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If you are thinking about renting out your home, there are some essential things to consider before doing so. This guide will help you.

You must be aware of your responsibilities as a landlord, know how to protect your property, and keep your tenants happy, dealing with any issues that may crop up.

 Should I use a letting agent or let my house out myself?

If you are going to use a letting agent, ensure the agent is a member of ARLA, NALS, or UKALA. Legislation that came into force on October 1st, 2014, requires all letting agents to be members of one of two independent government-approved redress schemes.

By using a letting agent, you are likely to have more time to concentrate on other things as they will manage your property.

Letting agent fees vary from 7% to 15% and depend on whether the property is fully managed or let and rent collected only. Some letting agents take the fees upfront, while others operate under a commission agreement.

You could consider letting and managing the property yourself; this could potentially save you 15% on agent fees. This is 15% of the gross rent, which is the rent the tenant pays each month.

If you are going to rent out your house by yourself, it is essential that you join a landlord’s association. Landlord associations can provide all the legal documents you require, credit checks, inventory, access to deposit schemes and Building insurance for landlords.

Not only will they provide these services, but they are discounted, so you will save money too. Irrespective of whether you are getting through a letting agent or letting the property yourself, you should still join a landlord’s association. The British Landlords Association is a national landlords association, and it is free to join, too.

Landlords need to be mindful of all your costs, such as letting agent fees, mortgage rates, warranties for works conducted and safety checks.

How to find a suitable tenant to rent your house?

A letting agent can find and vet the prospective tenant for you. However, if you want to find the tenant and get the credit checks yourself, we can guide you through the process.

You can advertise your property through various media. You can use the following methods to advertise your property to find a tenant for your property:

1. Notice board, the local paper shop
2. Gum Tree, however, you should be careful not to fall for one of the scammers who surf the web to find victims.
3. Your local paper, nearly all local paper has sections where you can advertise a property to let. Look at how others are advertising, so you can create an effective advert.

If you are a member of the British Landlords Association, you can download the free tenant application form. This is especially useful when several prospective tenants come to view the property.

It is best to email the application to prospective tenants. Once you receive the completed forms back, check them and make a shortlist of the most suitable.

It would be best if you always carried out credit & referencing on the prospective tenant to reduce the risk of taking on a tenant from hell.

Tenant Credit checks

Do not let your property without first conducting credit checks to be doubly sure of their past payment history.

The checks generally include affordability, employment status, court judgements, electoral roll check, date of birth check, checks on previous addresses, references from a previous landlord and employment references. BLA members and non-members have access to full credit & referencing services.

How to Prepare property for rent

Neutral colours appeal more to prospective tenants as this allows renters to picture themselves living in the space. This also makes it easier for each check-in/check-out.

The general sprucing of outdoor spaces helps and makes the property more attractive to rent.

You can consider hiring professionals to give your home a good deep clean. Professional cleaners will scrub everything from the doors and windows to the oven and clean the carpets and flooring.

Ensure you make spare keys that a tenant may need for windows and doors, or gas and electricity meters. You should keep spare keys for your use in the future or just in case the tenant loses a key. Do not forget to give the tenant instruction manuals for the boiler, alarm system, cooker, and any white goods so the tenant has them to hand in as soon as they move in. Keep copies for your file, too.

What rent should I charge my tenant?

It would be best if you charged the correct level of rent, not striving to achieve the maximum rent you can. Instead, consider charging the average rent for comparable properties in the area.

If the rent is too high, the tenant, at some stage, may, in the future, move and find a cheaper property. The void period and paying council tax will be a loss that may have been able to avoid. No matter how good the property or the location is, it is rare, and you can prevent some void period.

When letting a property and considering the tenant, you should attempt to take on a tenant that is long-term (We assume you do not want to let for a short period).

Frequent change of tenants usually affects your income and expenditure, so avoid taking tenants that will stay short term unless you want to let or a short term.

How do you work out your property’s rental value? You can check Zoopla and Rightmove to look at comparable properties in the area. Alternatively, invite letting agents to give you a free, no-obligation rental value of your property.

Mortgage lender

Unless you have a buy-to-let mortgage, you may need to inform your lender you intend to rent your home. Most lenders will charge you a higher interest rate if you decide to rent.

Check the terms of your mortgage before contacting the lender. Failing to tell your mortgage lender could mean you are breaking the terms of your mortgage contract.

Landlord Tax

Suppose you are entering the property investment market as a newcomer. You must consider if you will buy any property in your name or through a limited company.

In some cases, buying and letting through a limited company is more efficient and profitable. You will need to seek professional tax advice on this.

If you are letting your home, then it is likely you will have to pay income tax on rental income.

If you earn more income than the personal allowance, you will pay income tax at the rate you currently pay, unless the additional rental income takes you into a higher tax bracket.

You can no longer 2021 deduct mortgage interest and other financial costs from your rental income. You can read our blog on how to save tax on rental properties and what you can set off against tax.

For example, if one of you is a higher rate taxpayer and the other a lower rate and you own the property 50/50, then you have to split the rental income between you 50/50 when you declare your earnings on your tax returns.

For example, it is impossible to own a property 50/50 and then have the lower rate taxpayer declare 100% of the rental income on the tax returns to pay lower tax.

Due to tax changes, it is no longer possible for parents who have invested in a student let that they own for their child to declare the rental income as theirs and therefore pay no tax. BLA members have free access to an accountant for tax advice and/or a tax platform.

What tenancy should I use when renting?

If you are renting a house or flat and you do not live in the flat, then it is highly likely the correct tenancy to use will be an Assured Shorthold tenancy.

If you are renting a room in the house, you live in, and you pay all the bills, and the tenant does not have an exclusive occupation, then the correct agreement is likely a lodger agreement.

Members of the BLA can download free documents from the website under the services tab.

Building insurance for landlords

Some people renting out a property for the first time wrongly think that a standard home insurance policy will cover them for the letting.

You should check your insurance policy thoroughly and speak to the insurer if you need to. Informing your insurance broker may increase your insurance premiums, but will also ensure your policy is valid and will pay out for any claims you make

If you have separate contents insurance, you must inform the insurer of your intention to let your property, as your insurance policy will probably need to be amended.

Consider covering any financial losses connected with your rental property like rental loss, eviction costs etc.

Whilst insurance is not a legal requirement; it is advisable to take a landlord insurance policy as this will protect the building, your tenants, and your investment. BLA members get 20% off building insurance and a guarantee the broker will beat any existing quote

EPC for landlords

Energy Performance Certificate is a requirement; you should have one. An EPC is valid for up to 10 years and you are required to give an EPC to the tenant before the tenancy commences. A rough cost of an EPC is £75, does however depend on the size of the property and location.

Renting & Fire Safety

Fire safety & furniture Under the furniture and furnishings regulations 1988, as well as checking electrical wiring and appliances, you must make sure that any upholstered furniture you provide is fire resistant.

Landlords can be fined and sent to prison if they do not follow fire safety regulations.

Fire safety The Housing Health and Safety Rating System (HHSRS) is used by your council to make sure that properties in its area are safe for the people who live there.

If you own a property and rent it out, the council may decide to do an HHSRS inspection because your tenants have asked for an assessment.

An HHSRS hazard rating Inspectors look at 29 health and safety areas and score each hazard they find as a category between 1 or 2, according to its seriousness.

Smoke alarms

Smoke & carbon monoxide alarms – There should be working smoke alarms on each floor and carbon monoxide detectors in any room heated by solid fuel.

Deposit legislation

Since April 2007, legislation requires landlords in England and Wales to safeguard their tenants’ deposits in one of three government-approved tenancy deposit protection (TDP) schemes. You are legally required to protect the tenant’s deposit within 30 days of taking the deposit. Once the deposit is protected, you are required to provide the tenant within 30 days the deposit scheme certificate and the prescribed information.

The schemes which landlords can join are:

• The Deposit Protection Service (DPS)
• MyDeposits
• The Tenancy Deposit Scheme

You can visit their website and consider which one you like. There are two types of schemes:

1. custodial
2. Insurance backed scheme

The custodial scheme is where you hand the money to the scheme provider. Should you have any dispute with the tenant upon the tenant vacating you may have problems, delays in attempting to apply the deposit money to any losses. Getting the money from the custodial scheme is not always straightforward.

In the Insurance backed scheme, you pay a small fee, the deposit is insured, and you keep the deposit money and may apply it to any losses after the tenancy ends.

Inventory 

You must obtain an inventory; you can attempt to do this yourself if you want. British Landlords Association members can download a free inventory template from the document section.

If you do not have an inventory that has been checked and signed by the tenant, then potentially you may have problems applying any deductions from the deposit money. For this reason, it is best to have an inventory in place to avoid contention when the tenant is vacating.

Gas safety

You are required by law to ensure you conduct a gas safety inspection using a gas safe registered gas engineer. This must be done each year, and you must make sure all gas appliances are safe to use.

Electrical safety

It is also a good idea to make sure all electrical appliances and wiring are regularly tested too.

The Electrical Equipment (Safety) Regulations 1994 require you to make sure that wiring, plug sockets and any electrical appliances which you have provided are safe.

Electrical appliances

PAT testing does not have specific frequency requirements, and instead, it is a recommendation based on factors including the location, frequency, and type of equipment.

It is recommended that smaller appliances undergo PAT testing every two years to ensure that they are in proper working order.

HMO

If you let your property to three or more tenants, who form one household but are not in the same family, your property may fall into the House in Multiple Occupation (HMO) category.

When letting do I need a License?

Some areas require a license from the local council if you are looking to let a property. Contact your council to check to see if you require a license.

How to rent Booklet

You are required to provide your tenant with a how-to rent booklet when letting a property.

Author: Amanda Goldsmith  amanda@thebla.co.uk

Source: British Landlords Association

Date: 19th of October 2020

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