Becoming a landlord is an exciting prospect. The idea of generating passive income from a rental property is appealing. But running a successful rental business can be challenging and unlike any other type of business. It’s essential to find the right tenants, get the monthly rent price right, keep the property well maintained, and stay updated on landlord-tenant laws.
What are the ten most important things you should know when running a rental property business? We’ve compiled a list of the top ten things every first-time landlord must know.
1. Treat your buy-to-let like a business
The first thing to remember is that your rental property is a business, even if it’s not your primary source of income. This means keeping track of your finances, fulfilling your responsibilities as a landlord, and keeping the property in good condition. Although you want to be friendly with tenants, it’s best to keep the relationship professional.
2. Set the right rental price
Getting the rental price spot on is crucial for your business. First, the amount of rent you charge impacts your cash flow and yield. However, if the price is too high, you will struggle to find good tenants who pay rent on time. On the other hand, if the monthly rent is too low, you may attract a poorer quality of tenant.
3. Always vet potential tenants
Vetting a prospective tenant is crucial before signing a lease. Vetting involves checking references, credit history, employment, and previous addresses. It’s good to remember that it’s easy to let a tenant move in. But it can be difficult to evict a tenant who is always late with rent or damages the property. However, vetting can help you find quality tenants.
4. Never discriminate against tenants
The tenancy laws in England and Wales make it illegal to discriminate against tenants. This includes refusing to rent a property based on sex, gender, race, religion or disability. The law also requires you to treat everyone the same in rental policies.
5. Have a written lease agreement
Always put everything in writing. This includes the monthly rental amount, late rent fee, tenant responsibilities and your pet’s policy.
6. Take out landlord insurance
It would be wise to protect yourself against unforeseen events. Like house insurance, landlord insurance covers your property in the event of damage. However, you could also consider insuring for unpaid rent, eviction costs, and damage to furnishings.
7. Encourage tenants to take out renters insurance
Tenants insurance covers a tenant’s personal belongings in case of fire, theft, or accidental damage. Although not required by law, it’s a good idea to encourage tenants to insure things. Many tenants wrongly assume that landlords insurance covers their personal items.
8. Know your responsibilities as a landlord
You are responsible for keeping the property in a safe and inhabitable condition. Therefore, all appliances must meet specific standards. You also have to promptly deal with repairs, damp and mould, pest infestations and inspect gas appliances annually. Additionally, you must hold the security deposit in a government-approved tenancy deposit scheme.
9. Have an inventory for your rental property
The inventory lists everything in the rental property that could potentially get damaged. This can include the walls, fittings, fixtures, furniture and doors. You should have two copies. The tenant should check the inventory against the property’s condition when moving in and sign both copies along with you.
10. Stick to the law when ending a tenancy
A tricky area for first-time landlords to understand is when they want to end the tenancy. It’s vital to follow specific rules on reasons for ending a tenancy early, how much notice to give and eviction prodecures. For example, it’s illegal for landlords to change the locks without a ‘warrant of possession’ from the local court.