If you’re considering embarking upon the world of property management or becoming a landlord, it might be time to consider whether your first step lies under your very feet. With a bit of know-how, it is possible to turn your home into a money-making property, setting you on the path of establishing a home rental business. But where to start?
There is a lot to consider when renting out your property, whether entirely or as a resident landlord – but the rewards can be significant. If you are curious about entering the property sector, it might be high time to start monetising your biggest asset as you learn the ropes.
Common options homeowners let their homes
- Let-to-rent – This is when a homeowner lets out their property, only to rent out a different property from another landlord. Let-to-rent is when the owners have ascertained that their primary residence can achieve high rental returns and find cheaper acceptable accommodation elsewhere. Ultimately, this setup results in net gains. This is also common in relocations.
- Let-to-buy – This occurs when a homeowner lets their property out to buy a new residential property for long-term investment or transition into the business of becoming a landlord
- Taking in a lodger – This is where a homeowner rents out a room in their house whilst remaining a live-in resident – usually either for the company or a little extra income. The rules and regulations are pretty different between this and letting out your whole house, and in this article, we will be focusing on the latter.
Letting out your home – the essentials
Whilst the intricacies of being a great landlord and a savvy property business entrepreneur take years to learn, getting the ball rolling by letting out your home shouldn’t be all that hard. Becoming a legally compliant landlord is as simple as following the necessary steps.
Here is a list of the most important steps to letting out your own home, in order of the timeline you would follow.
Are you permitted to rent your home out?
Before you do anything else, it makes sense to determine whether you are even legally permitted to let your home.
If you own a leasehold property, review your lease to see if you can sublet your property. Unfortunately, many leases contain clauses that refuse sub-letting, although you may be able to appeal to the freeholder’s good graces to permit you anyway.
Whatever the potential barriers may be, get them addressed before proceeding any further. Far too many people waste a significant amount of time and money only to be penalised for not having the correct legal permissions in the first place.
How much rent could you charge?
Once you know you are legally entitled to let your home, it’s time to find out how much rent you could potentially charge. Determining this figure is crucial in ascertaining whether or not it’s even viable to let your property at all.
To get an accurate idea, consult the following sources:
- Check on zoopla.co.uk and rightmove.co.uk to see what similar properties are commanding in rental prices – this includes the same number of bedrooms, bathroom and parking spaces within the same neighbourhood. You can also use an online rental calculator to get an idea of how much your rental property could command.
- Ask some local agents to provide an informed figure based on their knowledge of the area (most will happily make an obligation-free visit.
It’s best to stick to a competitive figure based on current market rates than to get too greedy. Otherwise, you may find it hard to fill your vacancy.
Calculate your landlord-related costs
Any business owner will tell you that one of the most important aspects of any successful business is cash flow, and being a landlord is no exception. Once you know what rent your property will achieve, it’s time to calculate all associated expenses to determine the financial viability of the venture. These may include:
- Marketing costs (for finding tenants)
- Health and safety requirements
- Maintenance and repairs
- Income tax
Do you need a license?
Per the Selective Licensing Scheme, a selection of local boroughs requires landlords to be licensed before letting their properties. Failure to adhere to these rules can result in considerable fines.
You’ll need to check with your local council to find out if you need a license and if you do, it will cost approximately £500 every 3-5 years.
What about legal compliance?
This is commonly the most concerning aspect – all the legal and safety requirements! It also doesn’t help that the UK has different countries, all with different rules.
That said, there aren’t that many requirements to be legally compliant and start letting your property, and most of it is relatively easy to comply with.
You can review your legal responsibilities as a landlord via this link to the government website.
Preparing your property
Given that you will be responsible for maintaining every item provided within your property, the less you include, the better. So, ideally, other than white goods, don’t provide any furnishings, stick to neutral paint colours, remove all of your personal decorative touches and maximise space and lighting as much as possible.
It can be much more cost-effective for the experienced landlord to opt for online letting agents and get your rental listed on sites like Rightmove. However, if you are new to the world of letting, it may be more prudent to enlist the services of a local letting agent while you learn the ropes.
You also need to consider what type of tenants you need. For example, depending on your location, it may be profitable to consider letting to students. Whilst a student property can suffer a little more wear and tear, they are typically well-tenanted and particularly lucrative.
Suppose you do decide to go it alone. In that case, you can also consider utilising tenant-finding services, which can assist with screening for good tenants, taking a good deal of stress out of the process of finding the perfect tenant for your new venture.
The bottom line
Letting out your own home can seem daunting, but it can be the perfect segway into a whole new professional venture. If becoming an investor/landlord is something you are seriously considering, then letting your own property can be the best way to go about it. Providing you do your research upfront, it can be relatively straightforward, profitable, and a move from which you will never look back.