Renting for Beginners

 

You’ve taken the plunge and invested a rather princely sum in what, you hope, will turn out to be a very sensible acquisition. All you need to do now is find someone to live in the property and pay your mortgage. Easy peasy.

Well yes, if you have ventured into this with your eyes wide open. Your careful research will have made you aware of the potential threats and you will have budgeted accordingly. For those who have found themselves in possession of a spare property or two and haven’t done any homework, you will need these pointers as a crash course. 

 

Time is money

You need to realistically calculate how much time you are able to spend managing your property. Your level of involvement will ultimately determine the nature of the service you opt for with your letting agency, or indeed, whether you appoint one at all. If, like most of us, you are tied up in a full-time employment, you simply may not have the time needed in order to do your investment justice.

 Agents market the property, conduct viewings, negotiate rent, draw up the contract and arrange for rent collection. And, on a fully managed service, they will also verify inventory, conduct inspections and check-outs of the property and address any maintenance issues that may arise. Fees for these services range from 8 to 15% pa.

Deposit

A minimum of one calendar month’s rent should be obtained from the tenant in order to cover damages caused by the tenant or to clean the property if left in a bad condition. If the property has deluxe fittings and expensive furniture, a higher deposit can be stipulated.

The deposit must be registered with a Tenancy Deposit Protection Scheme and paid back to the tenant within 10 days of checking out of a property, less any agreed deductions. Tenants may not use the deposit as rent.

Rent and Utilities

The rent quoted is usually per calendar month and is due in advance. Tenants are responsible for Council Tax, water, gas, electricity and telephone costs. If the building has multiple occupants i.e. boarding houses, the rent price quoted should include all the bills. 

Meter readings should be obtained at the beginning and end of each tenancy to prevent any disputes with the utility provider. The Council should also be informed (by agent or Landlord) at these times since the property owner is liable for void periods.

Insurance

Apart from the usual building and liability insurance that you take out to protect your property, you should also invest in a Rent Guarantee Insurance which protects your income. Spend time investigating all the insurance offers because, as with everything in life, you get what you pay for. If it’s cheap – it’s cheap for a reason!

Property and Capital Gains Tax

Any profit, including rent, made on your property is subject to capital gains tax.

View the Direct.Gov link to view deductable expenses.

Void Periods

An extremely important factor to take into consideration is the “void” period - the period when the property is vacant. At this time you are fully responsible for your mortgage repayments, with no assistance from rental income. Avoiding the void is one of the most compelling reasons for appointing an agent since they have a vast net to capture potential tenants for your property.

Maintenance

Some properties are, for no apparent reason, more prone to maintenance work than others, even within in the same apartment block. Other properties seem to perpetually attract negligent tenants despite your best efforts to weed them out in the reference process. A large number of Landlords hardly have a moment of grief. While you strive to fall into the latter group, always prepare for the possibility of landing in one or, heaven forbid, both of the former two.

It is far easier to allow your lettings agent to manage the maintenance work on your behalf. The quotes will be slightly higher than normal since the agents will add on an administrative fee to each transaction. However, the fee is quite small when you consider the time it takes to phone around for quotes and make arrangements with contractors and tenants to gain entry to the property.