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Six steps new landlords must take

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Most UK landlords didn’t set out to make an income from property, a new survey, reported on the website Property Wire, has found, with fewer than a third considering it their main occupation.

According to the survey, only 5% consider themselves full-time landlords, with portfolios of five or more properties.

The majority of part-time landlords have ordinary jobs, such as teachers, nurses, IT professionals and accountants, and supplement their income by letting out a second property.

For many of these small-scale landlords, renting out property was something they came upon accidentally. Around 16% per cent inherited a property, which they decided to let out rather than sell.

A further 22% acquired their rental properties in other ways – as a result of moving in with a partner, being unable to sell their home or relocating abroad, for example. In the survey, just 18% said they deliberately bought property to let as a business venture.

There’s a common misconception that landlords are wealthy individuals. However, the survey revealed that many landlords, with a single property to let, struggle to break even, or sometimes make a loss. It was also revealed that a significant proportion of part-time landlords will leave the sector after a few tenancies.

Being a part-time landlord can be very rewarding. You’re providing a comfortable and secure home for someone, in a property you don’t need to live in, while making some additional income into the bargain.  But if you have a day job, being a landlord can be a demanding and time-consuming side-line, which comes a wide range of duties and responsibilities.

Around 40% of those polled said they had been a landlord for less than three years, with many admitting a lack of knowledge about the property market and its laws and regulations.

If you find yourself in this situation, the key to managing your new role is being well-informed and doing the right preparation. Read on for six steps you need to take before starting your search for tenants…

Six things every new landlord should know

1. Contact your insurance company 

It’s vital that you let the insurers of the property know that you’re planning to rent it out. Fail to do so and your insurance policy will most likely not be valid.

It’s also advisable to take out public liability insurance to protect you against any incidents that take place in or around your property.

2. Get in touch with your mortgage provider 

If you still have a mortgage on your rental property, you will need to inform the provider about its change of use. Depending on the type of mortgage you have – and your lender – you may have to switch or alter your current contract.

3. Understand your legal obligations 

As a landlord you must fulfil certain legal obligations and comply with a range of regulations.  It’s important to be clear about these from the outset – read more on the gov.uk website.

These obligations include making sure all gas and electrical equipment is safely installed and maintained; that the property has plenty of working smoke alarms and that your tenants have been provided with an Energy Performance Certificate

You are also required to protect your tenant’s deposit in a government-approved scheme and to carry out checks to establish that your tenant has the right to rent in the UK. 

Six things every new landlord should know

4. Get your tax right 

HMRC classes all the rent landlords receive as income, which means it must be declared on your end-of-year tax return.

If you are currently in employment and are taxed by PAYE, you will need to register for self assessment. If you do not usually send a tax return, you need to register by 5 October following the tax year in which you received rental income.

The first £1,000 of your income from property rental is tax-free. This is your ‘property allowance’. If your rental income is between £2,500 and £9,999 after allowable expenses, or £10,000 or more before allowable expenses, you must declare it on a self assessment tax return. You should, however, also contact HMRC for advice if your income from property rental is between £1,000 and £2,500 a year.

As a landlord you will pay tax on the profit you make after allowable expenses have been deducted. Allowable expenses are things you need to spend money on in the day-to-day running of the property and include buildings and contents insurance, repairs and maintenance (not improvements), interest on property loans and utility bills.

You may also be able to claim tax relief on the replacement of domestic items such as beds, sofas and white goods. Read more about tax, self assessment and allowances for landlords on the gov.uk website.

5. Draw up a proper tenancy agreement 

The majority of UK landlords use an Assured Shorthold Tenancy Agreement to let out their properties. This is a legally-binding contract between you and your tenants, which lays out the terms and conditions of the tenancy, such as its duration, the rent due and fees for late payments.

A tenancy agreement protects a landlord’s interests by allowing them to evict tenants if they break the terms of the contract. It also gives tenants peace of mind that they have a legal right to remain in the property.

Six things every new landlord should know

6. Put together a full inventory 

The most common type of dispute between landlord and tenant involves claims for damage to the property. Drawing up a full inventory can help you avoid this issue – make sure you take photos or videos of your property itself and any items included on the inventory.

At the beginning of the tenancy, you should ask your tenant to sign the inventory to confirm that everything it lists is both present and in the stated condition.

If an item of furniture is not included on the signed inventory, your tenants will not have to pay for any damage to or loss.

How Assetgrove can help  

If you do find yourself with an accidental property to let out, don’t despair. Do your research and follow our six steps to becoming a first-time landlord, and it should all be smoother than you think.

Alternatively, contact Assetgrove about our Rent Guarantee Scheme. We’ll explain more about how you could receive guaranteed rental income every month for up to five years.

As rent guarantee specialists, we have tenants waiting and will take on your property immediately. We respond to enquiries within 24 hours, and for added peace of mind, we also undertake any refurbishment works for landlords and offer finance solutions that avoid delays in renting a property.

Our in-house team is able to provide gas safety, electrical energy performance certificates within 24 hours and carry out day-to-day maintenance of your rental property. For full details, contact Assetgrove today.

Neil Jennings

Neil is the Operations Director at Assetgrove Lettings, London's Leading Rent Guarantee Company, providing Landlords with no voids, property maintenance, fee-free property management and stress-free service.

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