Acquired new property? Just had it surveyed? Or maybe you just have an extra one lying around, and now you’re thinking that you want to let it out for the public. While this is a great way to generate income, there are many things to consider.
How many times must you scramble on the books, find the exact pages while wishing it functioned just like Google, and realise that you do, in fact, have the ability to use google? Searching for facts can be a stressful part of a necessary good. Such as letting property!
However, it will be your vast array of knowledge that will be the key to unlocking your confidence in this endeavour. There are so many things you need to know and triple that for things to watch out for!
First and foremost
Should you get a letting agent? Let’s define what that is, shall we?
A letting agent is a role. This role entails being the facilitator, or “middle-man,” towards an agreement between two parties. The two parties are usually the landlord and the tenant, and the agreement being about the rental of a residential property.
However, this in itself already, comes with a lot of things that need consideration. Here are a few facts, and good-to-knows.
From the 27th of May 2015, letting and management agents are required to display any and all list of fees, charges, and/or penalties payable by landlords and tenants for any letting agency or property management service.
Some key fees include (but not limited to) the following:
- preparing tenancy agreements and conducting the initial property inspection
- reviewing applications from prospective tenants
- holding open homes
The only exceptions are tenancy security deposits (not holding deposits), rent payable to a landlord and fees, charges or penalties which the agent receives from a landlord under a tenancy on behalf of another person.
Sample questions to ask an agent
- What are your fees? What is included and what isn’t?
- What will you do if the tenant stops paying the rent?
- Do you belong to a professional association?
- What is included and what isn’t?
- How quickly can you let my property?
- What type of tenants do you usually let to?
- How will you advertise my property?
- How long have you been letting properties?
- How often do you let properties in my area?
Good to know:
A letting agent is like a biased referee. Fortunately, the bias is in the landlord’s favour, yours. Therefore, tenants should look out for, and be proactive on, your own interests.
Things To Sort Out:
You, as the landlord, need to be sure that the numerous legislations relating to the renting out of property have been complied with before the signing of the tenancy agreement. Also, it is far more likely that you will attract a good tenant if you ensure that your property is in excellent condition before it is let. Doing business in good faith usually builds trust and rapport.
In the end, anyway, it is almost devastatingly difficult, and expensive, to carry out rectification and remodelling works with tenants in occupation. That said, here are a few things you must keep in mind when going about this business!
1. If necessary, get a licence.
First off, let’s get this vital piece of information out of the way: do you or do you not need a licence? Here are 3 types of them:
A. Mandatory House In Multiple Occupation Licence
Having a property which is three or more storeys high and has five or more unrelated tenants will, by default, put this in the House in Multiple Occupation (HMO) category and you will probably have to obtain a licence from your local authority.
Speak to your local authority before taking on any tenants (and preferably before doing any building works) if you think that this would apply to you.
B. Selective Licence
Apply for a selective licence if you are a landlord of a property that is rented by a single family household or shared by two unrelated tenants.
All privately rented properties within a particular licensing zone must be licensed, regardless of their occupation and size. It is essential you are aware that landlords without a licence may be prosecuted and may no longer be able to operate their business.
C. Additional Licence
Apply for an additional licence if you operate a house in multiple occupations that is shared by three or more tenants living in two or more households. This excludes homes in various occupations that require a mandatory licence.
2. Make sure that the property is safe
This one might be the most important. For tenants searching for a place, home security is a major factor in the decision-making process.
Regulations for general safety in the property exist. This constitutes matters like; slippery rugs or ladders with broken rungs. Also, aged electrical appliances must be safe. Having them inspected, checked, and tested before and between lettings will be a worthwhile move. Plugs must be properly sleeved and sockets secure.
3. Look for up-and-coming areas
Making an effort to follow the property press and the Internet to see where the whispers are pointing towards as the next areas for investment potential can be a worthwhile effort. Government investment in infrastructure, the introduction of multinational companies, and special events are good things to watch out for.
All of these things will help to push prices and desirability up and help rental rates.
4. Getting permission
It is absolutely imperative to make sure of the legalities. To ascertain that you’re legally allowed to let the property, check with the following;
- Insurance Company, to check that renting is permitted.
- Landlord (if you’re letting a leasehold flat)
- Mortgage Company
You should also check that planning permission isn’t required (this is particularly important if the property can be classed as a House in Multiple Occupation (HMO).) You may need building regulations approval if any building works have been completed.
5. Check that the furniture is fire resistant
Even the furniture isn’t safe from regulations. All furniture must be fire retardant and carry the proper labels. Carrying out a fire risk assessment is mandatory by the fire safety law if you’re property qualifies as an HMO. You must also identify the general fire precautions you need to have in place.
6. Get the property into a good condition
A property must be in good condition and have no ‘category 1’ hazards at the time that it’s let. What qualifies as a category 1 hazard?
- excessive cold
- dangerous electrics
- a faulty gas boiler
- damp and mould growth
- risk of falling on stairs, floors or outside paths
- fire risks
‘Category 1’ hazards relate to the Housing Health and Safety Rating System set up under the Housing Act 2004, where local authorities are given powers to inspect properties and determine whether they contain any ‘hazards’. These all relate to health and safety.
The landlord will be responsible, during tenancy, for the maintenance of the structure and exterior of the property and for the installations for the supply of water, gas, electricity and for sanitation, and for the installations for the supply of space and water heating. This is stated in Section 11 of the Landlord and Tenant Act 1985.
Therefore, making sure that all of these are in good working condition at the time of letting to minimise any repair works during the tenancy is a no-brainer.
7. Maintain the electricity supply
There isn’t any requirement for regular inspections (as there are for gas appliances) for electricity unless the property is an HMO. This then will need to be inspected every five years. However, landlords are responsible for maintaining the condition of the installations for the supply of electricity.
8. Checking gas appliances for safety hazards
Gas installations at the property must be inspected. The inspection should ideally be carried out by CORGI(Council for Registered Gas Installers)-registered installers and affiliates. This must also be inspected annually thereafter. A certificate will be provided by the installer, and it becomes the tenant’s responsibility to secure a copy.
In the end, it will all be worthwhile
Success stories are abundant within this particular investment. As with all investments, there will always be risks, and this one is not exempt from that, but the risk can always be calculated. Whether your trump card is hiring a reliable letting agent or your vast and boundless knowledge of this field, you can still win if you put in the work!