7 Things to Know Before Letting Your Property | Landlord Guide
Congratulations, you’ve decided to let your property. Whether you’re doing it for a long-term investment or just to make some extra money, letting your property is a rewarding experience.
But if this is your first time out of the gate, there are a few things to consider before opening your doors to renters. Here are seven things to know before you become a landlord and start letting your property.
Choose the Property Wisely
Buying a rental property isn’t the same as buying a home for yourself or your family. There are many things to consider outside of your personal taste and style. Consider what time of renters you want to attract and in what location.
Do you want to let to parents with kids or single working adults? Are retirees your target market? All of these things determine proximity to schools, transportation, and other local amenities. Walk the neighborhood and talk to residents before making a final decision.
Let’s face it, you’re renting out your property to make money. The financial aspect is the first thing you need to look at. The two most important factors are your income versus your overhead costs.
Expenses include the mortgage and all other bills related to maintaining the property. When you let a property, it’s your responsibility to fix any repairs and address renter complaints. Once you calculate overhead expenses, you can set a reasonable rental rate.
When choosing a rental rate, consider the current market. What’s the average rent of comparable homes or properties in the area? You can also elicit the help of experts. Hire a property manager or letting agent to help you calculate costs and maintain the property.
For many new landlords, paying letting agent fees are well worth it. A letting agent brings experience and industry expertise to the table. This is especially beneficial if you don’t reside near your rental property or you’re a first-time landlord.
Consider the Uncertainty of the Market
When letting your property, you need to plan for the unexpected. This includes dips in the market value of your rental property and other economic hardships. Before you invest in a property, find out the most recent sale price.
You should also consider the age, size, and location of the property. The real estate market is unpredictable. Do your research and try to only invest in properties that show a substantial return on investment (ROI). Financially planning ahead is a big part of succeeding as a new landlord.
Plan for Vacancies
When planning ahead you also need to have a financial cushion for those times your rental property sits vacant. You may not always have reliable renters knocking on your door. That means all your overhead costs including monthly bills and maintenance come out of your pocket. But what happens when your pockets are empty?
Before you start letting property, put aside extra funds to fall back on when times get tough. This includes both vacancies and delinquent renters who don’t pay on time. One way to protect yourself from this is to avoid letting to unreliable tenants when you’re feeling desperate to fill a vacancy. The damage and headaches you may encounter will cost you much more in the long-run than a few months without steady income — especially if you planned for it.
Understand the Law (and Follow It)
Some new landlords don’t realize how many rules, regulations, and laws surround letting your property. Landlords are required to know and follow all laws surrounding letting a property.
There are important laws you should know about things like the eviction process, how much notice renters must give before vacating, what the security deposit covers, and your rights for performing routine inspections and gaining access to the property.
You also need to provide renters with important certificates and paperwork like an Energy Performance Certificate and both gas safety and electrical safety certificates for Houses of Multiple Occupancy.
One major law every landlord must follow is to protect the renter’s security deposit. If you decide to collect a deposit (and you should), you have to protect it using a tenancy deposit scheme. Protection must be in place within 30 days of receiving the money and returned if the tenant meets all requirements outlined in the rental agreement.
Following the appropriate laws means avoiding unwanted lawsuits and headaches. These laws are put in place to protect both you and your tenants.
Take Inventory of the Property Before and After
In order to protect your property and its contents, you should perform an inventory check both before and after letting the property.
Some landlords let their property fully-furnished. If you choose to do so, document all items that are inside the home and their condition.
Take photos and detailed notes. Make sure the tenant is present during this process so there’s no confusion or discrepancies later on. At the conclusion of the lease agreement, you should perform a final walk through with the tenant. This is your chance to point out any damages or excessive wear-and-tear to the property or its contents. Depending on the extent of the damage, you may be able to keep the security deposit.
Hire Professionals to Show You the Way
Although letting property can be a very lucrative and rewarding experience, it’s also quite stressful for new landlords. With so many things to consider, responsibilities to handle, and laws and regulations to follow, you may want to hire a letting agent or property manager to help. These professionals can vet quality tenants, collect rent, monitor activity at the property, and handle tenant issues in your absence. This is especially helpful for landlords living in a different location from the property.
Before you start the letting process, consider hiring a letting agent or property manager to simplify things. They can get you off the ground and help handle some of the day-to-day stress. If you’re investing, be sure to do your research about the current real estate market and the property location. With proper planning and the right resources in place, letting your property can be a great investment with long-term financial benefits.