BECOMING A LANDLORD...

When you first become a landlord, you will discover that there is so much more to the job than simply picking up the monthly rent. It sounds easy on paper but there are lots of other factors to consider before choosing this as your sole career. With this in mind, here are four important questions and answers which will make you feel more confident with your decision making.

WHAT MORTGAGE SHOULD I TAKE OUT?

First things first, if you are planning on becoming a landlord and you don’t want to rent out your existing property, you will need to search for a suitable property to let. You will also need to fund this purchase and the most common way of doing this is through a buy to let mortgage.

As the name suggests, buy to let mortgages are for those who wish to buy and let out a property. They operate in a similar way to a standard mortgage but as the risks are higher to the lender due to landlords relying on tenants to pay off these costs, rates are normally higher by around 1 to 1.5%.

There can also be a period of time where there are no tenants in the property so a larger deposit is required compared to a standard mortgage to cover these risks. This deposit is usually around 25%, compared to buying a property for yourself where the deposit can be as little as 5%.

You’ll also need to consider getting the right kind of home insurance policy in place and any tax implications. HMRC is the best place to go to make sure you understand the tax aspects.

WHAT SHOULD I LOOK FOR IN A RENTAL PROPERTY?

When deciding upon the ideal rental property, you should take into account whether you are looking to have students, young professionals, families or corporate renters as your tenants. Deciding this will help you invest in the correct property that your tenants will find most attractive.

It is important to remember when investing in rental property that the purpose of its purchase is to return as much money as possible and you will not be living there. It does not necessarily have to appeal to your own taste. Keep a look out for ‘rental hotspots’ through newspapers or local estate agents to get an idea of the types of properties that are deemed most popular.

Location is another important factor to target your ideal tenants. It may sound obvious but purchasing properties close to colleges and universities will prove more popular with students whereas families will be searching for houses close to shops and local schools.

HOW SHOULD I PREPARE TO LET?

Even though you’ve found the perfect property, there is still a lot to do before any tenants sign the contract and move in. As first impressions count, it is important to ensure the property is looking its best for both viewings and for when the tenants move in. You don’t have to spend much money but a bit of paint both inside and out and cleaning the property to a satisfactory standard can make a huge difference.

HOW SHOULD I MANAGE THE LET?

Using a letting estate agent to find tenants is a popular method for most private landlords, especially those who have limited time available. Even though this costs money, there are advantages to this method including availability for viewings and property management services. Using the property management services at a letting or estate agent would depend on personal circumstances and the number of hours you have available to complete any required work.

If you decide to manage your property yourself there are other options such as online letting agents. They provide the same services as high street agents but only cheaper and you get to choose who you want to live in your property.

However you decide to manage your property vetting potential tenants is important and limit the risks of having bad tenants, and taking out insurance will secure your rental income.

These are just a few things that need to be looked into before deciding whether becoming a landlord is the right career choice for you. Obviously, there are a lot more factors that also need to be taken into consideration but hopefully this will provide you with a quick overview of what is involved.