How to Become a Landlord

The process of letting your home can be complex and time consuming, you need to be serious about your investment and put in the effort to keep your tenants happy. In this video we go through everything you need to know about landlord ship that includes how you earn money working out the value of your venture, your obligations, and rights, and finally what you need to do to find the right tenant.

• How much do landlords make?

The amount of money you make primarily depends on the rent income left over after your mortgage repayments expenses and taxes. Your rental income is your main source of profit you can also make money if your property increases in long-term value this increases the equity invested within that property.

• How do I calculate whether becoming a landlord is worth it?

Many landlords work out the success of their buy to the investment, by working out the rental yield and capitalization rate.

• Rental Yield

Your rental yield is your annual rental income or your potential annual rental income as a percentage of the property value, this is used in calculating the assessment of your buy to let mortgage and also in evaluating the success of your investment. You work out your rental yield as your annual rental income divided by the value of the property, you obviously want to higher rental yield as it means you're making back the money you invested more quickly, 10% is a good reference point and the kind of rental yield you should be aiming for but anything between 5% and 10% is promising.

• Capitalisation Rate

Your capitalization rate or cap rate is the rate of return on a real estate investment property based on income that property is expected to generate. You use your capitalization rate to estimate your potential return on an investment and therefore its level of success. Your cap rate is worked out by dividing your annual net operating income by the property’s current market value, to work out your annual net operating income, total rental income you deducted to any mortgage repayments, property management expenses. As a buyer you want a higher capitalization rate, as a seller you want a low rate of one, you'll be missing out on potential profit. Sellers can use the capitalization rate to work out the best time to sell a property.

• What are my obligations as a landlord?

When you become a landlord, you'll be taken on a new set of responsibilities, you'll be renting your property to real people and you to ensure that they're safe within your property, you have an obligation to maintain your property and keep them safe and secure.

You must be easily contact all your tenants, this is unless you’re using a letting agency as it’s up to them to liaise with the tenant:

Arrange buildings insurance against accidental damage like fire or flooding, you may also want to arrange contents insurance if your property is furnished.

Keep any supplied furniture and appliances in good condition.

Carry out or oversee property repairs unless you're using a letting agency.

Ensure your property is up to code before tenancy stars, this means you need to check smoke alarms, make sure a property meets minimum energy performance standards, adapt to tenants special needs of appropriate, look after your tenants deposit it's by keeping them in a tenancy deposit protection scheme, a letting agency will typically do this on your behalf, and make sure that all paperwork such as gas safety of certificates EPC and tenancy agreements are in order, but don’t worry you won’t be responsible for everything. It’s up to tenant to organize their own contents insurance with their possessions, pay council tax and pay utility bills.

• So, what are my rights as a landlord?

You earn certain rights as a landlord, it’s not just about what you owe your tenants, but it’s also about the responsibilities they have towards you as a landlord. You have the right to:

Receive rent when it’s due, if your tenants don’t pay rent and there’s no foreseeable solution then you have the right to serve an eviction notice by the proper legal regulations.

Raise rent at certain points in a tenancy your tenancy agreement rent must also be justifiable in line with the rent of similar properties in the area.

Claim repair costs backing expenses for any damages have a tenant who sticks to the terms of the tenancy agreement. You don't however have the right to walk in and out of the properties at your leisure. Landlords must give tenants 24 hours’ notice even if entering the property for essential repairs.

• John Charcol’s top tips for landlords

So, let's move on to John Charcol with 9 top tips if you're considering becoming a landlord.

1. Market to potential tenants online.

Nowadays it is 92% of people search online for potential rental properties, Rightmove and Zoopla are your two biggest players in this space, so smart to use a letting agent that will advertise for you on these sites, some landlords have had property snatched up and a tenancy agreement signed within 48 hours of posting them on these sites.

2. Get your property professionally photographed

Advertising with professional photos of your property makes a real difference to the way potential tenants see it. A professional photographer knows which angles in lighting will emphasize your properties best features even most mobile phone screens are high-resolution these days, so it's important that the photos we promised you are high quality.

3. Consider paying for a featured listing

Buying a featured listing on the largest property listing sites will help get your property in the front of a greater number of potential tenants. Featured listings keep your property at the top of the search results for a selected period, this also gives you the opportunity to display more photos that can help sell your property.

4. Don’t forget the importance of tenant referencing

Before your new tenants are on our dotted line you must carry out a thorough tenant referencing to protect you and your property. You can hire a professional referencing company to carry this out for you to check the tenants credit history previous landlord and current employment.

5. Make sure your tenancy agreement protects

Once you found a tenant and carried out any reference in, the next stage is your tenancy agreement, this agreement is essentially the contract between you and your tenant and is key to making sure you are legally protected. You can download a tenancy agreement template from the Gov.uk website or you can have a letting agent drop on for you.

6. Arrange a government-approved deposit scheme

Another important aspect of a tenancy agreement is a deposit, by law you must hold your tenancies deposit by a government approved deposit protection scheme. A good letting agent can assist you with this and set up a standing order with the tenants to ensure the property is paid on time every month.

7. Make sure you have a Energy Performance Certificate

There are a few things you need to do ahead of your tenant moving in. You must have an energy performance certificate to give your property and energy rating and provide your tenants with an estimated cost of the energy bills. Since the first of April 2018 some landlords must ensure their budget properties meet the minimum energy efficiency standards with an EPC showing a minimum rating of E.

8. You will also need a Gas Safety Certificate

You need to ensure that a gas safety check has been carried out within the last year you must have a gas safety registered engineer conduct the check within twenty-eight days of the annual review. It's also important that you have a working fire and carbon monoxide alarms within the property.

9. Consider rental protection insurance

And finally, you might want to consider rental protection insurance, rental arrears are always a worry and rental protection can make sure you're always able to make your mortgage repayments.

So that was our quick guide to being a landlord 101 hope you enjoyed the video and found it useful. If you want to see more videos like this please subscribe and turn on your notifications, and please feel free to follow us at the various John Charcol social media platforms where you’ll be kept up to date with the latest JC news.

Thanks very much, see you next time.