Top Tips For Successful Landlords
With record numbers of rental properties flooding the market, we look at what you need to do to let your property, and what can help your chances of success.
Property prices are in the news again. Nationwide BS has revealed that, according to its latest survey, house prices fell by 15.9% last year.
Many home owners who have been unable or unwilling to sell have resorted to renting out their properties, with online letting agent Rightmove reporting that the number of properties it has on its rental list has increased by 60% over the last year alone.
What’s more, as this flood of so-called “reluctant landlords” are letting the properties they lived in (which will often be fitted to a much higher specification), these properties can prove far more appealing to tenants than the typical rental properties on offer. Couple that with often highly competitive rents and you can see why many traditional landlords are concerned for their own futures.
Rental Rewards
What's the best way to ensure you successfully attract a good tenant? Well, according to upad.co.uk, you should:
Make your property as energy-efficient as possible; as well as being environmentally friendly tenants will appreciate the reduced energy bills. Install energy saving light bulbs, check the thickness of loft insulation, fit lagging to pipes and water tanks, draught proof, replace inefficient boilers and turn down thermostats. You may even be entitled to some help as the Landlords Energy Saving Allowance enables many landlords to claim back these costs up to a maximum of £1,500 per dwelling.
2. Carry out market research
Keep up-to-date with the market rate and price your property accordingly.
3. References and credit checks
Ensure you request references from previous landlords or employers. It’s also worth carrying out a credit check. This should cost around £10 from the National Landlords’ Association.
Legal Requirements
Before letting the property, you must legally ensure:
- The safety of gas and electrical appliances
- The fire safety of furniture and furnishings provided under the tenancy
- The property is fit for habitation
- You have a house of multiple occupancy licence if you let to let to three or more tenants who form two or more households. (Visit this Government website for more information on this.)
You must also make sure you have an Energy Performance Certificate and are a member of a Tenancy Deposit Scheme.
Energy Performance Certificate (EPC)
Gas Safety Certificates are a legal requirement for landlords when letting a property. Any landlord letting a property that is equipped with a gas appliance must ensure the following:
* Any pipe work leading to or inside the property, appliances and flues provided for tenants are maintained in a safe condition.
* You must have a gas safety check every year.
* A Gas Safe registered engineer must carry out the safety check in your properties in Great Britain and the Isle of Man.
* You must give your tenants a copy of the gas safety certificate within 28 days of it being carried out or before they move in.
* You are obliged to show your tenants how they can turn off the gas supply in the event of a gas leak.
You can order a gas safety certificate from lettingaproperty.com, which has a nationwide network of gas safe registered engineers, though there are many other outfits which you may prefer.
Tenancy Deposit Protection Schemes
Another regulation landlords with long-term tenants may not be up-to-date with is the Tenancy Deposit Scheme.
Set up in 2007, the scheme essentially protects tenants’ deposits.
Three companies have been contracted to provide the service, and landlords are given the choice of either a custodial scheme (where the company chosen holds the deposit) or an insurance based scheme (where the landlord holds the deposit, but pays a premium to an insurer). The schemes are free, and are usually funded entirely by interest earned on deposits held.
In all cases both the landlord and tenant are informed where the money is, how it is protected and what to do to get it back. Should there be a dispute the money is held by the scheme until an agreement is reached by all parties. (All schemes provide a free, dispute resolution service.)
Emergency Procedures
Finally, a vital factor to consider when letting out a property yourself is how hands-on you wish to be? Tenants will need to know what to do in an emergency (i.e. if the heating should break down, there’s a burst pipe etc.) and while many landlords take on this responsibility themselves, if you've a full-time job, lack the suitable skills (or prefer not to be disturbed!) you may be planning to hand this over to someone else.
One option is to provide tenants with a list of emergency numbers for plumbers/electricians/handymen you know and trust. Tenants simply call them directly when things go wrong, and the bill comes straight to you.
Another option is to take out heating/boiler/electrical and plumbing care with a company such as British Gas (you pay a set monthly fee and your tenant is provided with a phone number to call directly when things go wrong). Again you won't be disturbed, but the cover is rarely comprehensive and over a year can prove very expensive – especially if the service is never used.
An alternative solution is to take up one of the many Landlord Emergency Insurance policies on the market. Typically costing upwards of £90/year with no excess, these policies tend to cover most emergencies, with tenants simply having to call a number to arrange for a tradesman to come out.
However, we haven't had much feedback on this type of policy - if you have any comments or advice regarding them please add them below!
And although the costs involved in letting a property yourself may seem high, it's worth remembering that they're still far lower than the fee most letting agents will charge to look after a property for you.
So if you're a landlord, reluctant or not, by keeping your property in good order and making it as energy efficient as possible you will hopefully encourage your tenants to stay for longer, and reduce the chances of every landlords dread: the void period!
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A lttle correction to what Guykguard said about the mortgage market in the Netherlands: most mortgages are actually 'annuity' mortgages, something I haven't found in the UK. The principle is that mortgage payments start off being almost 100% interest payments, gradually being replaced by a percentage actual repayment. This is because mortgage interest (on first homes) is tax deductable! This greatly helps young FTB, where the banks expect their salaries to increase over the years, get affordable repayments early on, and still pay off the mortgage by the end of the term. If only our government would take this approach...
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While the article is largely correct, I would add that you do not need an Energy Performance Certificate if you rent rooms of a flat/house to different tenants under different tenancy agreements (and as long as it isn't classified as 'multiple occupancy', I.e. three or more stories high and occupied by five or more people). Also it is well worth shopping around for all these certificates. In my area nine out of ten qualified gas inspectors wanted to charge £120 to £200 for the gas safety certificate, but I managed to get one for £40 (+ tax). This gas certificate is a particularly misguided piece of legislation. The idea, I think, was to stop tenants being killed by ancient boilers whose flues were likely to get blocked, forcing carbon monoxide into the living space. But for a couple of decades boiler flues have been built differently (I.e. without a long chimney going through the house, susceptible to birds nesting on the top) so that the flue goes directly to the nearest wall and out the building. The inspectors, therefore, are now just looking for gas leaks, which any landlord or tenant would notice pretty quickly since the house would smell of gas and the gas bill would rocket. I'm not aware that there have been any accidents relating to gas leaks from poorly maintained pipework! So the inspector waves his gas testing equipment around and signs a bit of paper, taking all of five minutes for his £100+. I imagine that the Environmental certificate is just as ridiculous. An inspector asked for £100 to check if you have double glazing and loft insulation. This is particularly annoying for landlords who pay the heating bill anyway!
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Soconnel: Well done, you! The median prices for property quoted in the newspapers come from the Land Registry, presumably with a time lag although I'm not sure how long the lag is. Maybe you know? For reliable regional data try here http://www.nationwide.co.uk/hpi/historical.htm. Please remember what the median means: half the data points will be above the median and half below it. Although the median compensates for outliers, it may conceal regional variations. For Q4 2008 Nationwide quote the lowest median price, in the "North", as £118,525 and the highest, in "London", as £257,963. The national median is £156,828. As for the prospects for median prices, the average UK gross salary is £25,000. In future banks will not, repeat not, lend, at affordable rates, more than 3½ times annual gross salary (partner's salary may be ignored!); nor more than 80% LTV; nor if monthly repayments are more than one third of gross monthly income. Monthly repayments on a 25-year repayment mortgage of £90,000 at 6%/annum are £580! There's no escaping that median property prices for the whole UK must therefore fall to somewhere around £120,000, a further fall, on national average, of about 25%. There's one feasible way out of this frightening prospect. For seven years I worked in the Netherlands, where land prices are out of sight and property prices astronomic. There, most mortgages are interest-only: practically speaking there's no alternative for most young Dutch people. If the British property market were to follow the Dutch model, median purchase prices of UK property might find a floor of about £135,000, but the market risk of property is merely postponed not eliminated. In view of the Equitable Life disaster, I also wonder whether the endowment mortgage model will make a comeback any time soon. In answer to your initial question, no, not the newspapers, just some simple arithmetic on some rock-solid data. It all makes for scary reading, I know! For all that, you've done well: good on yer!
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01 June 2009