I have been a UK landlord for 5 years now. I only own two properties - one in Manchester and one in Liverpool. It was difficult in the beginning, as there was a lot to learn, and I spent a great deal of money doing up the properties to a rentable standard.
However, now I have long term tennants and good management companies involved. I am pleased to say that it is a very low maintenance and profitable business once you have set it up and overcome the hurdles of the first year or two. I hope that you find my tips on being a landlord very helpful.
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Choose the Right Property
Choosing the right property is a key aspect on becoming a landlord. It is very different when house hunting as an investor than when house hunting for somewhere to live. Your focus must be on the location, standard of the property and potential income. You want to get the property in a highly rentable location and for the best value price. It doesn't matter whether or not you like the property, as you are not going to live in it yourself - you just want it to turn over a good rental income.
Check with local letting agents how much they would market the property for to tennants. Calculate the difference between the rental income and mortgage BEFORE you put in an offer. Make sure that you have money in the bank to pay the mortgage until the property is let.
Consider whether or not you have the time and money to do up a run down property. If you are enthusuastic to do this, ensure that you have a contingency budget. Bring in a project manager who can give you an estimate for cost and time scales. Double it just incase! If you expect the worst, you can't be caught out. Remember that renovating a property takes time, and during that time, you are without a rental income, so you also need to factor in the mortgage payments for the time it will take to renovate.
Personally, I would not look at doing up a property in the future. I have already been through it once, and unless you are a builder yourself, it can be callenging. It is possible these days to purchase properties with tennants already in. Low maintenance and no period of time without a rental income!
How much can you offer on a property in the UK? As much as you like! The asking price is what the vendor would like to achieve, but that doesn't mean that he will get it! I have a friend in the business who used to view ten houses a day and put in 'cheeky' offers on all of them. more often than not, he would find that one of his cheeky offers would be accepted, as he was in a position to move forward very quickly.
Tax and Accounting - Keep a Separate Account
Check with your income tax office to find out how you declare your income from your properties. Money from property is a taxable income, and you can be fined a great deal and even imprisoned in some cases if you do not declare it.
In the UK, I am registered as self-employed. Once you register self-employed, you fill in an annual tax return for the end of the tax year (April). Money from property goes into a separate section to money earned from being self emploed. I find it easy to have an accountant to deal with this on my behalf, and I use Nigel Herring from www.cheapaccounting.co.uk. His fee for completing the self assessment is very reasonable.
What works very well for me is keeping my property money in a separate business bank account. This is good because all the transactions for the property (rent, maintanance, mortgage payments) go through this separate account. This makes accounting very simple, as I can export the list of transations from HSBC to an Excel spreadsheet and send this off to my accountant. Much easier that ploughing through your own bank account trying to see which transactions are relevant to your property lettings.
Keeping a separate property business account also means that I don't withdraw too much money from my property account - I let it build up while I live on earnings from my other work. This means that if i have a disaster, such as a bill for a new roof, I know that the money is there, and don't need to panic.
Health and Safety and Landlord Responsibilities
It is essential that you are aware of your responsibilities towards your tennants. As a landlord, you are fully responsible for repairing anything dangerous, such as electrical faults or unsteady walls. Failing to take action on repairs that end up in injury may result in you getting sued.
There are certain legal obligations that a landlord needs to abide by, and this will vary from country to country, so I advise that you check on this. In the UK you must have an annual boiler and gas check. If a gas fire leaks carbon monoxide fumes, this can be lethal, and is your responsibility as a landlord. You also need to be available in an emergency, which means that you are contactable 24 hours a day.
Get Landlord's Insurance
Landlord's insurance is important, as it covers you in any unfortunate situation. You may find yourself being sued for not maintaining the property, or that tennants may seek compensation for injury as a result of negligence on the property. If you are sued, the landlord's insurance may cover you. If you are without landlords insurance, you will find that the money your being sued for would need to come out of your pocket!
Landlord's insurance will often include free basic legal advice. I once had to use this service because the son of one of my tennants had drugs in the property! The situation wasn't too bad, as we later found out that it was her son's friend, and no-one who lived there. But to have this free legal advisor on the end of the phone was very reassurring.
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Use an Agency or Property Management Company
For a management agency to manage aspets of your property, usually, expect to pay a management fee of 10-15% of the rental income.
Some landlords avoid using an agency to manage their properties, as it is an extra cost. However, I find it absolutely brilliant! I use Peapod Estates to manage my house in Manchester and ARW Property Solutions to manage my property in Liverpool. Both companies have made it so easy. They deal with everything from getting in new tennants and signing contracts, to getting someone in to fix the boiler. I don't need to worry when I go abroad, because I know that the properties are in good hands, and if there is any emergency, it will be dealt with.
You can choose to have an agent to deal with contracts only, which means that once the new tennants are in and the contracts are signed, it is your responsibility as a landlord to fix anything or be there in emergencies. I prefer to have full management, where my agents deal with every aspect of letting out the property. For me, the peace of mind and low maintenance nature of the business with an agent involved is worth that extra 10%.