The Beginner’s Guide to Becoming a Landlord
Becoming a landlord is an appealing prospect to the business-minded individual. After all, it’s an excellent side hustle that can earn you a consistent form of income, even as you enter retirement. What’s more, getting on the property market builds your asset portfolio, so you could eventually see a massive return on investment.
However, becoming a landlord is easier said than done. A significant amount of money is involved alongside complicated and cumbersome paperwork, which ends up putting a lot of people off. To help prospective landlords out, we’ve decided to write this article which breaks down the process into smaller, more digestible chunks. Read on to find out the basics of getting started as a landlord.
The Initial Expenses
Unless you happen to have a second home up your sleeve, then becoming a landlord is an expensive activity. The initial costs are steep and so you need to ensure you have enough money to spare if you want to fully commit. It’s also important to understand the basic principle of return on investment. Though it does cost a small fortune to become a landlord, if you play your cards right then you should see a significant yield of profit within a couple of years. Don’t be disappointed and give up early because you’ve not seen immediate results. So, now that disclaimer is out of the way, what exactly do you need to become a landlord?
The Right Property
You should invest in a property which will be attractive to renters and future homeowners you might sell on to. When doing so, you must avoid being lured into a false economy. Cheap properties will cost a lot to renovate, while expensive properties aren’t necessarily the best value for money. The next step is refurbishing. When doing so, work by the rule of thumb that everything needs to be as practical, durable and aesthetically-pleasing as possible. This includes light rooms, nice but neutral wallpaper, plus damage-resistant flooring. You might also want to consider whether you’re going to be letting a fully furnished, partially furnished or empty property (aside from the essential white goods). This will influence what kind of renters you attract. Avoid making the mistake that many landlords do, which is decorating their property to their tastes as opposed to what is widely palatable.
The Right Tenants
Nothing is worse than a bad tenant. This goes beyond simply not paying rent on time. If you let your property to the wrong person, you could see the value of your property going down the drain, even with the safeguard of a deposit. For example, messy tenants could incur you massive cleaning costs, while careless tenants could cause damage to the property which is extortionate to fix or – in some cases – irreparable. Therefore, you should research who you’re going to let the property to. What’s their track record like with previous properties? Do they have the income to sustain paying rent? Are they looking to settle down, or just need accommodation for university? All these things are worth investigating.
4.) The Documents
Like anything, you need to get the paperwork to become a licenced landlord. This will protect you from any future problems. For starters, you’ll want to obtain landlord insurance. Among other things, insurance means you can get compensation for damage to the furniture that tenants might have caused; you’re protected from any legal claims they might attempt to leverage against you, and your property is covered whenever it’s unoccupied. Therefore, landlord insurance is essential for protecting your licence and your money. It’s also your responsibility to seek out the appropriate information for your tenants. This usually includes an inventory of the property and its pre-existing damages, plus producing an energy-performance certificate.
As we mentioned before, significant costs are entailed with being a landlord. The main overheads you need to account for are replacements and repairs to the property. For instance, if the roof starts leaking, it’s your responsibility – not the tenant’s – to fix the damages. There are also letting agent fees to consider if you’ve used a third party to arrange the tenancy agreement.
The Health and Safety
Landlords sometimes become overly preoccupied with money-making and cutting costs wherever they can, which might put their tenants at risk. You must remember about organising annual safety checks of the property, which include looking for mould and conducting an audit of the boiler. Don’t forget about meeting standard safety requirements, too. Ensure your property is fitted with carbon monoxide and smoke alarms, plus get all electrical appliances PAT tested.
These are the basics of becoming a landlord who operates within the law. Your top priorities should be getting a return on investment, ensuring that your tenants are safe and protecting yourself alongside your property.