Becoming a first time landlord

Shandy953

Hi

Recently been looking into becoming a landlord and trying to obtain as much information as I can, I intially wanted to get a buy-to-let property several years ago however wasn't feasable due to financial aspect however now do. I am aware that laws have since changed and that being a private landlord is not as attractive as it once was however I still see this as the way forward due to owning a property that will increase in value whilst still making profit from rent-currently my money is getting minimal interest in the bank. So looking at the information available I can see that as a landlord I would need to  create a tenacy agreement, hold the tenants deposit in a protected scheme, ensure the the property is kept in a livable condition in terms of repairs etc, ensure boiler service, gas/electric check is done periodically as and when needed, to declare profit to HMRC so I get taxed appropriately, have home and landlord insurance. I can see that I can download tenacy forms or create my own but have found that if I joined the landlord association NRLA that I would be able to use their templated documents such as tenacy agreement and also use them to credit check tenants for a nominal cost, not gone throught he entire website so not sure of the other benefits they give. Is anyone a member of NRLA or another landlord assosciation, is it worth doing? I know I can use alternative companied to carry out the credit checks etc however I thought having a one stop shop of resources would benefit me. I've got my eye on a couple of properties for sale that are not in need of renovation and that are currently tenantent and give a yield of 5.9% and 6.3% respectively so I am keen to try to progress with this but overwhelmed by all the information out there and not sure how to take the plunge. Advise very much welcomed.

Andy

tacpot12

As you are finding, you need to comply with a lot of legislation; e.g. you haven't mentioned "Right to Rent", so you need to get organised - make a list of all the regulations you need to comply with and work out how you are going to comply with it. 

Many first-time landlords employ a letting agent as these can help market your property, vet tenants, collect and manage deposits correctly, find contractors to perform repairs and safety inspections, collect rent and help evict tenants if this is necessary. You need to understand whether you can afford to pay a letting agent - they usually charge between 12 and 15% of the rental income, but this can vary if they just market the property for you, or market the property and vet the tenants, but don't take any further part in the letting process. I would strongly recommend you use a letting agent for your first property. 

After you have paid a letting agent and paid tax, the return on the properties you mention may be less than what you would receive if you invested the same capital in a Stocks and Shares ISA, so you need to be sure that you want all the hassle of being a landlord. Having to evict tenants is probably the most difficult part of being a landlord as the legal process is complex, time consuming and costly. 

AdrianC

Have you read, digested, understood all this information...?
https://forums.moneysavingexpert.com/discussion/5180214/tenancies-in-eng-wales-guides-for-landlords-and-tenants

Show us the numbers on these properties...
Are you happy with the tenants you'll be buying? Are they on ASTs?

What other investments have you looked at? "Bank account" and "starting a residential lettings business" are nowhere near the only options.
https://forums.moneysavingexpert.com/categories/savings-investments

Retireby40

Il give you an idea of my income through renting a house.

House value £115,000.
I have no mortgage on it it is bought and owned outright.

Rent per calander month £590. Minus tax, rates, agency fee (9%) and insurance i probably have about £340 profit providing no major work needs done.

You need to do the maths and see what the figures look like. Then take another 20-30% for repairs or problems. Having to repair a boiler could wipe out a years profits.

The house is likely to go up in value over the next 10-20 years which again is further boost but its not guaranteed and if you're selling it to buy another house down the line it kind of cancels itself out.

Management companies are the best way to go. I never have to deal with the house. It takes up 0 of my time bar 2 or 3 emails a year.

macman

If your figures are correct, then your return  on capital, after deducting 30% for 'repairs or problems', is about 2.2%. If you allow something for void periods too, it's even lower. And your LA fees are unfeasibly low; at some point you are going to be paying 12-15%, not 9%.
For that return, I would simply have put my £115K into an S&S ISA to get a steady and conservative 3% growth.
The only real return you are ever going to make on that is when you sell it and get the uplift in value; which will of course incur a CGT bill with it.

greatcrested

** This thread is intended to provide information to both landlords and tenants relating to Assured Shorthold Tenancies (ASTs) in England and Wales.

Updated April 2020 to include the Coronavirus Act 2020 and July 2020 to include the Electrical Safety Standards Regulations 2020.

Topics covered:

Post 2: Repairing Obligations: the law, common misconceptions, reporting/enforcing, retaliatory eviction & the new tenant protection (2015) plus the Homes (Fitness for Human Habitation) Act 2018

Post 3: Deposits: Payment, Protection and Return.

Post 4: Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

Post 5: Rent increases: when & how can rent be increased?

Post 6: Repossession: what if a LL's mortgage lender repossesses the property?

Post 7: New landlords (1):advice & information :see links in next post

Post 8: New landlords (2): Essential links for further information

Post 9: Letting agents: how should a landlord select or sack?

Crashy_Time

Retireby40 said:

Il give you an idea of my income through renting a house.

House value £115,000.
I have no mortgage on it it is bought and owned outright.

Rent per calander month £590. Minus tax, rates, agency fee (9%) and insurance i probably have about £340 profit providing no major work needs done.

You need to do the maths and see what the figures look like. Then take another 20-30% for repairs or problems. Having to repair a boiler could wipe out a years profits.

The house is likely to go up in value over the next 10-20 years which again is further boost but its not guaranteed and if you're selling it to buy another house down the line it kind of cancels itself out.

Management companies are the best way to go. I never have to deal with the house. It takes up 0 of my time bar 2 or 3 emails a year.

Most BTL is mortgaged though?

Shandy953

AdrianC said:

Have you read, digested, understood all this information...?
https://forums.moneysavingexpert.com/discussion/5180214/tenancies-in-eng-wales-guides-for-landlords-and-tenants

Show us the numbers on these properties...
Are you happy with the tenants you'll be buying? Are they on ASTs?

What other investments have you looked at? "Bank account" and "starting a residential lettings business" are nowhere near the only options.
https://forums.moneysavingexpert.com/categories/savings-investments

No need for the numbers in terms of monthly rent and house cost as rental yield provided shows what return I would be likely to get, No not read and digested all the information as yet, as mentioned thinking about it and trying to get as much info as I can hence asking whether it was worth joining NRLA. Not seen the house physically or met the tenants as at the moment just got my eye on this, they are currently on AST and again why I was asking if being part of NRLA or something similar would be benefiically as they provide forms etc. In terms of other investments when you say those two options are no where near the only options it makes it sound like there are hundreds of options where as realistically there are only savings, investments and income. Saving wise I have money in the bank and premium bonds, not expecting returns on these as these are just risk free protection for my money which is accessable relativelty quickly. Investment wise I have stocks and shares account which I pay monthly into, like any investment there is a risk that any money here could be less than I put in so I don't really want to chuck an addional 100k into this when I'm putting in an amount already every month. Income would be rental etc thats why a buy to let appeals as it is income and investment. Unless you can tell me any options I have missed off. At this point like I mentioned I'm just looking at all the info and getting my head around it and hence asking here about joining an association, some replies mention getting a letting agency to deal with the managment of the property but nothing about joining an association. Granted when you take into consideration mortgage interest, repair cost, capital gains tax, rental tax etc it does make it seem as though it is not worth pursuing, sure with the right tenants and house though it could be beneficial?

macman

And how do you know if you have  'the right tenants' until they're already in possession? By which time it's all too late if they turn out to be the tenants from hell.

Shandy953

macman said:

And how do you know if you have  'the right tenants' until they're already in possession? By which time it's all too late if they turn out to be the tenants from hell.

Exactly no way of knowing, credit check and referencing them are no proof they are going to keep up with payments and not trash the house. Was saying it in more of an optimistic way, surely majority or renters are fine and only a very small % are like the ones that appear on "can't pay, we will take it away". Maybe someone will tell me that I am wrong? Suppose thats the relationship with money, the greater the return the bigger the risks

Rachlou_25

I have been a landlord before (although an unwilling one, I couldn’t sell my property to it was the next best thing) - I would suggest what other posters are saying and go with a leasing agent as they sort out all the legal stuff for you. 

Once you have an idea of what is required, you could do it on your own.  

For me renting wasn’t worth it, I ended up paying more in tax, mortgage, repairs etc than I took in from the house as it bumped my salary into the higher salary bracket.  But if you have a low mortgage, it can be a good source of income.  If you don’t go with an agent, I would seek legal advice on what to do to get yourself set up, legislation is heavily geared towards the tenant so best to make sure you’re covered