Buy-to-let checklist – be landlord ready with our top tips

Buy-to-let checklist – be landlord ready with our top tips

By Published On: 13 July 2022Categories: Limited Company, Small Business Owner, Tax

If you’re new to the world of buy-to-let there’s a number of things to consider before you’re ready to hand over the keys. From renting a second / third / fourth / etc property as either a handy passive income, or saving towards a portfolio to fund your future plans, there’s elements of risk you must consider before taking the leap.

In this blog we explore the world of being a landlord, what you need to consider before you get started, and how to make the most from the experience.

It might sound silly, but how do you know if you are actually a landlord?!

Whether you’ve bought a property to become a landlord, or your circumstances have meant you’re now the proud owner of an additional property, whatever the reasoning behind finding yourself in this position if you rent out the property for money then you can add the title ‘landlord’ to your job description. As a landlord there are a number of legal obligations you’re expected to meet.

Are you allowed to rent your property?

It is your property so you should be able to do what you like with it, right? Wrong! If you have a standard residential mortgage which allows you to live in it, then you’ll need to request permission from your lender to rent the property out.

If you’re renting your property for a short period of time (ie you’re going travelling and plan to return) your lender shouldn’t have an issue with allowing you to rent it. If you’re planning on letting your property long-term then you’ll need to obtain a special buy-to-let mortgage, which you’ll need to satisfy your lender’s lending criteria in order to obtain, and which will almost certainly carry higher interest rates.

If your property is a leasehold, you’ll need to also apply for permission to rent it out from whomever owns the freehold.

You’ve established you’re allowed to rent your property – what’s the next step?

Home décor is extremely subjective, and what you personally call homely and inviting might be another person’s worst nightmare. When marketing a property for the rental market it’s best to keep décor neutral, so a potential renter can visualise what the home could look like with their own belongings inside. Neutral tones and keeping clutter to a minimum tends to also make a property look bigger, and could be a strong selling point.

Be sure to fix anything that’s either broken or on its last legs, and replace items that will have a lot of use (such as carpets) with hard wearing versions which are easy to keep clean and will need replacing less frequently. Give the walls a fresh lick of paint and get the bathroom and kitchen (including the oven) cleaned professionally.

You may decide to use a letting agent to manage the tenancy. They’ll market the property for you, vet prospective tenants on your behalf, and handle the money side of things also. They will of course charge a fee for their services, so it’s worth weighing up their cost versus how much your time is worth if you’re thinking about doing it yourself.

How much rent should you charge?

It’s worth doing a little market research to see how much your place is worth. Take a look at sites such as Rightmove, OnTheMarket, and Zoopla to see what similar properties have rented out for. Also take a look at local estate agent websites to see how much they’re charging, to give you an idea of how to price your property.

Do you need a House of Multiple Occupancy (HMO) license?

If your property is large and you’re able to rent out multiple bedrooms to different people, you might decide to make it an HMO. You’ll need a license in order to do so, so how can you be sure your property is an HMO?

  • If you have 5 or more people living there, each from separate households, and they’re renting the property (for example student accommodation)
  • If the tenants share a kitchen or bathroom

Even with less than 5 people it could still be classed as an HMO, so it’s always best to contact your local council and double check. It’s advisable to speak to your local council about your plans to become a landlord regardless of whether it’s an HMO, as there may be some other rules or stipulations you’ll need to adhere to.

Get an EPC inspection

Before renting your property, you’ll need to get an energy performance certificate (EPC) inspection. You are unable to rent or buy a property without one. They show you how energy efficient the property is, and highlight where improvements are needed. Your property will be awarded a rating from A to G, and you’ll need a new EPC certificate every ten years. You cannot rent a property with an EPC rating or E, F or G.

Energy safety checks for landlords

It’s a legal requirement for your property to have safe gas and electricity supplies (and appliances if your property comes with them).

Gas – you’ll need a Gas Safe registered engineer to complete a safety check every year. For every new tenant a copy of the certificate should be given to them along with their contract.

Electricity – your property will need to undergo an electricity inspection every five years. If the report highlights any required maintenance it must be completed within 28 days, and your electrician must provide written confirmation. Once the inspection has been done and all work has been completed an Electrical Installation Condition Report (EICR) will be issued.

If you include electrical appliances with your property, they must all be PAT tested.

legionnaires risk assessment – it’s advisable you carry out a legionnaires risk assessment also, before renting out your property.

Carbon monoxide alarms and smoke detectors

Legally you must fit and maintain carbon monoxide alarms and smoke detectors.

Furniture fire and safety regulations

Under the furniture and furnishing regulations act (1988) all furniture must be fire resistant. If you do not adhere to these rules you could be heavily fined or even face criminal action.

Know your responsibilities when it comes to maintenance

Other than ensuring you meet all the legal health and safety regulations, you also need to ensure you keep it in a good, liveable condition. This includes:

  • The structure of the property and any outside buildings, such as sheds, garages, etc
  • The heating and hot water system
  • Toilets, sinks, baths, showers and any other sanitary ware
  • Any built-in appliances (fireplaces, ovens, etc)
  • Communal areas if the property is situated in a flat or apartment

Any damage caused either by the landlord or tenant, must be fixed.

Comprehensive landlord insurance

You’ll need comprehensive landlord insurance for your rental property, which your mortgage provider (if you have one) will most likely require you to have from the outset. You’ll also want to have contents insurance, which can include white goods, carpets, curtains, etc. Some insurance providers can also cover you for when tenants can’t pay their rent, and emergency cover can protect you in case of a major electrical fault or water leak.

Do your tenants have the right to rent?

Sounds like a strange question to ask, but it’s one you need to have answered before accepting anyone into your property. In the UK you have to be at least 18 years old to legally rent a property, so you’ll need to see proof of ID. You can check a person’s right to rent on the website.

Carry out checks

Impressions count, so if you feel that the person won’t treat your property in a respectful way, you don’t have to rent it to them. Don’t feel guilty about rejecting a person, you will have your reasons.

Tenants must also be able to provide proof of income and their right to live in the UK. You can carry out these checks personally, or if you’re using an agency they will do it for you.

When vetting tenants you may wish to prioritise those with the highest monthly income. Take a look at their credit history and whether they have any debt. The best place to do this is by using a credit check company, such as Experian. If the tenant doesn’t pass the credit check but you like them as a person, you could always ask them to provide a guarantor.

Draw up a tenancy agreement

The agreement is a contract which both you and the tenant must sign. If you’re not using an agency you’re able to use templates which you can find online.

Protect your tenant’s deposit

Most landlords require their tenants to pay a deposit upfront, before they move in. This protects you in case of damage, but the money does not sit in your account. The money is held in a government approved tenancy deposit protection (TDP) scheme, and you have 30 days from receipt of the deposit from your tenant, to depositing it into the TDP scheme. You have a few different options to choose from, but you must inform your tenant which one you’re using. If your property’s rent is under £50,000 pa your security deposit cannot be greater than five weeks’ rent.

Create an inventory list at your property before renting

Ensure to take photos of all the rooms of your property, including any white goods, and create a list of what’s included and where. Take photos of any damage or scratches and label them correctly. Be sure to give your tenant a copy of this and ensure they’re happy with the condition of the property and its contents before signing it.

Should the tenants leave any damage when they vacate the property, this inventory list will provide you with a solid argument to justify any deductions from the security deposit.

How much tax can you expect to pay when renting your property?

Any rent you receive from your property is treated by HMRC as income, and will therefore be subject to the same taxes as any other form of income. You’ll need to submit a yearly self-assessment tax return, which the team here at Vantage Accounting can take care of for you. The type of tax return you complete will depend on how you own your property ( through personal ownership, through a standard Limited Company or through a Special Purpose Vehicle (SPV), so be sure to get it right first time with our help. Alternatively take a look at our buy-to-let tax guide, which covers everything you’ll need to know about tax and your rental property.

You can reduce the amount of tax you pay by claiming allowable expenses and offsetting them against your tax bill. Allowable expenses include service charges, utility bills, letting agent fees, accountancy fees, council tax, insurance and any incurred costs relating to finding new tenants. Sadly mortgage interest payments are no longer considered allowable expenses. Your Vantage accountant will be able to guide you through all of this, to ensure you’re claiming everything that’s available to you.

‘How to rent’ guide

The government has produced a guide on renting that you must give a copy of to your new tenant. It highlights theirs and your rights and responsibilities, so it’s good for both you and them to have a copy.

If you need to take legal action against your tenant and you haven’t given them a copy of this guide, you could find it more difficult to win a case.

Gaining access to your property

You may from time to time need to gain access to your property. This may be for maintenance, to show prospective new tenants around, or even to have the property valued if you’re looking to re-mortgage or sell. You have to give your tenants at least 24 hours’ notice that you’ll require access, unless it’s an emergency and in which case you must still let them know you’re on your way and why.

If your property needs substantial work carried out then your tenants are within their rights to request a temporary reduction in their rent, which is called a ‘rent abatement’.

How Vantage Accounting can help you

Renting out a property is an exciting time, especially if it’s your first! But there’s plenty you’ll need to be aware of, especially when it comes to your money and ensuring you get the associated tax right first time. That’s where our team of expert accountants come in, they can help and guide you on your way, and provide expert advice and support. Take a look at our buy-to-let services now, or get in touch to speak to one of our team members.

Note: All the information and advice in this blog post was correct at the time of writing.

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