In life, a lot of things happen by accident – unexpected and unforeseen incidents that leave you in a pickle. Becoming an accidental landlord is actually more common than you might think.
Most landlords invest in property or rent out a home or condo on purpose. In fact, most people invest in a property with the sole intention of letting it out. But what happens when you become an accidental landlord overnight?
If you need a crash course in everything from letting fees to finding a property manager, you’ve come to the right place. Here we’ll cover how people become accidental landlords and share tips for navigating the letting world with ease.
How Do You Become an Accidental Landlord?
Okay, first thing’s first. How can you become an accidental landlord? If you have no intention of renting out your property, vetting tenants, hiring property managers or calculating letting agent fees, you’re probably wondering, how did I get here?
The most common circumstances that turn average citizens into accidental landlords are:
- A change in your financial circumstances
- Divorce or separation
- Inheriting a property
According to Business Reporter, 1 in 12 rental properties that hit the market were “by accident”.
Let’s face it, letting your property brings in extra income. If you’ve recently fallen on hard financial times, this extra monthly income can really make a difference. If you’re facing a divorce or separation, you might find yourself in possession of a property you don’t need or can’t afford. Letting is your only option. The same goes for inheriting a property. If it’s not paid off, you may need to rent it out just to cover the costs. If it is paid off, letting it will help bring in some extra pocket change.
Regardless of why or how you became an accidental landlord, you’re here — and you need help navigating our new role.
And that’s why we’re here!
Realising Your Responsibilities as a New Landlord
Most landlords view property letting as passive income. And while you may eventually get to this point, you’re not there yet. You need to lay the groundwork for a rental property that’s a well-oiled machine. And that’s not to say that you won’t encounter some hiccups along the way.
Landlord responsibilities are often more intense than most people realize. From maintaining the property and securing proper insurance to finding reliable, quality tenants, becoming an accidental landlord is equivalent to taking on a second job.
It might be in your best interest to find a letting agent and property manager to help you with the details. This is especially true if you don’t live in close proximity to the rental property.
Property manager fees pale in comparison to the stress and inconvenience of managing a property from afar. Don’t be afraid to compare property managers, either. You want to choose someone you can trust who shares the same opinion of acceptable living conditions and renter expectations.
A letting agent can also help you find qualified tenants, which is most landlords’ biggest complaint. Don’t waste your time vetting tenants — the renters’ pool can be a scary place. Compare letting agents before deciding who’s the right fit for your needs and budget. Keep in mind that online letting agents are growing in popularity for two major reasons — they’re talented and affordable.
To keep yourself from getting overwhelmed by your new role as an accidental landlord, let’s take a look at a few must-do steps in the process.
Although building insurance for landlords isn’t a must, it’s highly recommended. There are several insurance policies to consider as an accidental landlord. Some cover the building itself while others cover the contents.
Remember, you’re basically inviting strangers to inhabit your living space. And while you may be a very good judge of character, stuff happens. Obtaining the proper insurance will cover your butt in the event of an(other) accident.
Landlord Building Insurance
If nothing else, you should obtain building insurance as an accidental landlord. This covers major damage to the property itself including natural disasters or fire. Building insurance helps cover the cost of repairing or rebuilding if the property is damaged or completely destroyed.
The exterior of a rental property isn’t your only concern as an accidental landlord. You also need to protect the contents of your home or rental property. If you find yourself renting out fully-furnished living space, content insurance covers the cost to replace furniture or other belongings in the event they’re damaged or stolen.
Tenant Default Insurance
Remember how we said it’s difficult to find good tenants? One of the biggest problems accidental landlords face is tenants who default on their rent and rental agreements. You can’t get blood from a stone which means that if your tenant doesn’t pay, you have a few options — evict them or take them to court.
The problem is, both scenarios leave you without the monthly income you’ve grown to rely on. Property managers can help stay on top of tenants and ensure they pay their rent on time. Hiring a letting agent increases your chances of finding quality tenants.
In the event that an irresponsible tenant falls through the cracks, tenant default insurance will cover the rent for a short period of time.
Lastly, you need to cover yourself from tenants looking to make a quick buck. If a tenant is injured or incurs damage to their personal items while on your property, they can sue you for reimbursement. Liability insurance can help cover these costs and keep things civil.
Amending the Mortgage or Lease
Depending on whether you own or lease your home or property, you need to update your lending status as an accidental landlord. Your mortgage policy should be designed for a buy-to-let property and not just residential purposes.
If you’re leasing the property, you need to make sure that you’re allowed to sublet it. An experienced letting agent knows the ins-and-outs of these laws and can guarantee you’re making smart legal decisions.
Show Me the Money
Before you hire a letting agent or property manager, there are a few financial issues to consider.
Setting Your Rental Rate
Even if you’ve stepped into the letting role accidentally, it can be easy to get a little greedy. This is especially true if you’ve inherited the property and it’s completely paid for. Avoid setting your rent rates too high.
If you do, you’ll have a hard time finding tenants. A rental property without tenants will end up costing you money. Find a letting agent who can help you set your rent at the average going rate for the area.
Did you know that as an accidental landlord, you’re not required to collect a deposit but you should. The amount you request can vary but generally, landlords require one month’s rent or on and a half months upfront.
The latter is usually reserved for tenants with pets or when letting a fully-furnished property. Just be sure that whatever deposit you ask for complies with the tenancy deposit legislation.
This deposit protects you against tenants who violate or break the lease agreement. It’s also a financial safety net if they damage or destroy the property or you need to cover back rent.
Before you start collecting rent there are a few upfront costs to consider. One of the best ways to secure a reliable tenant (aside from finding a letting agent), is doing a background and credit check.
These will run you around £35 but are well worth it when securing a reliable tenant. Keep in mind that this £35 can add up quickly if you stumble upon a long list of undesirable candidates.
Aside from haggling with tenants for rent, as an accidental landlord, you’re also responsible for all maintenance and unexpected repair costs associated with the property. Things like a broken fridge handle, uneven walkway, or a leaky roof can all require your attention – and wallet.
Unless you’re handy with a wrench and a plunger, you’ll need to pay professionals to address any issues raised by the tenant. This is where finding a property manager can be extremely helpful in managing repairs and related expenses.
Understanding the Tenancy Agreement Contract
Now that you’re an accidental landlord and know a few preliminary steps to get you started, it’s time to discuss the legal stuff. You don’t need a law degree to create a tenancy agreement. You do, however, need to be smart and protect yourself.
A tenancy agreement is a verbal agreement between you (the landlord) and your tenant. Although some landlords are comfortable with just a verbal agreement, it’s recommended you have a written agreement signed by both parties.
Written contracts help avoid confusion and detail important information like the amount of rent, due date, and length of the tenancy. Most tenancy agreements are for one year, but you can alter it to fit your needs and the needs of your tenant. Keep in mind that the minimum length of most contracts is six months.
Although you can download tenancy agreements online, you don’t want to use just any template. This could result in major headaches later on. Instead, confer with a letting agent or a lawyer before drafting a contract.
Not every contract will cover all of the clauses and points you want to cover, however, you can’t just add in your own clauses wherever you see fit. Be sure any clauses you ad are legally enforceable.
Reasons to Hire a Letting Agent or Property Manager
When a rental property is dropped in your lap it can be viewed one of two ways — as a burden or as an opportunity. If you’re not in the position to take on all the responsibilities that come along with being a new landlord, it’s in your best interest to hire a letting agent or property manager.
These professionals can help you not only find and vet quality tenants but also monitor rental payments the property maintenance. While you’ll have to pay letting agent and property manager fees, this price is minimal compared to the headaches and stress you’d face going it alone.
Letting Agent Responsibilities
Wondering what exactly a letting agent does? By definition, letting agents manage private rental properties. Their responsibilities vary but can include finding reliable tenants, collecting rent, and managing the property itself. Letting agents are especially valuable to accidental tenants who don’t live near the property.
Don’t burden yourself with excessive travel and worry. Instead, hire the best local letting agent to do the dirty work for you! Then, your role as an accidental tenant equates to passive income.
Property Manager Responsibilities
If you don’t need a letting agent to find and vet tenants or collect the monthly rent, you may be fine just hiring a property manager.
Some property managers are still involved in the tenant process (finding them and collecting rent), but their main responsibilities include handling maintenance issues and repairs, addressing tenant complaints, and assisting with the eviction process.
Find a Letting Agent and Master Being an Accidental Landlord
Becoming an accidental landlord is often an unexpected experience — but it doesn’t need to be a negative one. With the right knowledge and help from a letting agent or property manager, you can turn your unpredictable circumstance into a lucrative investment.
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