If you’ve somehow managed to stumble here – face down, ass up – the odds are you’re interested in becoming a UK residential landlord, whether that’s by renting out your home, or specifically buying a BTL. Either way, cool.
Without wanting to sound like a 24-carat douche, I want to say that you’ve arrived at the right place. Or at least, this wouldn’t be a totally unreasonable place to start your journey!
Despite what the flashy title says, there’s a lot more steps than a lousy eight to becoming a landlord. I WISH there were only eight. I’d even take twenty over the reality.
I’ve already shed blood, sweat and other unidentified fluids on an in-depth guide for new and first-time landlords which covers a lot of what you need to know, and there’s about a million tiring steps in there, but that will take you forever and a day to grind through.
Don’t get me wrong, I’m not trying to encourage you from swerving that adventure, but I do want to provide choice to those that prefer a sample before putting all their chips in.
The purpose of this blog post is to provide you with a general overview of the steps required to become a landlord. Who knows, maybe the steps will make you more determined than ever to become a landlord, or alternately, confirm that you need to dodge the idea like a bag of haemorrhoids.
I just want to clarify that everything I’m sharing is based on my own personal experience as a landlord of several years, which includes both successes and some pretty horrendous failures. Right, so, the essential steps (not to be confused with reality)…
1) Understand being a landlord is a business
Yes, a business! You make money, you have expenses, and you pay your bullshit taxes. If you’re lucky, you’ll make a profit each month.
While property is notoriously a safe long-term investment, there are no guarantees of success, just with any business.
Over the years I have seen landlords secure nice and comfortable futures due to their BTL ventures, but I’ve also seen many drop like malnourished flies while striving to make their fortunes, particularly during the 2007 recession, when house prices plummeted like a lead condom.
Many people get into the game because they think it’s an easy way of making a shit-tonne of money. Believe me, it’s not always that easy.
No guarantees. Learn it, love it, live it.
2) Understand what being a landlord actually entails
I’m always amazed (and amused) at how many landlords step into the arena with a totally distorted view of what being a landlord actually entails. It’s like, when people used to watch an episode of Sarah Beeny’s highly edited and chopped episodes of Property Ladder, and feeling assured that property development is a breeze! News flash: they make it look a breeze!
But I get why people think it’s so easy. Unfortunately, the realities of being a landlord is a far cry from simply watching some schmuck pay off your mortgage each month.
I don’t want to scare anyone away, and you shouldn’t be scared by how it really works. It’s really not that scary, it’s just not as easy as many believe. My gripe is with people who think it’s so easy that they don’t have to lift a finger, because that’s complete bullshit. That said, I want to provide a dose of reality:
- The odds of ending up with a duff tenant really aren’t that slim, which means you’ll probably end up dealing with rent arrears, unexpected and excessive repair and maintenance bills, unauthorised sub-letting activity etc.
Believe me, dealing with any one of those scenarios can be utterly soul-destroying. You’ll want to kill someone.
- The laws can be excruciatingly unfair towards landlords i.e. it can take several months to evict a rogue tenant.
Not only are they unfair, but they’re frequently changing – so you need to keep your ear to the ground.
- It doesn’t matter if you’re relying on a letting agent to fully manage your tenancy, the responsibility of dealing with problems will ALWAYS fall back on the landlord.
Believe me, there’s not a single letting agent on the planet that will lose a single nights sleep because your tenant isn’t playing nice.
- You always need money on the side so you can cover any unforeseen expenses, especially those hefty ones that feel like a sledgehammer to the go-nads. For example, a broken boiler can set you back thousands to replace, and that’s not a repair you can simply delay until the times right.
- Void periods are common (i.e. when the property is vacant for short periods), particularly in-between tenancies. During that time you won’t receive rent, but you’ll probably still have a mortgage to pay, plus other expenses like council tax. Can you deal with that?
- Running costs of being a landlord can be a bitch, especially if your property is a rundown piece of crap that’s on its last legs!
If you’re one of those idealistic fellows that have two expenses on the business plan, one being incoming rent, and other being outgoing mortgage, then you need to get back to the drawing board and reassess!
Off the top of my head, here are a few expenses: complying with regular legal obligations (e.g. gas safety checks, EPCs, landlord license), mortgage, insurance, marketing and advertising, agency fees etc.
That’s like 1% of the harsh realities.
My point is, it’s rarely ever plain sailing. At least, that’s what you should mentally prepare yourself for.
3) Check if you’re even allowed to let your property
Funny thing, thousands of landlord are letting their properties illegitimately, and the cost of doing that can be decapitating if the powers that be cotton onto the scam.
So, here are a couple of mandatory checks – some may or may not be relevant to you circumstances (I’m sure you’ll get a tickly sensation when you read the one(s) that apply):
- If you plan on renting a house you once lived in, the odds are you have a residential mortgage. So you need to ensure you have a mortgage policy that covers BTL. Contact your lender to see how to make the switch.
Lenders can retract the loan if you have an incompatible mortgage, so it’s not worth sticking your head in the sand. Deal with it!
- If you have a leasehold property, check the lease, as many leaseholds don’t permit sub-letting (you’d effectively be sub-letting if you let a leasehold property).
- If you purchased your property as part of a shared ownership scheme – you should check with the housing association and any other parties involved what the deal is with letting.
4) Check, understand and meet your legal responsibilities
Hold onto your tampon, there’s a lot of legal jargon to get to grips with, and the list seems to growing by the day as more and more legislation gets introduced! Landlords even got affected by that GDPR bullshit.
Fortunately, many of the rules won’t apply to you to get started – so for now I’ll just focus on the ones that do!
Oh, and just to clarify, laws and regulations vary depending on country (e.g. England, Wales, Scotland and Northern Ireland), and they can also vary depending on the type of let (e.g. House of multiple occupation, single-let).
The following list of responsibilities applies to landlords that have single-lets in England, but many of them will apply to rentals in Wales. Scotland is a whole different kettle of weird sausages, which I have very little knowledge of!
Thinking about it, this is the only step which isn’t entirely based on good sense and practicality, and it can’t be applied across the board.
Fitness for Human Habitation
First and foremost, your rental property must be “fit for human habitation”, which means it needs to meet certain standards. In practical terms, the following must not be an issue:
- the building has been neglected and is in a bad condition
- the building is unstable
- there’s a serious problem with damp
- it has an unsafe layout
- there’s not enough natural light
- there’s not enough ventilation
- there is a problem with the supply of hot and cold water
- there are problems with the drainage or the lavatories
- it’s difficult to prepare and cook food or wash up
- or any of the 29 hazards set out in the Housing Health and Safety (England) Regulations 2005
Some local councils require landlords to obtain a ‘landlord license‘ before they’re able let their property. On average, the license will set you back approx £500, and it will need renewing every 3 years or so.
Check with your local council if a license is required.
Gas Safety Check
Landlords must ensure that all gas appliances, pipe work and flues are maintained in a safe condition. In order to ensure this, a landlord gas safety check must be conducted annually by a Gas Safe engineer (any respectable plumber/gas man will be Gas Safe qualified).
The checks cost approx £60 per year.
Energy Performance Certificate (EPC)
An EPC is a report which shows the energy efficiency of a property, rated from A (most efficient) to G (least efficient). From April 2018, properties for let must have a rating of at least E.
You should get an EPC BEFORE you start looking for tenants, as prospective tenants are required to view it BEFORE a tenancy agreement is created i.e. you should show the EPC tenants during the viewings. A property that isn’t very energy efficient will cost more to run, so that’s useful information for tenants.
Smoke and Carbon Monoxide Alarms
A properly tested and fully-functional smoke alarm must be fitted on each floor of the property, and a carbon monoxide alarm is required in rooms which have a usable fireplace or woodburner.
Every electrical appliance supplied by with the property must be safe to use; the electrical installation in the house must be completely safe.
Unlike the Gas Safety Regulations, there is no mandatory requirement for the equipment to undergo any safety testing. However, many landlords do have routine inspections by qualified electricians, just to be safe. It’s your call.
Minimise risks of Legionella
This is a bit of a weird one, and quite frankly makes little sense given how wishy-washy the requirements are to comply. But I digress.
Fortunately, there isn’t much required to meet this obligation, but the jist of it is that you need to ensure there’s a minimal risk of Legionella in the premises.
All you need to do is take the temperature of a few water outlets (e.g. taps, shower). I won’t go into the details on here, but when the time comes, you may want to hop over to my guide on how landlords can comply with the legionella legislation.
Secure tenants deposit into a deposit scheme
If you take a deposit from your tenant (nope, it’s not compulsory that you do, although it is recommended), you need to secure the deposit into one of three deposit schemes, and also serve your tenants the prescribed information related to the securing of the deposit.
Ensure your tenant has a right to rent in this country
Yup, we’re also immigration officers.
Landlords have to ensure their tenants have a legal right to rent and live in this country. Basically, it involves checking the identity of each applicant (e.g. passport, driving license). For example, all E.U citizens have a legal right to live in this country, so if your prospective tenant is from a country in the E.U, you just need to check their passport/identity card to confirm their origin.
For prospective tenants that come form further afield (e.g. doctors from India), you may have to run a few extra checks. Here’s a more complete guide on the right-to-rent legislation.
I think that pretty much covers the basics, or at least the need-to-knows to get started. If you’re interested in a more comprehensive article on landlords legal obligations <--- there you go!
5) Decide if you want to manage the let and tenants yourself
I’m not looking forward to covering this step, because there’s a lot of ground together. I’ll try my best to be efficient!
Every landlord needs to decide how “hands-on” they want to be with the lording. Generally speaking, there are three traditional paths:
Use an agent to find tenants and fully manage the property
This is the solution for landlords that want minimal involvement with the tenancy.
Needless to say, the privilege of doing sweet-nothing comes at a significant cost – paying an agent to find tenants and fully manage the tenancy is the super expensive route. Most agents typically charge between 10 – 15% of the rental amount for fully managing + extras (which are often hidden. Buyer beware), and watching that amount get deducted every month can be painful, especially when you bear in mind that you have to pay the fee every month even if your agent spends ZERO hours working on your tenancy through the majority of the months (which is extremely common).
From my experience, most inexperienced landlords opt into fully managed services needlessly, simply because they believe it’s the ‘norm’. It isn’t.
Use an agent to find tenants and take viewings
This is a middle ground – whereby you pay an agent to typically advertise your property, conduct viewings, conduct referencing, draw up the tenancy agreements, and secure the tenancy deposit. Once a suitable applicant is found and secured, you then handle the management.
This is a much cheaper option than the full management package, but it can still come at a hefty cost. Most typical agents charge a one off fixed fee (about £800’ish), or a one-off 10% (or thereabouts) of one year’s worth of rent.
If this path sounds on the money, my only word of caution is to be wary of tenancy renewal fees! This is when some unscrupulous agents will charge you a fee EVERY time the tenancy needs renewing (i.e. if you sign a 6 month contract with a tenant, the agent will charge you £200 after 6 months… for doing absolutely nothing)!
Find tenants yourself and manage the let
It’s all on you, baby!
This is the power move.
This D.I.Y option entails you taking on every aspect of the tenancy, including the marketing and finding of tenants, the viewings, the decision making, and the management. Yup, that means you do more work, but in return you get to save a buttload of cheese on agent fees!
But there’s also another particularly potent and noteworthy advantage – that’s often overlooked – that is, you get to conduct the viewings yourself, which means you will get to look into the eyes of the prospective tenants, and decide whether you would like them to live in your property or not. I ALWAYS prefer doing my own viewings for that purpose.
6) Decide between online agent & high-street agent
We all know what a regular
greaseball high-street letting agent is, so I won’t waste my time getting into it. However, you might not be familiar with an online letting agent – even though they’re currently the biggest rage! For those unaware, maybe it will help if I drop a few names.
You’ve heard of PurpleBricks, right? Online estate/letting agent.
You’ve heard of Upad, right (may not)? Online letting agent.
You’ve heard of OpenRent, right (may not)? Online letting agent.
One way or another, you’re going to want to use some kind of agent (whether it be a online or high-street agent), irrespective of whether you want to take the D.I.Y route.
Online letting agents don’t have shop-fronts like high-street agents, they operate purely online, so you can’t just stroll into their local branch. That’s why they’re a shit-ton cheaper than high-street agents.
Don’t worry, most online agents have a fully-dedicated support team which can be easily contacted via phone or email, so you’re not just dealing with a dormant website and automated responses- you actually are dealing with real people with experience in the field.
In terms of price comparison, an online letting agent can charge as little as £30 (some even offer free trials) to market your rental on property portals like Rightmove & Zoopla to generate leads from prospective tenants, while high-street agents have charged me £800 for a similar service. Online agents also offer more comprehensive fully managed packages, which start as little as £30 per month. Yeah, I’m not kidding.
So, the decision, do you want to use an online or a high-street agent? I can’t say which is better or more suitable for new landlords, because it depends on how much you require localised and in-person support. For me personally, using an online agent is a no-brainer.
If you don’t feel comfortable taking your own viewings, and you want the option of being able to walk into your local agent for face-to-face support, you’re better off paying the premium rate of a high-street agent. Personally, I think you get much more value, and equally good support from online letting agents.
If you’re interested in finding out more about online letting agents and checking out your available options, you may want to read my guide on online letting agents.
7) Preparing the property
It’s showtime. It’s time to get the punters through the door and sell it.
There are a couple of issues I want to touch on here, so if the ride seems turbulent and irratic, please bear with me, because it’s for your own good.
Firstly, you need to choose between providing a furnished and unfurnished property. What’s my opinion? UNFURNISHED EVERY DAMN DAY! Providing furnisher is just added hassle. Avoid! I’m not going to say anymore about it (because I’ve already had a massive rant about why landlords should never provide furnishings).
Secondly, the issue of white goods! Most tenants expect at the very least a cooker/oven, but most landlords also provide fridge/freezer and a washing machine. But I’d say a cooker/oven is a must. The others bits, some times you can get away without providing. However, be warned, you may hinder the efficiency of finding tenants if you skimp on the white goods, as many tenants expect them to be supplied with the property.
Thirdly, the decor. You may or may not need to replace some carpets, rip out some tired fittings, and run a flesh lick of paint through the entire house to make it presentable. I’ll let you be the judge of what needs freshening up, but common sense generally rules here: use neutral colours, keep the house clutter free, spacious and clean (that’s exactly how the property should be presented during the viewings). If your house is neither of those things prior to marketing, you have work to do.
The key is to neutralise the decor, so it appeals to the masses. Little personal touches are usually a waste of time and detrimental.
Make sure the place smells nice also, but don’t overdo it with the air-freshener/Lynx, because people will think you’re trying to mask the fumes of a decaying body.
Here’s a plug to another article of mine, which covers a plethora of decorating tips for landlords! Enjoy.
Lastly, there’s no point going to all this effort of pimping out your crib if you’re not going to flaunt it in the right way. There’s no question about it, you’re GOING TO shove your property on Rightmove and Zoopla one way or another in order to find tenants. That means you’re going to need high-quality images to capture your creation in its best light so you have the punters foaming around the mouth.
If you are using a high-street agent, professional photography is usually covered within their fee! If you’re using an online agent, you can still order professional property photography from them (i.e. a photographer will visit the property to take photos), but you’ll typically have to pay a little extra on top of the tiny base price. It will set you back approx £70 for professional photos and floorplans, which isn’t too bad at all considering that you’ll get to keep them, so you can reuse them for all future marketing purposes.
Of course, you do have the option of taking the photos yourself. However, I typically don’t recommend taking this route – because it usually results in someone who thinks they’re a “pro” taking dog-shit pictures on a phone. If one things going to drastically minimise the volume of enquiries, it’s poor photography. However, if you’re handy with a cam, by all means go for it.
The point is, marketing your nicely prepared property with high-quality photography is crucial to tying your tenant-finding efforts all together!
8) Finding & referencing tenants
Arguably the most important step out of the whole lot! At least, in my opinion it is. Why? Because lousy tenants can lead to the biggest expenses and headaches, and by nature, they have enough oomph to topple your empire.
After short-listing a couple of prospective tenants that tickles your pickle, you should conduct thorough tenant referencing, which should include credit checks, and verifying references.
It doesn’t matter if you use an agent to find your tenants or not, I always recommend that landlords take an active role in referencing. From experience, I’ve realised that NO ONE will care about your investment/property as much as you, so you’re more likely to be a lot more diligent when it comes to picking the right tenant.
So there you have it, 8 steps covered in errr… 10 billion words.
I genuinely didn’t anticipate this blog post to be so buff, but I hope it’s been useful, and if anything, I hope it’s provided some clarify on whether you want in… or out.
If you have any questions, hit up the comment box below…