If you are having trouble selling your house or are looking for an income to put some money in the bank or pay the mortgage then renting out the property you own is a great option to consider. There are a few things to consider to ensure that your experience as a landlord is stress-free and profitable
Research rental properties in your area.
Deciding on the rent to charge needs a little research. Price your rent to high and you will not find a tenant. Price it too low and you may be out of pocket.
Go online and look at properties that are similar to the one you are looking to rent out to see how much the landlords are asking for in rent and as a security bond.
Using a letting agent can take the hard work out of this as they will know what rent you can achieve and will manage the advertising of the property, collecting rent and ongoing management, but they will charge a fee to do this, so make sure you can afford this.
Do your sums.
Make sure your numbers add up. Calculate the mortgage and other costs you have to pay such as insurance and rates. Work out what percentage you want to achieve on top of this to cover any maintenance costs and you should get an idea of the rent you need to charge, anything that is left after all costs would be your profit. Make sure this is in line with the market level of rent for similar properties in your area.
Any rental income you receive may be taxed as income at your usual rate (20% if you are basic rate taxpayer, and 40% if you are a higher-rate taxpayer).
Ideally, it should also leave you some surplus for a back-up fund in case you need to do any maintenance and repairs on the property. This could also cover paying the mortgage between tenants when you are not receiving any rental income.
Speak to your mortgage company.
If you are renting out your house, you need to let your mortgage lender know. Your mortgage may need to be changed to another loan type such as a “Buy to let” mortgage or you may need to request a “Consent to Lease”. Your lender will be able to provide more advice on this.
Failing to tell your mortgage lender could mean you are breaking the terms of your mortgage contract, so ask their permission before you do anything else.
Get the right insurance.
Having the right insurance is essential. You must let your buildings and contents insurer know that you plan to let your property as they may need to make changes to your policy. Failing to let them know of these changes could cause problems and you may not be able to claim under the current terms of your policy.
AS a landlord you will also need to have a landlord’s insurance policy. Landlord insurance can protect your property and your tenants. Some can also pay out if your tenants miss rent payments. Speak to your insurer to see what they offer and compare prices and policies with other insurers to see what you can save.
Make the property rental ready.
You need to decide if you are letting your house furnished or unfurnished. If you are letting it furnished, remove anything of value, personal or cannot be replaced with money.
Make sure that you have had all fixtures and fittings checked, such as pipes, washer, cooker, and boiler. You are responsible for your tenant’s safety so carrying out these checks and getting sign off from professionals is essential.
Make your property look nice so that you can attract a tenant, but keep it simple as a tenant will look for somewhere that is not personalised to your tastes and where they can feel comfortable and add their own personality within reason.
Find an agent.
You can do this yourself if you have the time, but using an agent can save you a lot of hard work and expense. Agents typically charge around 10-15% of the rental income
An agent will:
Advertise your property for you
Show prospective tenants around
Draw up a tenancy agreement
Deal directly with the tenant on your behalf
Vet prospective tenants
Find a lodger.
If you don't want to move out of the house, you could always rent a room in your home to bring in some extra money.
Under the government's Rent a Room scheme you can earn up to £7,500 each tax year, tax free by renting a furnished room in your family home which is easy money if you are happy to share your home.
If you think this would be of interest, you should advertise online in sites like gumtree or Spareroom.co.uk. Always Vet potential lodgers: Ask for references from an employer or previous landlord, so you can verify their identity and ensure they will make a reliable tenant.
Draw up a tenancy agreement that clearly outlines the rent amount and due date, let period, notice period and house rules.
As with any rental of your property, make sure you Inform your home insurance provider: This may require changes to your policy and your premiums.
Other important things to remember.
To make sure you are a good landlord and stay on the right side of the law, always make sure that you remember your responsibilities to your tenants and everyone will be happy.
Be responsible for all repairs, maintenance and refurbishments
Fit smoke alarms and extractor fans where required
Have any gas appliances tested by a Gas Safe registered engineer
Make sure any upholstered furniture is fireproof
Arrange an Energy Performance Certificate for your tenants
Register with the Tenancy Deposit Scheme
Always be available for your tenants to contact you in an emergency.
There are lots of things to consider if you are renting out your property. If you have considered all the options and becoming is a landlord is appealing then there is nothing to stop you. Always make sure you are up to date with the latest legal requirements and your responsibilities as a landlord.
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