5 Things The First Time Landlord Needs To Know

When you do something for the first time you are bound to make mistakes. First time parents, first time job seekers and, yes, first time landlords.

Instead of running blindly into the fray of buying to let investing, you should learn from the mistakes others have made before you.

Being a landlord can be a great investment, particularly in up-and-coming areas such as the South West where flats to rent in Bristol are in demand as people look to relocate from London. Renting out property can offer a lot of stability at a time when markets can be volatile. Yet, one thing to remember is that renting out a property is not always as passive income as it can seem. For example, if your properties are located in university towns, you will have to deal with a highly transient and term-renting population. This means that you will need to be good at managing the student-landlord relationship as you will have a high turnover of tenants and you’ll need to do a lot of introductions, onboarding, and off-boarding of tenants.

In this article, we will go over some of the things a first-time landlord needs to know before getting started. It pays to know what some of the hurdles are before you start the journey.

1 – Find a mortgage

Before you buy, you’ll need to find a mortgage. It’s the only way you can make an educated decision on whether or not you should even become a landlord.

In the next section, we’ll talk about rent price ranges, but you have to know how much mortgage you will be paying and then research what the rents are in that area.

Talk to a mortgage broker like Rivington Mortgages to see how much of a mortgage you are qualified to get.

2 – Rent-price range

Being a landlord is only going to be a good real estate investment is you are making enough from your rent.

There is a commonly held belief that you should follow the “1%” rule when it comes to rent. That means that you charge 1% of the value of the home. A house valued at £200,000 then you would charge £2,000.

The problem is that is a very simplistic approach. Chances are high that this will be far too much to ask for in your area. Unless you are close to the downtown area of a major city like London or Manchester.

Instead, calculate your costs to determine the appropriate amount. Add your mortgage payments with your insurance premiums, maintenance fees and property taxes as well as other expenses like Stamp Duty Land Tax (SDLT).

The rent should total at least this amount. If you can ask for more then do so as you are looking to make a profit short term as well as long. If the area where you own the property doesn’t have an average rent to the same amount as your expenses, then you have to evaluate your property and ask yourself if you can charge over the typical rent for that area.

3 – Make rent collection easy

Collecting rent should be a priority and as painless as possible for you and the tenants.

Using an online payment system is the best way to collect since it is quick and painless. If you need a handwritten check every month then it will likely cause delays in collection.

Set clear guidelines with your tenants about how and when they need to pay. You should give your tenants a grace period for paying their rent. In fact, the law requires that you give them 14 days after the due date. 

You should also have a late payment clause written into the lease. You can charge up to 3% over what the current base interest rate is from the Bank of England but no more than that. 

4 – Get insurance

Any type of investment comes with risk. Insurance can mitigate the risk so you should purchase insurance.

Here are the types of insurance landlords should look into:

• Buildings insurance – Covers any damage to the structure of your property. This includes damage caused by tenants but is not limited to only that.
• Contents insurance – Like building insurance this covers damage caused by tenants and other factors but to the furnishings of the interior of the building. Carpets, furniture, appliances and others are covered. 
• Liability insurance – In the case a tenant or a guest is injured inside or on the property by an unforeseen accident.
• Tenant default insurance – If your tenant stops paying rent you are covered for loss of rental income and the legal expenses required to evict the tenant.

5 – Hire a property manager

If you truly want your rental property to be passive then you should pay a manager. They will be the ones the tenant calls for any emergency or if something is not working on the property.

Managers can also handle the marketing to attract renters and do the paperwork once a renter is found. They have the means to screen potential tenants based on your criteria such as requiring referrals etc. 

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