Becoming a landlord can be a fantastic chance to make a return on a property you own, but it’s not a choice that should be taken lightly. Letting a property comes with a slew of responsibilities and legal requirements for the tenants who will become your responsibility.
When done correctly and with the right knowledge behind you, letting your property can be a lucrative and even enjoyable undertaking. Here we take a look at the ins and outs of property letting and what you need to know before taking your first steps.
Who can become a landlord?
In theory, anybody. There is no special requirement that one must satisfy in order to gain the legal right to become a landlord, though there may be several conditions to check before you have the ability to let a property.
If letting an HMO (house in multiple occupancy), you will require an HMO licence. This comes with its own requirements, including the condition that the landlord be ‘fit and proper’, i.e. having no criminal record and no history of breaching laws and codes of practice relating to letting property.
If the property you own is under a standard repayment mortgage, it is recommended that you speak to your lender before deciding to let it out. You may need to remortgage to a buy-to-let, which is the typical mortgage sought by investors who want to buy a property specifically for renting it to others.
You may also need to check whether your property is a freehold or a leasehold. Freehold properties mean that the owner holds both the property itself and the land upon which it is built, whereas a leasehold is a fixed term ownership of a property but not its respective land. Therefore, a leasehold property will need permission from the freeholder in order to be let for others.
Why become a landlord?
Becoming a landlord can be a great choice for certain individuals who want to let a property for logical, financial, or career-based reasons. You may want to move into property letting if:
You have a property you don’t need
Property doesn’t always find its way into people’s hands through purchase. If you inherit property that they don’t want or need, it may make more sense to let the property rather than sell it outright.
The housing market could be in a place where the property’s value is below what you feel is reasonable or representative for the area, and want to hold off on an eventual sale until prospects improve. Alternatively, there may be sentimental value attached to the property that prevents you from wanting to sell, but you have your own home to live in.
Letting a property in such a situation means a financial return in lieu of other options that might not be right for the time being.
You want the extra income
Some landlords don’t go deeper than a single property into investment, and choose to let a property they own and used to live in. This can present an eventual longer return over selling the property, and means a secondary income stream as opposed to the upfront sum that selling would fetch.
The rent payments from letting a property can also cover the repayments needed to cover an existing mortgage on it, making it an ideal way to cover the cost of an existing property whilst being able to pay for another, such as in the case of a house move.
You want to make a career of it
House lets can provide the passive, steady income as mentioned above, but for many people it can be a fully fledged living. Commonly referred to as house flipping or property flipping, many investors look for cheaper properties that need renovations to bring them up to modern standards or reintroduce them to a safe, habitable state.
It is thought that since the start of the pandemic in 2020, around 19,000 properties have been flipped in this manner. Though many property flips are done with the aim to sell and thus make a profit as soon as possible, some landlords play a longer game and flip properties in order to let them out.
This can be especially true for HMOs, where renovations are done specifically to increase the number of rooms to reap multiple rent payments each month, making the gap between monthly payments and upfront sale profit considerably smaller.
Letting a property is an important first step to getting a foot on the ladder and building a portfolio.
You want to improve housing prospects in the area
Not all property investment will necessarily be done with the goal of pure profit. Some investors may be looking to improve the condition of homes in their local area in whatever way they can, using the profit from rent to do the same for further investments.
This could be to give back to the community they grew up in, or to help patch over the gaps in deprived areas of their town or city. Turning a rundown property into an affordable rented home for a family may be a reward equal to, or greater than, the financial gain for the right kind of investor.
Everybody has their own reasons for getting into property investment and being a landlord doesn’t need to follow any specific ethos or reason for being. It does, however, come with legislation and codes of practice that must be observed.
How do I let a property?
There are stringent needs that must be satisfied for a property to be suitable, both functionally and legally, for renting.
Gas and electrical appliances must be proven to be safe and fit for purpose. This extends to fixtures like chimneys and flues, provided they’re useable and not sealed off.
It’s a legal obligation for landlords to arrange a gas safety check every year to be carried out by a qualified engineer. A copy of the resulting record should also be given to your tenant(s).
As of 2021, it’s also a requirement for landlords to have properties tested for electrical safety every five years. This will also produce a safety report, a copy of which must similarly go to tenants.
The local council may want to carry out what is known as a Housing Health and Safety Rating System (HHSRS) check. If they have reason to believe an inspection is necessary, either through a report or the results of a survey, this is something you will need to accommodate.
Smoke and carbon monoxide alarms
In England, smoke and carbon monoxide alarms will be wholly compulsory from 1st October 2022.
The Smoke and Carbon Monoxide Alarm (Amendment) Regulations 2022 provide that, in all rented properties, any room with a fixed combustion appliance must have a carbon monoxide alarm fitted. This includes gas boilers and wood stoves, however it has not yet been extended to gas cookers.
Landlords in the private sector must have at least one smoke alarm fitted on every storey of their properties where a room is used wholly or partly as living accommodation, and the alarms should ideally be checked for good working condition at the start of every tenancy (and at reasonable intervals during).
Alarms found not to be working properly must be repaired or replaced ‘as soon as reasonably practicable’.
Further to having smoke alarms, monoxide detectors, and gas safety checks, landlords must also abide by the Furniture and Furnishings (Fire Safety) Regulations. All loose furniture and upholstery must be fire safe as laid out in the regulations.
Note that this applies to furniture you as the landlord provide – landlords are not currently responsible for tenant-owned and provided furniture.
These are just some of the safety-based requirements of property letting. There are also ongoing obligations to keep the property well maintained and safe, pay income tax on your rental income, and ensure that tenants are kept informed and listened to when problems or emergencies arise.
The GOV website is an invaluable resource for the responsibilities of landlords and the necessary admin to stay compliant.
What kinds of properties can be let?
Many kinds of standard residential properties can be let, and some will come with certain advantages or drawbacks when compared with others. Flats and bungalows, for instance, mean only one storey to concern yourself with, making them relatively simpler than a two or three-storey house.
Many landlords will let individual living spaces such as contained flats and houses, but landlords with more capital and experience may look to buy and let blocks of flats or whole housing developments.
How can I get help with letting property?
Even the most seasoned landlords can benefit from help with managing their properties.
Managing higher demand properties like HMOs can become complex. Multiple tenants mean multiple agreements, and needing to juggle the needs of each can quickly tax your energy and attentions. The need to respond quickly to high-priority incidents like boiler failures or water leaks can be impossible for landlords who live in different time zones or who also work a full-time job.
For many landlords, gaining the help of experienced letting agents is the relief they desperately need.
Mistoria Estate Agents Salford’s experienced team is ready to help landlords with all kinds of property management and letting enquiries. Our knowledge of property management and lettings puts us in the strongest position to bring landlords up to speed on their obligations and help their properties run smoothly.
To find out more about our work in property letting, please contact us today.