What To Think About Before Becoming A Landlord

So you are thinking about becoming a landlord? But what do you need to consider? In the current market, it’s more important than ever to be prepared and fully understand your obligations before taking the plunge.

Do Market Conditions Suit?

Understanding whether market conditions suit becoming a landlord is key, so it’s essential to assess potential demand in your area and for the type of property you already own or are looking to buy to let.

Broadly, the rise in interest rates and inflation has meant high mortgage rates, with an average of 5.84% in June 2023 increasing mortgage payments for buyers and pushing many to the rental market instead. Mortgage approvals are down 24% on the same time last year while residential property sales have fallen 27%.

Understand Your Property Management Responsibilities

As a landlord, you will have a number of legal obligations which fall under the remit of your property management responsibilities, particularly related to the safety of your property. These include annual gas safety checks, safe operation of electrical systems within the property, and working smoke alarms and carbon monoxide alarms fitted on each floor. You must also provide Electrical Installation Condition Reports at the beginning of a tenancy, with all new contracts and renewals, or if requested by the tenant.

Properties also need to meet a basic standard of energy efficiency – hitting a minimum energy performance certificate (EPC) rating of E.

You will also be responsible for all major and structural repairs of the property – from walls to the roof and windows as well as plumbing issues. Although greater repair responsibilities can be written into tenancy agreements, the usual tenant’s responsibility is only on ‘reasonable care’ of the property, such as gardening and cleaning

Know Your Legal Obligations

As well as your legal obligations around the safety and energy performance of your property, your legal obligations also include checking that your tenants have a legal right to live in the UK. This should be done by examining and copying immigration documents such as passports. This can be done either by you as the landlord or by a letting agent like us.

Any tenant deposits will need to be protected in a government-approved scheme, and you will also be obligated to provide tenants with a copy of the How to Rent checklist.

Obligations will also change and increase with the adoption of forthcoming measures such as the Renter’s (Reform) Bill and the Decent Homes Standard, so it’s worth understanding how such changes might impact you further down the line if you do decide to become a landlord.

Consider The Financial Implications

The financial implications of becoming a landlord go far beyond just the purchase price of the property. You will need to be able to cover the obvious outgoings such as your buy-to-let mortgage (with consideration that a minimum buy-to-let mortgage deposit is normally 25%) but should also consider a contingency fund for unexpected costs.

Within the expected costs budget should be maintenance costs, with a minimum of £250 a year per property advised. Similarly, the cost of refurbishment and redecoration also needs to be considered, particularly between tenancies. Your contingency fund is also useful to help cover the void periods between tenancies or when you are doing refurbishments and aren’t collecting rent.

Using a letting agent to find your tenants and handle rent payments will cost you around 10% of your monthly rent while a fully managed service will take this figure closer to 15-20%.  Landlord insurance will also ensure you are covered for the unexpected and will be another cost to consider.

Your income tax liabilities, stamp duty and mortgage interest tax relief obligations will also need to be understood.

It may not be right for everyone, but being a landlord can be a fulfilling and lucrative profession. Our other articles provide further advice and support.

We Can Help

At Progressive Lets, we aim to take the stress out of letting and managing your property, especially if you are a new landlord. Get in touch to find out more about how we can help.