to run some background checks to ensure they are in a suitable financial position to pay rent each month in full and on time. This can be through references from previous landlords or letting agents, as well as proof of income from their employer. Keep a record of these checks in case you need them in the future as evidence that you undertook such searches if you need to claim on a rent guarantee insurance or similar. To understand what rent guarantee insurance is, then check out Just Landlords who have a wealth of information on their website.
2. Never ignore the law for letting accommodation
There are lots of legalities when it comes to letting out your property, from fire safety standards to the tenants legal rights and your obligations to them. Before renting out your property, or even taking the leap, it's vital you familiarise yourself with all the current laws.
In England and Wales you will want to understand the legal standards that are required for renting in the private rental sector (also known as PRS). They can be found in the Housing Act 2004.
Another useful source to ensure your property is up to scratch is the UK Government's list of of possible hazards, which you can find in this Housing Health and Safety Rating System guidance document.
Electrical safety standards for landlords are also another important factor when renting out your property and these can be read in government guidance at 'Guidance setting out how the Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 affect landlords, tenants and local authorities.'
If you are considering renting out a single property to multiple tenants then you'll need to brush up on the legalities for Houses in Multiple Occupation, also known as HMOs.
There may come a time when you need to evict a tenant, or tenants, but as you may have guessed, there are rules and regulations surrounding eviction too. You can't simply evict tenants whenever you feel like it. You will need to understand the Section 8 or Section 21 notice for England and Wales. You will need to apply the correct section to your eviction and understand the ins and outs such as the notice you must give the tenant and the correct procedure.
There is a lot to know and understand when it comes to letting out your property. Ultimately it is ensuring your property is safe, meets required standards and that both you and your tenants have legal rights.
3. Regularly update contact details
At the start of a new tenancy you will exchange contact details with your tenant such as phone numbers and email addresses. Don't forget to check these are up to date, perhaps when you do a house inspection, to ensure everyone can be reached when needed.
4. Remember to inspect your property
You will want to regularly inspect your property to ensure it is being cared for appropriately by your tenants. They have a responsibility to keep it clean and tidy and in a respectable condition. They should make you aware of any breakages and damage.
Don't inspect too regularly as you will be invading on your tenants privacy. Remember, it is their home. You must give at least 24 hours' notice in writing before inspecting, but it would be considerate to give much more than this. See the Landlord and Tenant Act 1985 for more guidance on this.
Equally, make sure you maintain the property and fix any broken down appliances you provide, or any other damages promptly. It's your responsibility to maintain the fixtures and fittings and to ensure the property is safe.
5. Don't forget about landlord insurance
Like you would take out a buildings insurance policy for your own home in case something goes wrong, you will also need to take out a landlord insurance policy on the property you are renting out. This will be a different type of policy to your home insurance as it's specific to renting out a property, so make sure you search for a quote for landlord insurance so you are adequately covered if something goes wrong.
It may also be a condition of your mortgage, if you have a mortgage on the property you let out, so check their terms and what it insists your landlord insurance must have cover for within the policy.
Landlord insurance will cover things like theft by your tenants, as well as any damage they may purposefully cause.
As a landlord, you may also want some extra peace of mind when it comes to insuring your property. There are various options such as unoccupied property insurance and also rent guarantee insurance.
Essential Aspects of Successful Landlording
While we've covered some things to avoid... here are some more things you should do as a landlord...
Setting clear expectations and communication
Establishing clear expectations and rules from the outset of the tenancy is paramount. Create a comprehensive tenancy agreement that outlines the rights and responsibilities of both you as the landlord and the tenants. Clearly communicate regulations regarding pets, smoking, maintenance responsibilities, and rent payment methods. Effective communication plays a pivotal role in fostering a healthy landlord-tenant relationship, so promptly address their inquiries and concerns.
Proper maintenance and repairs
Regular maintenance and timely repairs are vital for upholding your property's condition and ensuring tenant satisfaction. Schedule routine inspections to identify any issues early on. Promptly attend to maintenance requests and repairs to prevent further deterioration and safeguard the property's value. By cultivating a reputation as a responsive and responsible landlord, you can generate positive word-of-mouth referrals and foster long-term tenancies.
Rent pricing and market analysis
Setting an appropriate rental price is of utmost importance. Conduct comprehensive market research to understand prevailing rental rates in your area, ensuring your asking price remains competitive. Consider factors such as location, property size, amenities, and market demand. Overpricing may result in prolonged vacancies, while underpricing could lead to financial losses. Consulting local real estate agents or property management companies can provide valuable market insights.
Property upgrades and renovations
Regularly evaluate your property's condition and consider necessary upgrades or renovations. Enhancing fixtures, improving energy efficiency, or enhancing the property's curb appeal can attract high-quality tenants and potentially increase rental income. However, be mindful of your budget and carefully weigh the potential return on investment before undertaking major renovations.
Building a reliable network
Developing a trustworthy network of professionals can greatly facilitate your role as a landlord. Connect with local tradespeople, contractors, and service providers who can assist with property maintenance, repairs, and emergencies. Having dependable contacts to rely on will save you time, money, and stress in the long run.
Educate yourself on tax implications
Being well-versed in the tax implications associated with landlording will help you avoid unwelcome surprises and optimize your financial gains. Seek guidance from a tax professional or accountant specializing in real estate to comprehend deductible expenses, depreciation allowances, and relevant tax benefits. Staying informed about tax laws and regulations ensures compliance and enables informed financial decision-making.
In conclusion, becoming a landlord can be a rewarding venture, providing both current and future financial benefits. However, it's essential to approach it with careful consideration and knowledge so you can avoid common first time landlord mistakes. In addition to avoiding common mistakes, there are key aspects that contribute to successful landlording.
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