If you can’t sell your house or if you don’t want to sell it at a rock bottom price (especially if you’re not buying somewhere else) then you may have to become a landlord. This scenario is not uncommon for those whose employment relocates or those who have new commitments outside their home area.
The tricky start is that you already have a property to rent. Professional landlords buy a property having researched the local area and know what their target tenants are: students near a university, professionals near the city, etc. However, as your starting point is your property you will need to research what tenants are likely to be attracted to your house and then mould your property accordingly.
Contact your mortgage provider to check whether you need to switch to a buy-to-let loan or whether you can continue with your current mortgage. You will also need to notify your insurers who will need to change the policy.
Remember that you will need to cater for periods when your property is empty and you are not receiving the rental income to cover the mortgage. To cover void periods you will need to have an income of around 125% of your mortgage payments. This figure also needs to cover gas and electricity safety certificates, repairs and maintenance.
You may need to be flexible on the rental payments – it’s better to have good tenants at a slightly lower rate, rather than an empty property, or tenants that say they’ll pay but then don’t pay.
If you are redecorating your property to rent out, make it neutral, do not personalise it. You need to prepare your property to be run as a business. In your mind, change the word “home” for “property”. It will help you become detached from your old home and help you run your property cost effectively.
If you are adding or changing fixtures do it properly and use good quality materials. People don’t want to live in shabby accommodation and remember that you are competing for a good tenant. Good tenants want good accommodation. The better quality fixtures will also last longer and so lower your maintenance costs.
When you choose tenants and if you are not using a letting agency you should vet your tenants (or pay for the service through the National Landlords Association). Be sure to get references from tenants and check them.
Always treat tenants and potential tenants with respect: get back to their enquiries quickly and politely, repair what needs repairing. Maintaining a good relationship with tenants is a business solution and makes the whole process less stressful and easier to manage. In turn, however, do not let your tenants pay rent late – you need to have clear boundaries and once they’ve paid their rent late once, it could easily happen again.
If you don’t want to manage the property, then consider using a lettings agency which will cost you around 10-15% of the rental income. However, if you do this, make sure you keep an eye on the agency and check that they are doing their job in getting back to the tenants as you would like them to. Check what the contracted tie in is, as if you’re unhappy with their service, you might then want to do the job yourself and do it according to your own standards.
You need to know the rules and regulations regarding health and safety, insurance and tax. For tax you may need to use an accountant for the first year or so to know what you can and can’t claim for.
The key to renting out your home is to view your property as the tool for business. Look after it and attract and maintain good tenants. Do your homework, be prepared to put some time and energy into the business and make it work.