10 Things to Expect When Becoming a Landlord
This article was provided by Savvy Women – a UK-based financial education, property, business and solutions organisation.
In a lot of the current life situations that we find ourselves in, we are always looking for alternative ways to use our savings in a more practical and financially rewarding way. One of the most popular investments is investing in property and then renting it out for a monthly income.
How Many Landlords are in London?
Over the last five years, the number of buy-to-let landlords has risen by a whopping 49% from 1.8m to 2.7m, according to London agency Ludlow Thompson. Despite tax changes in recent years, landlords and investors have found ways to adapt.
This is because venturing to become a landlord can still be a profitable decision to make. In ideal circumstances, you’ll be able to receive a positive cash flow on your property, while it also appreciates in value.
The decision many landlords have to make is: are you looking to pursue it full time, or do you prefer to let a management company help you so you can focus on securing more properties?
With the time, energy and money involved in managing your own rental property, how hard is it to achieve? There are things that any new landlord should come to expect, which we Savvy Women are happy to take you through!
- You will need to adopt a business mindset
You will need to keep profit in the forefront of your mind. Keeping a detailed inventory of records on your income and expenses is crucial. Any cancelled checks, copies of bills, and receipts, get in the habit of keeping!
Expert property investor, business and life coach Sapphire Gray works alongside those looking to diversify their portfolio, gain massive success in their endeavours and can help you transition on your next step to financial security and abundance.
An inexpensive bookkeeping system is fine for tracking your finances. There are also various spreadsheet programs and dedicated accounting software that are excellent tools.
CONSIDER USING A TAX ACCOUNTANT, AT LEAST AT FIRST, TO GET YOU SET UP CORRECTLY.
- You’ll have to pay taxes. Even though you need to pay taxes on the profits, there are also tax advantages available to property owners and landlords. Some of the common deductions include:
- Interest payments on the mortgage
- Advertising to find tenants
- Insurance premiums
- Property taxes
Repairs and maintenance
- Tax preparation
SevenCapital has a team of dedicated property tax specialists. For guidance on any recent tax changes and to ensure the best solution for your needs visit us.
- Expect to adhere to strict laws and rules set for landlords:
There are numerous laws concerning housing. There are local codes related to the structure itself as well as laws related to evictions, the handling of deposits, how much rents can be raised, and other related issues.
Your local government is likely to have copies of all the applicable laws available for you.
There are also laws that pertain to tenant-landlord relationships. These primarily address discrimination as it relates to renting and advertising practices.
Housing specified for senior citizens is also exempt from some requirements.
As a landlord, you must meet certain requirements, (visit us at Seven Capital, where we go through the 4 core steps to become a landlord):
-Your building must comply with the local building codes.
-The property must be kept in liveable condition.
-The utilities must be in sanitary and safe working order.
-You must provide functioning smoke detectors.
- You’ll be conducting business with a good solicitor. It’s a good idea to have a solicitor review your lease before the tenant signs to ensure you’re following the law. Lawyers are also useful during the eviction process. Your local estate agents likely endorse some solicitors that specialise in property investing matters.
If you’re in doubt about any legal issue, it’s better to be safe than sorry.
- A standard homeowner’s insurance policy will likely not apply.
Your regular homeowner’s insurance policy is for owner occupied homes, so you’ll need a policy specific to rentals. You might also require a separate policy if the home is vacant for an extended period.
- Outsource services to save you time
Consider a property management service. For about 10% of the rent, a property management company will find tenants, collect the rent, make repairs (at your cost), and handle nearly every other type of issue. If you’d rather spend your time finding additional rental properties to purchase, a management service can be a good idea.
- Protect tenant’s deposit
On any shorthold tenancy that started after 6 April 2007, you must put a tenant’s deposit into a government approved Tenancy Deposit Scheme (TDP). This is paid back to them within an agreed time after the tenancy ends, depending on if they have met the terms of the tenancy agreement.
8. Expect health and safety assessments (HHSRS hazard ratings)
There are 29 health and safety areas that inspectors look at, they score each category 1 or 2, according to its seriousness.
When the council enforces a notice, you must take action. You also have the right to appeal enforcement notices.
If the council find a serious hazard, they have the right to:
- Issue an improvement notice
- Fix the hazard themselves and bill you for the cost
- Stop you or anyone else from using part or all of the property (In some cases if a tenant finds a sizeable portion of the property, they are renting to be unusable, they can request this be deducted from their overall rent)
For more information on this gov.uk has helpful outlines about health and safety assessments.
- You will most likely become better at communicating and mediating scenarios
As human beings, life can be massively complex and as a landlord you will be faced with lots of people’s unique experiences. As we’ve seen with Coronavirus, tenants could lose their jobs making their payments difficult, or maybe there’s a repairs issue that hasn’t been dealt with that is now affecting the tenant’s ability to use the space provided.
Instead of proceeding to take legal steps like going to Small Claims Court, being a strong communicator and negotiator will likely allow you to come up with fair arrangements when problems do arise, so you can expect your problem-solving skills to improve!
Keep in mind you are your tenant’s first point of call during an emergency. Things like burst pipes, lost keys, broken boilers, break-ins are matters you will have to deal with. Prepare for phone calls from tenants as it could happen at any time.
** CAREFULLY ASSESS WHERE YOUR PROPERTY INVESTMENTS ARE LOCATED. IF YOU ARE A QUICK DRIVE AWAY THEN EXCELLENT, BUT IF YOUR MAIN BASE IS FAR AWAY, YOU MAY WANT TO CONSIDER WORKING ALONGSIDE AN AGENCY WHO CAN BE THERE TO DEAL WITH THIS WHEN YOU’RE UNABLE TO **.
Becoming a landlord may be a lucrative field but you shouldn’t take it up without precaution and educating yourself on certain expectations. Having reputable tenants can be a hassle-free way to profit from your rental home, be aware you may still come across individuals who can make things difficult and very expensive.
Learning how to vet a potential tenant and how to cultivate the right skills for this role will massively help boost the success of your business.
If you want to take your venture to the next level, SevenCapital has the resources to assist with your research alongside a number of properties ready for investment.
From Savvy Women Group and SevenCapital, we hope to speak with you soon.
This guest post was provided by Savvy Women. The opinions expressed by the guest writer above and those providing comments are theirs alone, and do not necessarily reflect the opinions of SevenCapital or any employee thereof. SevenCapital is not responsible for the accuracy of any of the information supplied by the guest writer.