Check the fine print on your mortgage and speak to your lender
One of the key steps to becoming a landlord is making sure you’ve informed your mortgage lender. Depending on the conditions on your mortgage you may find that you need to move to a buy-to-let mortgage, or your lender may be open to negotiating a change of tenure if you follow particular conditions they set out. It’s more than likely that you’ll find you’re legally obligated to tell your provider so make sure you read the fine print and follow the conditions set by them.
If you own your home outright, you might consider taking out a small buy to let mortgage to free up some cash. Speak to a mortgage broker or financial advisor to find out about the options available.
Selective landlord license /HMO license – do you need one?
You may need to apply to your local council for a license for your property, two of the most common are House of Multiple Occupancy (HMO) and selective landlord licenses. An HMO is a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen, such as a house share. A Selective Landlord License covers almost all private rented properties within defined geographical areas set by the local council. This may include poor areas where many tenants are receiving housing benefits, areas with high levels of anti-social behaviour and poor-quality private landlords.
It’s important to check with the local council to find out if and what license you may need, failing to apply and adhere to the appropriate license conditions may leave you open to severe financial penalties up to £20,000. You’ll need a separate license for each property that requires one, the cost varies by area but some council offers bulk rates if you have more than one property.
Safety makes sense
When you rent out your property, it is no longer a private dwelling and you assume a duty of care to those living and visiting the property. You’ll need to ensure you comply with fire safety, gas safety, and electrical safety regulations.
You can contact the local fire service to check your requirements and ensure your property adheres to safety standards. As per The Landlord and Tenant Act of 1985, you’re legally required to carry out annual gas safety checks. This includes a CORGI registered engineer checking the flues and all gas appliances including the boiler. You’ll also need to have an electrician check the safety of all electrical appliances every 5 years.
Take an inventory
If you plan to rent your property furnished, taking and recording a thorough inventory is in your best interest. Naturally, there will be some wear and tear within the property regardless of how well your tenants take care of the property and you need to allow for a reasonable level of deterioration. However, tenants will be liable for deliberate damage, breakages and missing items and furniture. It’s here where your inventory will come to play as it’s your evidence of the condition of the property and the furniture rented along with the property.
You should take pictures throughout the property and a detailed list of all the furniture, fixtures and fittings at the commencement of the tenancy, such as 5 white plates, 10 clear glasses, 1 black leather sofa, 3 wall lamps, oven, etc, as well as a recording of the energy meter readings. The inventory should be signed by both landlord and tenant before or on the day of the start of the tenancy during the check-in process. Make sure you both agree and make any amendments necessary as this will also be used at the checkout once the tenancy comes to an end. You can always use an inventory company or a lettings agent to carry this out if you don’t feel confident in carrying out this step yourself.
Managing your income tax
Once you have set up a tenancy and the rental has been established, you will be liable to pay income tax on the rent you receive. You’ll need to declare your expenses and deductions to HMRC online to determine the amount of tax you need to pay. As a landlord, there will some costs that you can offset through taxable allowances which may significantly reduce your tax bill. Allowances include things like; professional fees for solicitor and letting agent’s costs, the cost of replacement furniture, kitchen white goods, furnishings and tax relief on mortgage interest.