How to become a residential landlord

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Thinking of becoming a residential landlord? There are a few things you should consider first.

If you’ve been toying with the idea of becoming a residential landlord, you’ll probably have a few questions you need answered. This guide will help you decipher the main roles and responsibilities of a landlord, the benefits of becoming a residential landlord, and the first steps you can take to start the process.

This piece is just basic advice for anyone considering becoming a landlord. For more specific information visit the National Residential Landlords Association website to access helpful resources.

Why become a residential landlord?

Being a landlord comes with many challenges but many rewards also — the most obvious one is the chance to generate a higher level of income on top of your current job. According to research, the average private landlord makes about £15,000 a year renting out a property, but how much you make depends on your location.

Research conducted by CIA Landlords found that Brighton is the most profitable place for landlords, with monthly profit reaching £571.85. Whereas if you’re renting out in Salford, landlords can expect a monthly profit of £393.33.

But remember, although there are profits to be made, you need to calculate whether you can afford to cover costs if rent isn’t paid, or you need to pay for a new boiler, for example.

First steps toward becoming a landlord

Before you rush into anything, there are a few things you need to consider, here are some to mull over.

Can you let out your property?

Are you planning to let out a house you already own? If so, you’ll need to make sure you can legally let out your property.

If you can, you’ll need to secure a buy-to-let mortgage because you’ve probably only got a residential mortgage on the property right now.

Can you afford to buy a property to let out?

If you haven’t already got a property you can let out; you’ll probably want to purchase one. To purchase a property, you’ll need cash to use as a deposit, and you’ll probably need a bit of spare cash to renovate or refurbish the property before letting it out.

4 common ways to fund a property purchase

Bridging loan

The property market moves quickly, so sometimes, it makes sense to secure a bridging loan in a matter of days rather than await a mortgage application which can take weeks, even months. A bridging loan can help ‘bridge’ the gap between buying and selling a property, or it can come in handy when purchasing a property from an auction.

Personal funds

If you’ve got access to funds from your own personal savings, this could be a great way to invest it in a residential property to let. If you have access to this kind of cash, it’s cheaper than a loan and much quicker.

Mortgage or remortgaging an existing property

As you’ll already know, getting a mortgage is the most common way to purchase a property. But have you considered remortgaging? Remortgaging can mean you release tied up equity in your existing property, which can help fund your new investment.

Family or friends

Similar to having access to personal savings, borrowing money from friends and family means you’re not tied up by loan applications and comparing lenders. Instead, you can go right ahead and purchase the property. Remember, though, mixing money and family might not be the best decision.

Understand your role and responsibilities as a landlord

It’s every landlord’s dream to have perfect tenants and never have anything go wrong with or need attention at the property. But this view isn’t realistic. Being a landlord can be more involved (and expensive) than you think.

Ensure the property is safe for tenants

You have an obligation to ensure the property is gas, electric, and fire safe. This means things like providing a smoke alarm on each storey, providing tenants with a gas safety check record, and making sure wiring is safe.

Make your house energy efficient

Not only does making your property energy efficient save money on energy bills. But it’s also a legal requirement that all UK landlords have a property rated E or above in energy efficiency before you take on a tenant. As the landlord, it is your responsibility to arrange an EPC (Energy Performance Certificate), which will tell you the property’s carbon dioxide emissions and more information about how energy efficient your property is.

You can get a new energy certificate here.

Place your tenant’s deposit in a protection scheme

You must use the deposit protection scheme to protect your tenant’s deposit. If you don’t, they can apply to a county court at any time during the tenancy. This is so that the tenant understands they will get their deposit back should they meet the terms you’ve set out for them in your tenancy agreement.

Your house must be in a suitable condition to let out

To be fit to house humans, your house must meet certain standards; for example, the building can’t be in bad condition, it must have adequate ventilation, it has to be safe for tenants to live there, they must have access to hot and cold water. The list goes on, but they’re pretty standard requirements for any house, so they’re not too difficult to abide by.

Read more about the criteria for ‘Fitness for Human Habitation’.

Hopefully, this piece has given you a bit to think about when it comes to weighing up the pros and cons of becoming a residential landlord. It can be an exciting journey, but it’s important to be prepared for unforeseen costs and circumstances that might not have been considered before.

You might find this guide useful: Top 10 easy mistakes buy-to-Let landlords should avoid making