First-time landlord? Top tips for letting property
Whether you’re thinking of purchasing a buy-to-let property as an investment or considering letting an existing house, you must be aware of the laws that govern the private-rented sector. Becoming a landlord is a big responsibility, but with the right knowledge and guidance, it can provide you with a consistent income.
In this week’s blog, the team at Townends have brought together their top advice for first-time landlords. From finding the right property and understanding tax, to adhering to regulation and looking after your tenants, we’ll start you off on the right foot.
Finding a property
Firstly, if you’re searching for a buy-to-let property, estimate your rental yield before purchasing. This will be your income from the rent, minus expenses and tax.
When looking for a property, research its location and ask letting agencies and other landlords to advise on the area. Is it popular with students or young professionals? What are the transport links and local amenities like? Our team will be able to show you the latest properties for sale and assess how much each might fetch in terms of rent.
If you’re viewing a property, try to look at it as if you were a tenant. Getting a detailed survey will help you avoid any unexpected costs, but check the property is aesthetically up to standard too. Make sure you keep the decoration and furniture fairly neutral.
If you’re not purchasing a property outright, you’ll need to look for a buy-to-let mortgage. Bear in mind that this agreement is different to a standard mortgage as it will require you to demonstrate that your income from the rent will cover the payments. Speak to our expert team at dot financial services for the latest buy-to-let deals.
Your tax obligations
There are a number of tax obligations all landlords need to know. When looking at your rental income, the first £1,000 is known as your ‘property allowance’ and isn’t liable for any tax. If you’re earning up to £2,500 on your property each year, then you’ll need to contact HMRC. If your rental income is between £2,300 and £9,999 after allowable expenses, then it’s necessary to complete a tax return.
Anyone purchasing an additional residential property in England and Northern Ireland (that isn’t their only or main residence) for £40,000 or more must pay an extra three per cent stamp duty above the current Stamp Duty Land Tax (SDLT) rates. The current rates mean that you’ll pay SDLT on increasing portions of the property price above £125,000 – much like income tax. Take a look at the Government’s website for more information.
If you decide to sell your property and make a profit, you’ll probably be liable to pay Capital Gains Tax. It’s also worth being aware that the laws around mortgage tax relief are reducing over the next four years and eventually there will be a single claim allowance of 20% across all tax bands.
Helpfully, there are some tax deductions for landlords which relate to the cost of letting a property. These include letting agency fees, accountancy fees, buildings and contents insurance, maintenance and repairs (but not renovations) as well as Council Tax and utility bills.
Tenancy Deposit Protection (TDP)
By law, if you take a deposit from a tenant, you must protect it in a government-authorised scheme. At Townends, we use my|deposits. You then have 30 days to hand your tenant’s a copy of the certificate and Prescribed Information.
When protecting a deposit, you can opt for either an insurance or custodial scheme. The insurance scheme means you’ll be able to keep hold of the deposit in a bank account, but will pay a joining fee and an individual fee per deposit. The custodial scheme is free to join, but the deposit will be kept in a secure bank account on your behalf. At the end of the tenancy, you’ll come to an agreement with your tenant and authorise the return of the deposit money.
Alternatively, you can offer your tenants the option to purchase a guarantee through Zero Deposit, which reduces the upfront cost of renting for a tenant and offers the same level of protection to the landlord.
Undertaking an inventory
Before your tenants move in, you should complete a professional inventory which records the condition of the property. This will protect your investment as it means your tenants will be liable for any damage caused during their stay.
It’s always a good idea to obtain the services of a professional inventory clerk, but if you want to do this yourself, make sure it’s detailed and includes dated photographic evidence. Ask your tenant to attend the inventory and agree that it’s accurate.
Conducting safety checks
Landlords legally need to complete an annual gas safety check from a gas safe registered engineer and pass a copy of the certificate to tenants. If your property relies on solid fuel (such as coal or wood) then you must also fit a carbon monoxide alarm in every room where this is burned, as well as fit a smoke detector on every floor.
It’s also advisable to have all electrical appliances (such as cookers and kettles) PAT tested and check that electrical systems (such as sockets and switches) are safe.
Providing an Energy Performance Certificate (EPC)
An Energy Performance Certificate (EPC) will rate the overall efficiency of a property from A-G and explain what you can do to improve it. As of April 2018, new Minimum Energy Efficiency Standards (MEES) meant all rental properties in England and Wales must have a rating of at least an E, so ensure you check this information and provide your tenants with a copy of the EPC.
Other important legislation
It’s also crucial that you check to see whether your property is a House in Multiple Occupation (HMO) and obtain the correct licence from the local council. The laws in this area are fairly complex, but you can find out more information on the Government’s website.
In England, you’ll also need to provide your tenants with a copy of the Government’s How to Rent Guide before they move in.
Issuing a contract
Although it’s not a legal requirement, every landlord should issue a contract to their tenants. The most commonly used type is an Assured Shorthold Tenancy (AST) agreement. This contract outlines the responsibilities of both the tenant and landlord in accordance with the law. It should include information such as the names of all involved, the rent and how it’s paid, when the rent will be reviewed, the deposit and how it is protected and the length of tenancy.
Not all AST’s are treated equal, so it’s important you issue a detailed and fair agreement. If in doubt, contact our professional staff at Townends for help.
Preparing a property
Before taking on a tenant, you should always undertake reference and credit checks (and Right to Rent checks if the property is in England). It’s also important to source the right insurance to protect your investment as most standard house insurance policies won’t provide the right level of protection. Insurance for landlords should include loss of rent, unoccupied periods, accidental image, legal expenses and rent protection.
At this point, make sure your property is ready to receive tenants and that you’ve complied with all the right regulation. If you haven’t met all your obligations, you may not be able to serve a Section 21 notice should you need to regain possession of your property.
Moving in your tenants
There are over 145 laws and 400 regulations that need to be followed to legally let a property in England and Wales. Although being a landlord can be a positive and rewarding experience, if you fall foul of the law, the penalties can be high.
If you’d like peace of mind that your property and tenants are being looked after, contact your local lettings team at for more information about our Fully Managed Plus service or call 020 3911 3673 for your free valuation.