Ok, let’s do this! How to rent out your house guide for absolute dummies, one-on-one!
The purpose of this blog post is to provide guidance to homeowners that are either contemplating or in the process of letting out their own home, so it’s not specifically targeted towards BTL landlords (i.e. people buying property with the intent of letting), although most of what I cover will still be relevant to BTL landlords, so if that’s you, you may as well stick around for the festivities.
Due to disgusting economical circumstances, more and more homeowners are starting to take the gigantic leap of converting their residential homes into money-generating rental machines. But, not everyone is taking the same approach, there are a couple of common scenarios.
Common scenarios when homeowners’ let their home!
Taking in a Lodger: Okay, so if you’re trying to find a lodger (i.e. you want someone to rent a room in your home while you remain in the property, which will ultimately make you a live-in landlord), then I’m about to derail you from your tracks. The rules and regulations for taking in lodgers are very different from letting out your entire home and creating a tenancy, so this blog post won’t be relevant for you.
But don’t worry. I have written a guide for landlords that want take in lodgers, so I recommend that you make like a tree… and buzz off over there!
Let-to-Buy: This is when someone lets out the property they currently live in so that they can purchase a new residential property.
Let-to-Rent: This is when homeowners let their home to tenants, only to rent a property from another landlord.
This is most commonly done when homeowners can achieve high rental returns from their own home, while finding a cheaper place to rent. It ultimately results in net gain. This is also a particularly common model when homeowners want an easy way to relocate to another part of the country.
There are probably more, but my withering memory fails me right now. So don’t worry if I haven’t listed your scenario- it doesn’t mean you don’t have a legitimate model. But please, feel free to leave a comment below if your model doesn’t quite fall into the listed examples.
The essentials to letting out your home!
I’m not going to smother you with every last detail of how to rent out your house, because 1) there’s way too much to learn 2) you don’t really need to know it all to get started 3) trying to learn it all in one-go will make you suicidal.
While the overall process of being a good landlord entails years of experience, including more self-inflicted mishaps than any landlord would ever like to admit, getting the ball-rolling isn’t all that difficult. By that, I mean, doing the things you should be doing in order to be a sensible and legally compliant landlord. Getting the fundamentals in place is key, everything that comes after can generally be dealt with as and when!
Below is a list of what I believe to be the most important points/steps, chronologically ordered, to consider when renting out a home.
1) Are you permitted to let your home?
First and foremost, before you do anything else, determine whether or not you have the legal right to let your home. This question mostly applies to leaseholders (not freeholders).
If you own a leasehold property, check your lease to see if you’re allowed to sub-let your property (technically speaking, you’re sub-letting if you let a leasehold property). Many leases contain a clause which specifically refuses sub-letting, in which case you may have to contact the freeholder to get permission.
If there are any other potential barriers which may cause problems, get them addressed first.
I’ve seen many landlords invest time and money into letting their property, only to be penalised because they didn’t have permission in the first place. It’s more often than not an extremely expensive mistake.
2) How much rent?
Most people naturally do this first – they find out how much cheese their property can generate from rent. And I don’t blame them, and I wouldn’t hold a grudge against you if that’s your first port-of-call!
But I don’t see the point in getting excited about spinning dollar-signs when you may not even be legally entitled to let your property.
In any case, finding out how much rent you can charge is crucial to determine whether or not it’s a viable business (yup, BTL is a business) for you in the first place.
I recommend doing the following to get an accurate idea:
Check on Rightmove.co.uk and Zoopla.co.uk to see what other landlords are demanding for similar properties (i.e. same number of bedrooms, parking spaces, and bathrooms etc) in the same neighbourhood!
Talk to a few local letting agents (most of them will provide no obligation home-visits).
Tip: I always discourage landlords from being overly greedy when it comes to rent (i.e. don’t ask for over the odds, even if you think your property is worth it), because it’s often a fatal strategy. Stick to the current market rates and be competitive, otherwise you could find yourself struggling to fill your vacancy! Bear in mind, a vacate property is generally more expensive than receiving immediate rental income at a slightly lower rate!
3) Calculate costs of being a landlord
Any experienced landlord will tell you that cash flow is one of the most important aspects of being a successful landlord! If you don’t have a firm hold on your finances you’ll sink quicker than a lead turd in the bath-tub!
After you’ve calculated your rental income, start forecasting your expenses so you can determine whether or not this venture is even financially viable:
Costs associated to meeting health and safety requirements (which I’ll discuss in more detail further down)
Finding tenants / Marketing costs
Insurance
Mortgage
Repairs and maintenance
Income Tax
For more details, I recommend going through my breakdown of the financial costs of being a landlord (but after you’ve finished this blog post)!
4) What about your mortgage (if you have one)?
The assumption is you currently have a residential mortgage (because having a BTL mortgage for a property that is currently your residential home would be bonkers), so you’ll need to notify your lender that you intend on letting your property. Most lenders will require you to obtain a ‘consent for lease’, or require you to change your policy altogether. Most lenders make the switch pretty easy.
Failing to tell your mortgage lender could mean you are breaking the terms of your mortgage contract, and could then result in penalties, so it’s important to talk to them!
5) Do you need a license?
Under the Selective Licensing Scheme, some local boroughs require landlords to obtain a license before they’re allowed to let their property. Failing to acquire the licence can result in hefty fines.
Check with your local council whether you need one or not! If you do, it will set you back approx £500 every 3-5 years, and you’ll also need to meet a couple of basic standards in order to be granted the license.
6) Legal compliance
This is the part which most prospective landlords are most concerned with; all the safety and legal requirements!
I’m not going to lie, it can be overwhelming, and it doesn’t help that different UK countries (e.g. England, Wales, Scotland) have different rule books!
But, actually, there aren’t THAT many requirements you need to be aware of in order to be legally compliant to start letting your home, and most of it is pretty straight-forward to comply with! I’m not going to get into the nitty-gritty here, because I’ve already compiled a nifty checklist of requirements for new tenancies (once again, I recommend making the jump after you’ve made it to the bottom of this page).
7) Getting your property ready
Probably one of the biggest mistakes novice landlords make is that they over complicate their properties by stuffing it full of furnishings and fancy frills!
DO NOT DO THAT!
What you need to realise is that you will be responsible for maintaining (and replacing in cases of disrepair) every item that you provide with the property, so the less you provide, the less you are responsible for!
Here are a couple of golden rules I personally in terms of preparing a property for tenants:
Don’t provide any furnishing other than white goods (e.g. fridge, oven, cooker etc.). More details on Furniture & Fittings in BTLs.
Stick to clean and neutral coloured decor; avoid adding any of your personal touches. More details on Decorating tips for BTL Properties
Maximising space and lighting (or at least, providing the illusion of both) is crucial.
8) Letting agents / finding tenants
Bearing in mind that you’re currently an inexperienced and lousy landlord, I won’t offer you the advice I would ordinarily serve to landlords that have a couple of years experience under their belt, which is to dump their local high-street agent and look into online letting agents in order to get your rental listed on Rightmove and self-manage the enquiries, because it’s a butt-load more cost-effective.
Instead, I’m going to recommend that you DO use a local letting agent to help fully-manage your property… to start with.
Now, the thought of using a traditional high-street letting agent may send shivers down your hairy spine, and of course, with good reason. We’ve all heard the horror stories which are ALL true!
But let me assure you, among the many, many, many, many, many asshole agents swamping the market, there are hard-working and honest options available that only want to do best by their clientele, landlords and tenants. Now, finding those desirable options is always a challenging task, even for the best of us, but fortunately I’ve written an entire guide on how landlords can find good letting agents! YAY ME!
For those wannabe’ landlords that have a bit more confidence, and like the idea of bypassing their local sleeze-bag agent and saving thousands of pounds on letting agency fees in the process, I can confidently point you in the direction of some cost-effective fully-managed services offered by online letting agents that are actually remarkably suitable for new and first-time landlords. The only catch is that you’ll be required to take the viewings with prospective tenants yourself (which in my opinion, is always the best policy anyways. For reasons explained in my why Landlords should take their own viewings blog post).
For example, take a look at LettingAProperty’s Platinum ‘Rent on Time’ package, for £89 per month. Just to clarify, ‘Rent on Time’ means they will pay your rent even if your tenant doesn’t, the package also includes ‘home emergency cover’:Letting AgentRatingContractNotes / IncludesPrice Letting A Property
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LettingAProperty isn’t the only online agent that offers managed services that are suitable for novice landlords (and, to be fair, experienced landlords simply wanting a managed service), but their package is a good example of one. Here is a list of other online letting agents that offer managed letting services.
9) BTL Insurance
Similarly to updating your mortgage policy, you’ll also want to update your residential building insurance to a BTL specific building insurance. Needless to say, it’s also crucial to do this; having an invalid insurance policy will make any claims void, meaning that in the event – God forbid – that your stupid tenant accidentally burns down your house, you won’t get a penny!
I think that just about covers what I believe to be the most important need-to-knows before renting out your home. However, if you’re left thirsty for more in-depth knowledge on being a landlord, may I point you in the direction of my free downloadable ultimate guide for new and first-time landlords!. It covers everything I mention above in more detail, and a buttload more!
Any questions, thoughts or opinions? Pick up the mic and leave a comment below!
Goodluck all! :)
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