Being a landlord requires more responsibility than just offering a property to rent. There are rules and terms to consider when buying to let a property. You firstly need to decide whether you want to let privately or use a landlord agent. There are also certain steps you need to take when preparing a property to let. This section includes guidance on buying to let a property, how to prepare your home to let and different ways to let a property.
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Guidance on buying a property to let, including information on how to get a buy-to-let mortgage and the deposit cost.
A checklist of things you need to prepare when renting out your property, including health and safety regulations and other preparations.
Guidance on private letting, using a letting agency, renting out holiday homes and student properties.
Buying a property to let means you are buying a property with the sole purpose of renting it out. The rules regarding buying to let and taking out a mortgage differ from the ordinary process of buying a property.
Buy-to-let mortgage fees and interest rates are also usually higher than ordinary mortgages. Most buy-to-let mortgages are interest-only, meaning you pay the interest each month. You will then pay the interest on the loan as it accrues every month, generally from the proceeds of the rent they collect. The full amount of the mortgage is paid at the end of an agreed term.
The minimum deposit for a buy-to-let mortgage can vary between 20-40%; however, it is usually 25% of the property’s value.
It is a good idea to use price comparison websites and look for the most suitable buy-to-let mortgage for you. Most of the big banks and some specialist lenders offer buy-to-let mortgages. As with ordinary mortgages, you will have more mortgage deals available if you have a good credit history.
The maximum amount you can borrow depends on the amount of rental income you expect to receive, the deposit, and your personal circumstances. Lenders typically need the rental income to be 25–30% higher than your mortgage payment. It is a good idea to find out how much similar local properties are rented for to get an idea of how much your rent will be.
Choosing a buy-to-let property depends on your budget and the tenants you are expecting to live in it. It is a good idea to research your chosen area and find a property that is close to necessities and is also in a reasonable attractive location. Properties near to good transport links and amenities are likely to get the best rents and always be occupied. You should also first check the condition of the property, and how much maintenance it requires. If you are interested in more than one property, you could consider building a property portfolio. This means purchasing a number of buy-to-let investment opportunities with the aim of generating a significant return on investment.
You should consider the following when you are preparing your home to let:
Ensure that all gas appliances are maintained in good order and pay for an annual service from someone who is licenced to legally work on gas. The Gas Safe Register operates the official UK list of gas businesses and qualified gas engineers that work for those businesses. You must give the tenant a copy of the gas safety certificate to prove that whoever is checking the gas appliances is licenced.
As a landlord, you must make sure:
While you’re in the process of preparing your house to let you should get a spare set of house keys cut. There needs to be a set or two for the tenant, a set for you and perhaps a set for the letting agent.
Cleaning your property is an essential step in preparing to let.
Fire safety is a priority. Your local fire service can provide a free home check to advise you on the measures you’ll need to take.
It’s your responsibility to:
Carbon monoxide exposure can be fatal. Not checking fire alarms and carbon monoxide alarms can have serious consequences, including fines or even imprisonment.
Making a note of meter readings at the start of a tenancy ensures you have an accurate record for the utility companies.
You need to provide tenants with a tenancy agreement when they decide to rent your property. This should include information on who will be living there, how much the rent they’ll pay is and the conditions they are expected to meet. The document should also include how the rent should be paid, the start and end dates of the tenancy. It should also provide an outline of the bills for which the tenant is responsible.
If managing all the bills yourself in a bills-inclusive agreement sounds like a struggle, bill-splitting services like Split The Bills can help. These services take responsibility for managing the bills and have pre-agreed deals with service providers for all the major bills, so you don’t have to look for the best deals yourself. If you’d prefer to offer bills-inclusive to your tenants without the commitment, many bills splitting services like Split The Bills will also give you the option to refer your tenants directly to them, and you can earn a commission for doing so.
You can read more about landlord responsibilities in our guide: Landlord responsibilities: utility bills, council tax, maintenance and more.
Letting agents take on responsibilities such as sourcing a prospective tenant, rent collection and full management. Having a letting agent can be timesaving and sometimes leave you with minor maintenance. This is particularly beneficial if you don’t have time to fulfil duties such as finding tenants. They offer professional help which can particularly benefit new landlords or landlords with numerous properties.
You can read more about the benefits of letting agents here.
All lettings agents should do the following:
When using a letting agent, you can choose between a tenant-find service, a tenant-find and rent collection service or full management.
Tenant-find is the most hands-off approach from the letting agent and will end when a tenant moves into your property. Additional services may include collecting the first month’s rent/deposit, property inventory, and checking in on moving day to ensure the tenant is happy.
A tenant-find and rent collection service is halfway between a hands-off, letting agent service and full management. It includes the tasks in the tenant-find service and bi-weekly or monthly rent collection.
A full management service means the letting agent is responsible for the day-to-day operations of the property. This service means that the landlord is only contacted during an emergency, at contract renewal phase or the end of a tenancy.
Letting a property privately requires you to find tenants independently, chase unpaid bills, take control of health and safety requirements and other duties.
As a landlord, you are responsible for a number of legal factors.
These legal responsibilities include the following:
Using a letting agent can be ideal if you will struggle with time to fulfil your responsibilities. A letting agent can sometimes deal with tenant emergencies, rent collection, property inspections and ensure the property maintains a certain standard. Using a letting agent can also be suitable if you are unsure about how to advertise your property and screen tenants correctly. Letting agents can screen prospective tenants to ensure the right one rents your property and provide a property inventory.
You may wish to let privately if you are concerned about the cost of paying a third party and potentially complicated terms and conditions. A letting agent service can cost up to 20% of monthly rent depending on the service. Communication can also sometimes be delayed between you and your tenant if there is a third party involved. Using a letting agent can be more costly than letting privately if unpredictable circumstances or issues arise. If your tenant decides to stay beyond their initial contract, for example, you may need to pay a renewal fee to the letting agents.
Short-term holiday lets can be an attractive option if you own a property somewhere that is popular with tourists. Holiday lets can be very profitable, as landlords are able to charge much higher rents for short-term lets when a property is in a highly desirable location.
In most cases, planning permission is not required to let out a property for holiday use. However, if you turn your property into a B&B, planning permission must be sought.
Any income you make from letting out a property as a holiday let is taxable. It is wise to look for a specialist insurance policy designed for holiday lets, as ordinary landlord insurance won’t cover short-term lets.
The best way to advertise a holiday home is through a holiday let website or a bespoke website. If you don’t have a full-time job, you could consider managing your holiday letting business. If you have other time commitments, it’s wise to hire a manager to take care of the everyday property maintenance and showing tenants around.
The type of mortgage you need and where you get it from depends on how you intend to use the holiday home. If you’re purchasing a holiday home for your own use and don’t intend to regularly rent it out, you’re essentially taking out a standard mortgage. However, if you have an existing mortgage on your main residence, it may be called a second home mortgage. For a second home mortgage, you’re likely to need a large deposit and may have slightly higher interest rates and fees than a standard mortgage. If you intend to let out your holiday home as a business, you’ll need to consider a dedicated holiday home mortgage. Most providers of holiday home mortgages are small building societies, which can look at unique circumstances and underwrite on an individual basis.
Demand and competition in student areas are consistent, making student letting a potentially good investment. You are likely to be letting to sharing occupants who are not in the same family group, so you will need to comply with rules around Houses in Multiple Occupations (HMOs).
Student lets can be marketed in the same way as traditional lets. You can either look into buying large houses you can restructure to maximise returns, or purpose-built accommodation set up as self-contained units or flats.
As student tenants can be difficult to reference as they do not have a regular income and have likely come straight from living with their parents, you should seek a guarantor for each student tenant. The guarantor will be responsible for the rent if the tenant fails to pay.
Some lenders specialise in various types of tenant, and each will lend different amounts. Most lenders will want a deposit of at least 25%. It’s often advised to use a higher deposit such as 40%, as this is likely to unlock the best deals.
The amount you can borrow will mainly depend on the rental income your student property can generate. Lenders will likely want the rental income to be at least 125% of the mortgage each month.
The rules in England and Wales are the same. However, there are different rules if you rent out a property in Scotland or Northern Ireland. You can read a full guide to the rules for England and Wales here.
Investing in a buy-to-let property provides the opportunity for long-term investment and growth. Property prices will likely increase in the long-term, which means you could make a reasonable profit when you come to sell the property. Renting out your property to tenants who will pay your mortgage for you and provide some extra income is the best way to make an investment.
Allowing people to live in a property rent-free may affect the extent to which expenses are deducted. To ensure the property does not lose its ‘business status’ it should always remain available for commercial letting.
How much you want your letting agent to do depends on how much time you have on your hands to manage the responsibilities. It also comes down to your budget and how much you expect to pay an agency.
The letting agent will usually charge a percentage of the rent, which is paid monthly. For a fully managed service, letting agents usually charge between 10-15% of the rent.
Buy-to-let mortgages are designed for landlords who want to buy property to let, rather than live in the property. A landlord should have a residential mortgage to live in a property that they rent out.
Some residential mortgages may not allow you to let your property, while others might require an application for “Consent to Let”.
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