As an experienced agent, it’s your role to debunk this myth and offer realistic insights. Remember that Landlords often stumble into the role unexpectedly, whether due to life events, short-term work relocations, or through inheritance.
We’ve previously covered in some detail how to sell the benefits of using an agency, however, this guide aims to support you in advising new landlords looking to get started.
Being a Landlord is a Real Business!
Many people daydream about building a portfolio of rental properties for a stress-free guaranteed income, however, as a letting agent, you know it’s very rarely this straightforward.
Being a landlord is not just about sitting back and watching the money roll in – it can be as demanding as running a full-time business, which is why we have letting agents!
Let’s look at some of the things that newbie landlords need to be aware of…
1. Is the Property Suitable to Rent Out?
New landlords need to understand that renting out a property involves more than online advertising. Researching the local rental market is crucial. Some areas yield excellent returns, while others have lower demand. As an experienced agent, you can provide accurate advice on rental values and expected time to rent based on similar properties.
Tenants expect a minimum standard of decoration and fixtures and fittings. You may also need to tactfully convey that personal taste in decoration could impact the property’s appeal to potential tenants.
Sentimental connections to the property should not hinder necessary improvements. If landlords self-manage and neglect maintenance, they may receive calls about broken fences, leaky taps, and drafty windows. Remind them that, ultimately, when they hand over keys to a tenant, it becomes the tenant’s home
2. Consider Monthly Costs and Void Periods
While rental properties can be lucrative for landlords, they can also quickly strain their finances. Ensure that your novice landlords are aware of the costs they’ll incur before committing to becoming a landlord.
- Mortgage Costs: If the property is mortgaged, this will be the most significant monthly expense.
- Insurance: Standard home insurance doesn’t cover rental properties and could be invalid if the landlord has failed to inform the insurance company. Specific landlord insurance is advisable, and often a requirement of the mortgage lender
- Void Periods: Explain that void periods occur when the property is empty. An agent can reduce these gaps by efficiently handling tenant finding and management. (see Top Tips for Handling Vacant Rental Properties)
- Additional Expenses: this includes one-off costs such as a new boiler, or replacement windows, as well as council tax and utility bills during void periods.
- Fines: The lettings industry is heavily regulated, and breaching these could lead to huge fines!
Remember, your goal is to inform, not dissuade!
3. Can the Property Legally be Rented Out?
Similarly, if the property was purchased under a shared ownership scheme, then it’s unlikely it’s allowed to be let without speaking to the housing association first.
4. Consider How the Property Will be Marketed
New landlords often overlook crucial considerations such as pet clauses, whether to allow smoking or vaping, furnishing options, and effective property marketing. Managing properties independently limits access to major platforms like Rightmove and Zoopla, and it’s unlikely that a new landlord will have their own website to advertise the property on!
While using a letting agent incurs additional monthly expenses, it includes widespread advertising and alleviates the stress of navigating tenancy clauses, marketing strategies, tenant viewings, and other interactions.
5. Money Handling
Many new landlords are unaware of their responsibilities regarding the handling of tenant money. There are of course rules about what you can and cannot charge a tenant and how deposits must be handled. Landlords must keep records of all monies received from the tenant and protect any deposit in line with current regulations, or risk a penalty.
Using an agent means the deposit will be protected correctly and detailed records will be kept of all financial transactions. Additionally, agents provide monthly statements detailing expenditures for tax purposes. The good news for landlords is that tax is only paid on profit, and some expenses are tax-deductible.
Landlords (and agents) are required to keep records for at least 5 years after the 31st of January tax return deadline each year. More information on income tax can be found here.
6. Check Legal Responsibilities
Last, but certainly not least, landlords need to be aware of the legal responsibilities that come with renting out a property. This includes everything from ensuring that the property meets minimum safety standards and completing regular gas and electrical safety checks to carrying out Right to Rent checks and providing all relevant documentation to the tenants.
Also, consider that a property cannot be rented out if it has an EPC rating below E unless there is a valid exemption in place.
As a side note, with the increasing number of new landlords exploring HMO opportunities (properties housing three or more tenants from two or more households), it’s vital to stress that landlords must obtain a license and adhere to legal obligations for HMO management and compliance.
Whatever the type of property, compliance is key and should be taken seriously. We will cover this in more detail next month when we look at UK safety standards for rental properties
This article is intended as a guide only and does not constitute legal advice. If in doubt seek professional legal advice.
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