Your Involvement
The most important thing to remember is that buying to let should be a long-term investment and that it is a business so should be treated as such, with investment of both money and time needed to make it a success. However, this doesn’t mean you need to be a full-time landlord. Many buy-to-let investors do so alongside a regular nine to five job.
One way to decrease the amount of time and hassle involved with owning a buy-to-let property is to employ the services of a letting agent. However, you will obviously have to pay for this. ‘Let only’, where the agent just finds and vets tenants for you, usually costs around 10% of the rental income, while full management, where the agent will also deal with any problems that arise with the tenants or property, costs 15%.
Using a letting agent will obviously reduce the amount of profit you can make from your investment so think carefully about the balance between the time and effort you are prepared to put in and the amount of money you want to make before deciding whether to or not and which level of management to choose.
When choosing an agent make sure you go for one that is a member of the Association of Residential Letting Agents (ARLA), which has 1,800 member offices across the UK. Agents belonging to ARLA are governed by a code of practice and the organisation runs regular training courses and seminars to ensure member agents run their offices according to best practice.
Before they can become a member, agents must prove they have sufficient professional knowledge and expertise and that their offices are run to a high standard. All must have professional indemnity insurance. ARLA also has its own complaints and disciplinary procedures that could help you if you encounter any problems with a member.
It’s also a good idea to join a landlords’ organisation such as the National Landlords Association (NLA), the largest of its kind in the UK. It represents the interests of private landlords and provides information on issues concerning landlords, such as new legislation, drawing up a tenancy agreement, finding a lawyer or letting agent and paying council tax. Members also have access to a telephone advice line.
As a landlord you will have to ensure the property abides by certain regulations, including getting a licence if the property is a house in multiple occupation (HMO) – broadly defined as one with three or more storeys with five or more tenants from two or more families. Some buy-to-let lenders may not lend for HMOs, however.
You must also get all gas appliances checked by a CORGI-registered gas installer every year and obtain a gas safety certificate, and ensure that furniture meets fire safety standards.
As well as HMO licensing, the Housing Act 2004 introduced other new regulations, including a new housing health and safety rating system (HHSRS), which also takes into account energy efficiency, and, as of October 2006, the requirement for all tenants’ deposits to be held in a tenancy deposit scheme. The NLA can provide you with more information and advice on these issues.
You should maintain the property a high standard. It should be repainted inside every three to four years and outside every five. Depending on the kinds of tenants you have and the resulting wear and tear, kitchens and bathrooms may need to be replaced every 10 years or so and carpets every seven to 10 years. You should budget for these costs at the outset and keep a contingency fund for any unexpected repairs or maintenance that arise.
You should also make sure you have a written tenancy agreement in place to protect both you and your tenants and set out the rights and responsibilities of all the parties involved.
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