A Guide for First Time Landlords

Becoming a landlord is an exciting prospect that offers a lot of fantastic benefits. To make a success of your venture, you should take your time to plan and research everything involved so you can avoid making any costly mistakes. Our guide for first time landlords covers everything you need to know, from the costs involved to choosing the right tenants for your property.

Why become a landlord?

Many people become a landlord largely because of the long-term income it can provide. Every month you will receive money from your tenant, which you can use to pay off your buy-to-let mortgage, while also making a profit.

Renting out a property can offer long-term security through income that can be put towards a pension, for example. You are essentially running your own business, giving you control over contracts, terms, costs and more (within the boundaries of the law).

Costs of being a landlord

While being a landlord offers the chance to enjoy long-term financial returns on your investment, there are several ongoing costs that need to be taken into consideration, such as:

• Mortgage costs

If you’ve taken out a buy-to-let mortgage, this will be the biggest regular outgoing. If you do not have a fixed-rate deal, then changes in interest rates will affect your repayment amounts.

• Maintenance costs

It is hard to estimate how much you will need to spend on maintenance, as the age and condition of the property will influence this. Using a ‘little and often’ approach to maintenance works best as it can help to keep costs lower long-term.

• Refurbishment

As you will own a rental property, it will likely need to be redecorated and refurbished in part every few years. A helpful guide is to base it on costs for similar work you have carried out around your own home.

• Tax fees

Any profit you make will have to be taxed, although you can deduct some allowable expenses such as legal fees, letting agent fees, landlord insurance and more.

• Rental Yield

Rental Yield is also something you need to take into consideration. When it comes to rental yield, your mortgage doesn’t really play much of a part.

For example, if you were to purchase a 1 bedroom flat for £300,000, 50% mortgage and 50% cash, based on a 150,000 interest only buy to let mortgage at 4.25%, that will be £600 pcm and you rent the property out for £1600pcm, you’re left with £1000pcm after mortgage payment. Now take away £200 pcm for insurance and agency fee’s you’re left with a net of £800pcm. To work out the yield, you need to work out 800x12 / 150000x100 = 6.4% net yield.

• Stamp duty

Just like buying any other property, stamp duty is also a requirement for a buy-to-let. Be sure to factor this into your budget when looking around for a property to buy.

Finding the perfect buy-to-let property

You should take time to find the right buy-to-let property to ensure it can become a successful venture. Here are some useful tips you can follow:

• Do thorough research

Research local property markets to see the going rate for different types of properties. Speak to local letting agents who can provide you with some valuable guidance.

• Buy new or old

New homes tend to cost more, although long-term maintenance costs should be lower. The opposite is true of older homes, so you need to weigh up which one works best for you.

• Tenant profile

Think about the type of tenant you want in your property. Families tend to want larger unfurnished properties, while young professionals look for modern city-based spaces. If it will be shared accommodation, ensure the layout is suitable. 

• Plan your investment

Plan your budget to the smallest of details, as margins can be small, and you want to avoid losing money. Set a budget and stick to it and avoid going overboard and breaking the bank. Take your time and don’t rush in – view your ideal property several times before committing.

Applying for a buy-to-let mortgage

You will usually need a minimum of 25% of the property’s value for a deposit (although it can be as high as 40%) and some lenders require you to be at least 21 years old to take out this type of mortgage. Lenders may ask that you own and have lived in your current home for a certain period of time. Interest rates can also be higher for buy-to-let mortgages.

Aside from the criteria, the mortgage process is like a standard mortgage. The lender will run credit and affordability checks to ensure you are financially stable enough to take on the mortgage for the long-term.

Choosing the right tenants

By choosing the right tenant you can expect more stable yields on your property, reducing the likelihood of dealing with non-payment of rent, evictions and a high turnover of tenants. Some helpful tips you can use include:

• Carry out a tenant checklist to see if they smoke, have pets or other requirements as this will help you narrow down your prospective pool.
• Do property credit and reference checks to ensure they can afford the property for the full tenancy. A Right to Rent check is also a legal requirement you must undertake.
• Meet your tenants in person if they pass reference checks and trust your instincts if you have a good or bad feeling about them.

Your responsibilities as a landlord

As a landlord you have a care of duty for the people living in your property. There is a long list of legal rules and regulations you must adhere to, such as: 

• Gas safety

All gas equipment must be inspected by a Gas Safe engineer at least once a year. An inspection should also happen within 28 days of the tenant moving in.

• Electric and fire safety

The electric system must be declared as safe and inspected at least once every 5 years. Fire alarms must be installed on every storey and a carbon monoxide alarm installed in any room with a ‘solid fuel burning appliance’.

• Repairs and maintenance

You will be responsible for most repairs and maintenance in the property. You should give at least 24 hours warning in writing before coming to the property to view the issue.

• Evictions

If you wish to evict a tenant you must provide proper legal notice, take court action if needed and only then can you use bailiffs to remove the tenant if permitted by the court.

Rent out your property with Living Residential

Living Residential is a leading independent letting agent with a long and successful history of working with landlords in West Hampstead, Kilburn, Cricklewood, Temple Fortune, Hendon and Golders Green. We offer a range of exclusive letting services, ranging from Bronze to Platinum, helping you to find tenants, market your property and manage the property for as long as you need.  Get in touch with our lettings team today for advice and a free valuation