There are more than 2.5 million landlords in the UK, but some of those are accidental or first-timers. And if you're one of those landlords who are new to the rental game, you might have a few questions about how it all works.
From renting out your property for the first time to managing the in-life tenancy, there's plenty for you to take on. That's why it's essential to know the ins and outs of renting, including particulars that may not seem evident at first.
If you're a new landlord wondering about how it all works, you've come to the right place. In this article, we're giving you the lowdown on everything you need to know, from potential licenses to tax-related elements.
You might need a landlord license
Some postcodes require landlords to have a license to rent out their property. Whether or not you need one depends on the local council where the property is located, with legislation introduced in 2006. Before you let out your property, ensure that you check licensing matters with the your council.
To furnish or not to furnish
The old rule of renting centred around offering a buy-to-let furnished. However, with average tenancies lasting slightly over four years, many renters are choosing to bring their own furniture. Offering a property furnished still has many benefits, especially if renters are coming from overseas or another city. But furnished properties aren't as essential as they were in the past.
Get that reference
Referencing is a fundamental part of finding the right renter. Many rent guarantee insurance companies also require a referenced renter before giving you cover. There are several options for finding verified renters. Whichever one you choose, ensure that anyone moving into your property is fully referenced before.
While we're on the topic of insurance, it's vital that you take out the necessary cover to protect your investment. The main insurance option is building insurance (also known as landlord's insurance), which covers the structure of the building and the fixtures and fittings.
Renters are often required to pay a security deposit, with the maximum amount capped at five weeks. There's also the option of zero deposits for landlords. No matter which one you choose, you'll need to register the security deposit with a deposit protection scheme. It needs protecting within 30 days, and you must notify the renter with all the details.
As a landlord, you will have specific safety responsibilities to your renter. These include making sure the property is rental ready with things like an energy performance certificate (EPC), gas safety certificate, EICR report, and makichecking that ng smoke alarms and carbon monoxide detectors work.
Privacy is essential for renters and helps ensure a smooth in-life tenancy. Yet, it's still crucial that you inspect your investment to see if it's in good condition and the renter is looking after the home. Two per year should be enough, and you should always provide the renter with at least 24 hours notice – if not more.
Many landlords prefer to assign a property manager to handle the day-to-day of their investment, especially if they're an accidental landlord and didn't plan on renting out their home. Property management fees often cost between 10-15%, and they liaise with the renter on your behalf, which means your role isn't as hands-on.
Pay your tax
Getting rental income is the same as earning from your job, which means you'll need to pay tax on rent received. Any amount earned over £12,500 is liable for tax, and your rental income is included with your professional earnings: if you make £35k from your job and £15k from your rental property, HMRC will see your total earnings as £50,000 and will tax you on any amount after £12.5k.
A need-to-know basis
Being a landlord can be a profitable venture, as you earn short-term rental income while your asset grows over time. However, you need to be savvy to rules and regulations so that you can make the most out of your investment. The more you know, the better your experience should be. You can then focus on the perks of being a landlord.