Becoming a landlord may be the first step along the road to a successful and profit-making business – it might also prove the first step towards financial disaster.
Although the pitfalls may be serious – and potentially very costly – there are a few things you might do to lessen the risks you are taking on.
If you are buying your let property with the help of a mortgage, buying to let may have been your intention from the outset.
If you are a new landlord of property that may have been your home as an owner occupier, however, it is important that you advise the mortgage lender. Depending on the lender, this may simply amount to a point of information, in other cases you may need to switch to a buy to let mortgage.
In terms of the financial investment you are likely to have made in buying to let, nothing may prove more of a life-saver than arranging suitable financial protection for the property.
Insurance for landlords is something on which you might want to consult an expert – such as ourselves at UKinsurancenet – in order to navigate safely around considerations such as the type of property to be insured, the kind of tenants you hope to attract, and the range of particular liabilities you are taking on the moment you become a landlord.
As a condition of your buy to let mortgage, your mortgage lender will usually require you to have appropriate buildings cover in place.
Note that if you are an owner-occupier moving out from your property to let it to tenants – or even renting out one room – you will need appropriate let property cover. Your standard home insurance will not be valid.
The success of your business relies on your success in finding and retaining tenants and in keeping those inevitable periods of vacancy to a minimum.
Even in a buoyant market for landlords, and even in an area where potential tenants seem plentiful, efficiently managing your tenancies this may prove an almost full-time job.
To help take up at least part of the strain, you might want to consider using the services of a lettings agent.
If you are using an agent, one of their key responsibilities is likely to be the reference check on tenants’ backgrounds. If you are selecting tenants yourself, it is important not to overlook this relatively straight forward check – not only that a tenant is who he or she say they are, but also that they are likely to have the financial wherewithal to pay the rent.
Since your business relies on the success you have in recruiting and retaining tenants, it is important to make the property as appealing as possible – to that group of tenants you are looking to attract.
Clearly, this is probably going to be a balance between whatever you spend to make the premises appealing, the rent you expect to receive in return, and the demands of the particular group of tenants most likely to be living there. A professional couple, for example, is likely to have different standards to a single person claiming benefits; older tenants may have different demands to students.
Naturally, the contract between yourself and your tenant is the tenancy agreement.
As with any contract, you are more likely to be adequately protected and your interests more likely to be met, if the clauses in that contract are as specific as possible. Tempting as it may be to rely on off-the-shelf, standard forms of tenancy agreement, you may want to avoid this in favour of a contract that actually suits you and the particular letting you have to offer.
Remember that you now have a legal obligation to lodge any deposit you receive from your tenant or tenants with an approved Tenancy Deposit Protection (TDP) scheme.
Finally, as a landlord, you are effectively running a business. That means you need to keep a set of books with all your income and expenditure, as well as receipts. You will need to complete an annual tax return too.