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With the number of landlords in the UK rising to 2.5 million, this lucrative career path and investment option is still proving a popular choice for many. This number could be considered surprising - what with the heavy tax increases and mortgage rules recently introduced to deter buy-to-let landlords from buying up property.
However, there is still plenty of money to be made managing a property and opening it up to tenants. Here, we’ve taken a look into how to become a landlord, what you need to consider and know to make a real success of it.
There are a huge range of benefits that come with being a landlord. Turning this into your full time job means being your own boss, as well as being an excellent investment opportunity too.
Savings rates have dropped significantly in 2018, with many savings accounts failing to pay above the base rate - the lowest level since January 2013. This means investment in other areas could prove more lucrative than even an ISA or a high interest savings account. Housing has always been a worthwhile investment and as a landlord your tenants effectively pay the mortgage, before you enjoy the full rental costs as an income.
If you work with a letting agent, you’ll pay a fee for them to handle requests from your tenants. This means more time to focus on other investments and business opportunities, while you continue to make money from your rental property.
Essentially, to become a landlord you must:
Rental yield: An important figure in renting, as it is the return you can expect to receive on your property. It is often used by landlords to monitor the value of the property.
Buy-to-let: Any property bought with the intention of renting it out to another person. You can get mortgages from the bank created specifically for this type of purchase.
Assured shorthold tenancy: This is the most common type of tenancy agreement, it is when the tenant has a set period of time in which their stay in the property is secure. This typically lasts for six months to a year but can be extended when finished.
Tenancy deposit protection (TPD): A scheme that protects the deposit given by the tenant. It also offers you protection as it safeguards the money and ensures that the strict rules regarding it have been stuck to. You can end up with a large fine if you don’t put the deposit into a TDP scheme within 30 days. You must return the deposit to the tenant within ten days of agreeing the amount they’ll get back once the tenancy is over.
Stamp Duty: A payment someone must make to the government when buying a house. It is an upfront cost and you can calculate it using the Government’s online Stamp Duty calculator.
Capital Gains Tax On Property: The type of tax that has to be paid on the profit you’ve made from an asset, which is the property you’ve bought as a landlord in this case. You can read more about it here.
Subletting: This is when your tenant begins renting out a part of your property to another person. While this isn’t illegal, the tenant should ask their landlord for permission in advance. However, they could face eviction if they rent out the entire house as they lose their tenant status.
Tenancy agreement: The contract between you and the tenant. This is used to set out the legal terms and conditions of the property, including when rent should be paid, when the tenancy will end as well as the general rules you should like the tenant to follow.
Inventory: A detailed list of everything included in the property as well as the condition of it. This will help you know how much of the tenant’s deposit you should keep back for repairs when they move out.
Consider what rules you want to put into place before the property hits the rental market or someone might take advantage of loopholes in the contract.
Although they aren’t always strictly required, here are some additional things to consider:
Now you have the legal side sorted, it’s time to find the perfect tenant. Here are a few tips to do so.
There’s a lot to do when it comes to finding a tenant, so why not let us do some of it for you? From advertising the property and creating a tenancy agreement to arranging the viewings, we can find the perfect tenant for your property. Find out more about what we offer here.
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