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If you decide to rent out your property, one of the first decisions you’ll have to make is whether to employ a letting agent to do everything for you – from advertising your property, collecting the rent and dealing with any problems to arranging for health and safety checks.
Handing everything over to a letting agent is the easy option, but it is also a more costly option – and if your profit margins are small it may be the difference between making money and losing money.
If you decide to take the management of the property on yourself, there is a lot to bear in mind…
Do the groundwork
Just like any other business venture, it is a good idea to have a business plan. Include financial projections, especially if you need to cover mortgage repayments. Factor in money for repairs and to cover periods of time between tenants when the house is likely to be empty and there is no rent coming in.
Before you begin, you may need to get certain permissions from your local authority’s planning, building and environmental health departments, your mortgage company, your home insurance company and your freeholder, if there is one.
You will also need to get your head around the basic letting rules and regulations, both the landlord and tenant’s legal obligations and some of the laws governing lettings. It may be best to employ a solicitor to help you with this, or alternatively, take some time out to read up on the subject.
Be sure who you are renting to
Before handing over the keys to your house, make sure you vet your tenants thoroughly. It is better to have no tenant at all than one that will not pay the rent, refuse to leave and cause damage to the property.
Always do a credit check on potential tenants. It is not an absolute guarantee but a basic check is quick and fairly inexpensive, and it is a good safeguard against real problem debtors.
Also, make sure you actually call up or write to the references given – don’t just take them at face value. However, don’t spend too long doing this as you may lose a valuable client.
This is one aspect where being your own landlord can be better than relying on a letting agent, as you can generally deal with applications more quickly, often at weekends and outside normal working hours, and so make quick letting decisions.
Get it down in writing
Always get your tenant to sign a written tenancy agreement in front of a witness and pay the first month or six week’s rent and security deposit up front. If you accept a cheque, allow time for clearance before finalising the agreement.
Without a written agreement you may find it difficult to prove even the obvious points of the tenancy if they are disputed at a later date, such as when the tenancy actually started, how long it is due to last and what the rent should be.
If you don’t have a solicitor to prepare an agreement for you, there are plenty of ‘off the shelf’ agreements available for download from the Internet. Be sure to read through them carefully, however, and amend them according to the specifics of your property. For example, if you don’t want pets in the property, make sure it is mentioned in the agreement.
How much to charge?
Another thing you need to decide is what rent to charge. Compare similar properties in your area and try to match the market value – too high and you might struggle to find tenants, too low and you might not make enough money to cover your costs.
If you opt for a long-term let of more than a few years, then it is only fair to review and possibly raise the rent slightly every now and then. Try to come to an agreement with the person renting your house on this to avoid losing a good tenant, which could end up being more costly than leaving the rent as it is.
There are a thousand other things you need to consider when renting out your home, but much of it is common sense and as long as you are sensible and take the time to learn the rules of being a landlord, there is no reason to be deterred from what could be a nice profit-making venture.