A Complete Guide to Renting Your HouseWritten By PropertyLoop March 19, 2021
There are many reasons as to why you would want to rent out your house to tenants. For some it’s the allure of managing their own property portfolio as a business, for others it’s another source of income, or perhaps a financially viable alternative to selling their home. However, there are many things to consider if this is your first time as a buy to let landlord.
There are many incentives, the steady income provided by the rental property could help cover an outstanding mortgage, or help expand your rental portfolio. Few occupations provide the same independence, and complete control over your own income, allowing flexible hours and a personal approach to running a business.
Here we offer the PropertyLoop guide for those renting out a property for the first time.
Why Rent Out Your House
Over the last two decades the private rental sector has seen a surge in popularity, with the amount of privately rented households within the UK more than doubling from 2.3 million to 5.4 million between 2001 and 2020. This phenomenal increase is showing no signs of slowing down either, with predictions siting that by the year 2025 over half of those aged between 20 and 39 will be finding a home in a rental property.
The incentive for such an undeniable move towards renting properties to tenants is clear. Everyone chases the peace of mind that comes with greater financial stability, and with a dependable monthly income heading straight for your pocket each month being a landlord certainly helps reach this goal. With this in mind, becoming a landlord is certainly not a quick and easy way to riches, but when a portfolio is managed correctly, the benefits far outweigh that offered by banks and other investment vehicles.
With taxes, void periods and legislation to navigate, the income gained through being a landlord is anything but passive. But nothing can remove the sense of pride and accomplishment in establishing a property portfolio and welcoming tenants into their new home.
Finding the Right Rental Tenants
When advertising your rental property online, it is essential to keep I mind the type of tenants that you wish to attract. The description of your property can be the ideal place to maximise the appeal of the lifestyle your rental can provide. If you are hoping to attract families, detailing the nearest schools and nearby parks will capture their imagination, with young professionals and students wanting to know more about public transport links and local amenities.
But, if you are trying to fill your vacant buy to let property broadening your horizons with the type of tenant that you wish to let to will only generate more long term interest in your rental. With this in mind whilst there has been historic reluctance to do so, allowing pets into your rental can be a fantastic opportunity. Throughout lockdown the number of adults that own pets has increased exponentially and even before this a fraction of the nation’s landlords offered pet friendly properties. Yes, we understand the hesitation to do so, after all if you can avoid unnecessary cleaning and repair work to your property, it’s less of an expense for the property owner and affords them more time in which to find their next tenants. However, there are many things a landlord can do to safeguard against this issue and still benefit from renting to pet owners. In most circumstance the landlord is able to take a deposit equivalent to five weeks rent from the tenant in anticipation of any repair work beyond fair wear and tear. Additionally, it is not uncommon of pet friendly landlords to charge was has been dubbed “pet rent”, a modest addition to the tenants monthly fees so they can bring along their furry friend.
Students may also offer a fantastic rental opportunity for the right landlords. Of course when appealing to the student rental demographic an increased emphasis is placed on location, after all, will you really attract many students if the campus is a lengthy commute away? However, letting to students can offer fantastic financial security, with students possibly staying for the full duration of their studies, and if they don’t a fresh wave of potential tenants arrives at your door every academic year.
Looking to see what similar properties in the area offer to the type of tenant that you wish to attract can offer a great insight into how you can better adapt your rental property to suit their lifestyle, or where you property exceeds the expectations of how renters can be accommodated for.
Of course when trying to search for the perfect tenant the referencing process is essential helping landlords to make an informed, confident decision in which tenants are the right fit. Tenant reference checks provide landlords with a comprehensive evaluation of the tenant’s financial ability to pay the rent, assessing their credit history to ensure they have cleared all past debts, alongside verifying their employment status and current earnings. The tenant’s most recent landlord is also contacted to obtain a reference, giving you a brilliant insight into the length of their tenancy, if the rent was consistently paid on time, and of the property was left in the same condition at the end of a tenancy as when it was initially rented. To help safeguard landlords against ghost or rouge tenants, the potential renter’s identification is also authenticated.
How Much Should You Charge for Rent?
The office of national statistics notes that the average monthly charge for rent in UK private rentals has increased by 14.5% since 2011, and with current interest rates being at historical lows, the equity market proving to be as volatile as ever, renting out a private property certainly seems to be a favourable investment. Partially attributable to this rise is the surge in people choosing to rent. Dubbed generation rent, more adults in the UK are choosing to rent than ever; this alongside the growing popularity of short term lets and the demand for rental properties soon outstrips supply.
It is difficult to overstate the importance of ensuring that the figure you decide to charge for rent is made through an informed process. Of course, this entire process would be redundant if at the end landlords dint have a return on their investment, however, it’s important to ensure this figure stays competitive with rentals that offer similar benefits within the surrounding area. When assessing surrounding rental opportunities it’s important to compare what each rental offers in comparison to your own in order to fully appreciate why the monthly rent is set at such a figure. Does the property offer more outdoor garden space, an extra bedroom or bathroom, has it been recently refurbished? These are all things that play a significant role in informing how much tenants are charged for renting.
If the monthly charge for your property is too much, it goes without saying that it won’t attract as much interest from potential renters as it deserves, which will only serve to edge you closer to perilous void periods.
Working out how much you should charge your tenants starts simply. All you need is to calculate the annual outgoings for the property, detailing all the costs you will incur as a landlord. This of course will provide you with the absolute minimum you need to earn from the property each year, with anything over this amount being a welcome return.
It may also be worth noting that if you plan on letting your rental property out to tenants with pets you will be able to charge slightly more each month for your rent. This is in part due to the complete lack of pet friendly properties within the UK’s rental market, and landlord wanting an extra layer of financial protection again any potential damage to the furnishings that may happen throughout the rental period.
When Can a Landlord Increase the Rent?
If you are currently in a fixed term tenancy agreement with your tenant then, as a landlord, you are unable to increase the rent until the tenancy period ends; unless, it is specifically stated otherwise In the tenancy agreement. However, if your tenant are currently staying at the rental property through a periodic agreement, or rolling contract, the rent can only be increased once a year, after the increase has been formally agreed with the tenants. If the tenants do not believe that the amount the rent is being increased by is fair they are able to appeal this decision with the First Tier Tribunal to settle the dispute and agree on an appropriate rental charge.
Rental Lease Agreements
Despite the two terms being commonly used synonymously, there are important distinctions to be made between lease agreements and rental agreements, with this being crucial for a landlord to understand. What is important to remember here is that whilst lease and rental agreements are similar, they are not the same and function independently of each other.
Typically, when a landlord opens the doors of their rental property to a new tenant they will require them to complete a lease agreement. This is a legally binding contract between the landlord and tenant that permits the new tenant to occupy the rental property for a given period of time. This tenancy period is usually anywhere from 6 months to a year and details the terms of the agreement, covering of whether pets are permitted in the property, how much the tenant should pay in rent each month and other responsibilities expected of the tenant regarding the condition of the rental property. Given that this agreement will be the backbone of any disputes that may occur in the tenancy period, it is essential that this document is fair, legally sound and the clauses are enforceable by the landlord.
Usually taking place once a tenancy period is over yet the tenant doesn’t wish to immediately leave the property, a rental agreement is a “rolling” or “periodic” tenancy, which typically lasts a month. Whilst the most obvious distinction between the two agreements is of course, the length of the contract, it can be argued that rental agreements can be more beneficial to a landlord. The details of a rolling tenancy are stipulated in the original tenancy agreement but many landlords decide to place a premium of the flexibility these agreements offer to tenants. Whilst these month by month rental agreements do renew automatically, the landlord can no longer confidently depend on a consistent long term source of revenue, so this extra fee placed on the rent is essential to help cover costs when finding a new tenant.
These shorter agreements also address one of the longest running and prevalent issues landlords and property owners face, problem tenants. With the length of the rental agreements being so inherently short it means a problem tenant can never be with you for very long. Additionally, for tenants that begin to accumulate high amounts of rental arrears, or cause excessive damage to the property, the eviction process is heavily weighted in favour of the landlord, allowing a lease to be terminated after 30 days of notice being served to the tenant.
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With PropertyLoop landlords will have everything they need to let out their rental from start to finish, with no hidden fees, financial barriers or catches; only a revolutionary new way to let.