Everything a First-Time Landlord Needs to Know to be Successful
Becoming an official landlord for the first time can be both exciting and daunting. Here at Mayweather Estates we work with a wide range of landlords, at each end of the experience spectrum, and we understand the anxieties first-timers have going into their first buy to let venture. It’s no secret that the rental market can be a fruitful one, but only if you understand your personal market and avoid the common pitfalls to becoming a successful landlord.
We have listed some of those risks involved and offer some of our own personal advice on how to avoid them. Remember, letting a property should be considered as important as running a business; there are various things you should have in place to ensure success and legal adherence.
So read on for everything you need to know to be a successful first-time landlord.
Get a Step Ahead With Your Paperwork
No one likes to do the little nitty-gritty bits or the paperwork, but you might as well get this out of the way first. Landlord’s insurance is extremely important as this will cover your building’s contents and fittings. Obtaining a gas safety certificates is a legal requirement so this must be acquired before continuing any further. It seems like obvious advice, but sorting out the small details beforehand is something that is often overlooked by first time landlords. Doing this first will save you time and inconvenience later on.
Understand Your Target Market
This is no longer a property that you live in or have the choice of living in; this is going to be somebody else’s home. You may have bought a property with the sole intention of renting it out. Therefore, to be successful you must have good knowledge of the surrounding area and have an educated idea of your target market.
Do your research; find out what properties let well in the area and the best neighbourhoods to do so. A reputable letting agent is almost invaluable here as they will have extensive knowledge of the local region.
Create an Imaginary Ideal Tenant
As essential as it is to assess your market, it’s equally as important to identify an ideal tenant. Painting the walls black is hardly going to work in an environment where people are looking for ultra-modern, bright and airy living spaces. This is an extreme example, so take the student market as an example; the chances are they will be looking for fully furnished properties. Therefore, you must cater for this requirement and create a durable and reusable environment. Families on the other hand, will be more concerned about large open spaces and a private garden, as well as good access to local schools.
Never Forget to Chase References
It’s a common mistake amongst new landlords believe it or not, but sometimes being honest and trustworthy can be a pitfall in the making. If you are letting a property alone make sure that you not only obtain references from your potential tenants, but that you chase them up too! Be as thorough as you can be, as it will help you greatly if you are able to build a picture of your tenant beyond what you see.
If previous landlords have had bad experiences with your potential tenant(s), or they show history of jumping from job to job, this could deter you from making a deal with them and ultimately avoid issues later down the line. If you are letting through an agent they will employ a referencing company to do background checks on your potential tenants on your behalf.
A Shorthold Tenancy Agreement is a Must
A shorthold tenancy agreement is vital in protecting your interests. It really doesn’t matter who you are letting to, you should adapt your terms and conditions to cover the specific requirements of your property. Getting it all down in fine print creates a legal document that allows everyone to understand what is required of the tenant and landlord; so it protects both sides too. Your agreement should take into consideration elements, such as who tends to the garden and whether or not pets are allowed inside the property.
Landlord Deposit Scheme is a Legal Requirement
Tenants’ deposits must be protected by law and the simplest way to do this is to secure it with a registered third party. This could be a bank account separate from the one that accepts rental payments and one that is not used by yourself or any other person. Should you wish to withhold some, or all of the deposit amount when your tenants move out, you must register a claim.
Consider Using a Letting Agent
Deciding whether or not to use a letting agent ultimately rests on the balance between hassle and income. If you decide to go alone you will of course reap all the financial benefits. However, you must also go through the hassle of this list by yourself and make sure your property is well-maintained and in the right condition to let too. Estate agents will take away all of the trouble and stress of finding the right tenants and all of the rest that comes with it; but that will of course come at the cost of a percentage of your rental income.
The balance between higher stress levels and higher income will be decided by how comfortable you feel flying truly solo. Our expert team are here to advise on your options should you be in the early stages of your decision making process. Our team are more than happy to advise on how we can help you get you first letting property off the ground.
Obtain Mortgage Advice
Acquiring independent mortgage advice for your buy-to-let investment is an incredibly wise move too. Seeking professional advice may open doors you never thought of before, such as accessing a number of lenders that only operate through a mortgage broker. These will often specialise in landlord mortgages. Plus, it always helps to have advice from a professional in the market!
Do Not Dream Dreams of Grandeur!
Especially when letting for the first time you must limit your expectations and maintain a long-term approach. Get ‘rich quick’ plans will not work in the rental market. The buy-to-let market is a long-term investment and everyone must start off slow. So, to save your own hopes and heartbreak caused by impatience, do not dream dreams of grandeur too soon!
There is always a cost for repairs somewhere down the line and capital appreciation is speculative. It’s also much more tax-efficient for you to keep hold of your property for 10 years, when your Capital Gains Liability is reduced via taper relief. Plan way ahead of time – do you want this to provide a pension fund or do you plan to repay a mortgage at the end of the term? Make sure you have a clear idea of your long term goal.