Becoming a first-time landlord

Property investment is an ambition of the many but a reality for the few. But now you have sold your home and benefited from its capital growth, you may be looking at property investment as an option to boost your income.

There is a lot to consider when pondering investing in property, so CJ Hole has created this guide to becoming a landlord, answering some key questions along the way.

What is the best way to make money from property?

If you’ve recently sold your home, you probably made money on it in terms of capital growth.

That’s one way to make money from property, but it can be a long-term game to play unless you are looking to buy a property in need of renovation which you can improve and sell on for a profit.

The other way to generate an income from property investment is through rent. Rental properties are also a long-term investment, which means they could benefit from capital growth, too.

Is property investment a risk?

Property investing does carry a risk, as most investments do.

The first thing to consider is that, despite the past 10 years of unbroken growth in the property market, prices do go down as well as up.

We saw that in 2008 and there is always a chance it could happen again. With a rental property, though, there is a good chance you would be able to ride the storm of a property crash – but only if the demand for rental properties held up.

Another thing to consider is a rise in interest rates. This could push your monthly mortgage payment higher than the rent coming in, meaning you would be making a loss.

Is it more expensive to buy a rental property?

Not in terms of purchase cost. However, there are lots of other costs to consider before purchasing a buy-to-let investment.

As you would when buying a home, you will have to pay estate agent fees, solicitors’ costs and stamp duty. And it’s that last bill that increases if you purchase an investment property.

Anyone buying a second home or buy-to-let property is subjected to 3% additional stamp duty on each band, so this is very much a cost worth considering.

Does buy-to-let cost a lot to run?

Day-to-day costs can vary between properties, but generally you will be facing the following:

  • Mortgage interest payments
  • Managing agent fees
  • Costs of decoration
  • Landlord insurance
  • Gas and electric checks
  • Ongoing maintenance bills

It’s important to factor in these running costs when calculating your rental yield. This is will reveal if a property is a sound investment or not.

Legally, what am I responsible for?

Essentially, you are responsible for the safety of your tenant, or tenants.

Here are some of the obligations you will face as a landlord:

  • Smoke alarms must be installed on all floors
  • Carbon monoxide detectors must be placed in rooms with coal fires or wood-burning stoves
  • You must provide a safety certificate, available inside the property, for each gas appliance
  • Electrical devices should be PAT tested for compliance
  • If you furnish your property, items must be fire safe and all labels must be on display
  • The water supply must be safe to protect tenants from Legionella bacteria

As well as the above, you must provide an Energy Performance Certificate (EPC) with a rating of at least E. It is now illegal to rent out a property with a rating beneath this.

What other obligations are there?

Tenant deposits must be placed in a deposit protection scheme and returned in full as long as there are no disputes regarding damage or rent arrears.

You are also obligated to repair problems with the exterior and structure of your buy-to-let, which includes the roof, guttering and exterior walls.

Finally, water, gas and electric supplies must be maintained and fixed in the event of a problem, ensuring they are safe for the tenant to use.

I would like to check over the property - can I do this?

With sufficient notice, you can check over your rental property when it is let.

Your tenant is entitled to ‘quiet enjoyment’ of the property so as a landlord, you must give notice if you wish to visit – usually 24 hours but sometimes more.

I'm keen on an HMO - can you tell me more about them?

Houses in Multiple Occupation (HMO) are properties with three or more tenants renting rooms individually and using shared bathroom, kitchen and toilet spaces.

HMOs can provide landlords with reliable income streams from separate tenancies under the same roof. So, if one tenant moves out at the end of the agreement, there’s a good chance you’ll still have rent coming in from at least two others while you arrange for a new person to move in.

Do HMO rules differ from standard buy-to-lets?

There are other regulations to follow with regard to multiple occupancy properties. ‘Large HMOs’ are those housing five or more individual tenants and are at least three stories high.

These require a licence from the local authority.

Landlords must ensure all tenants have a separate bedroom to sleep in and that their HMO is not overcrowded. All tenants must have good quality communal facilities and electrics in an HMO must be checked every five years for safety.

Speak to the experts

If you have any further questions about renting a property, your local CJ Hole branch will be more than happy to advise you.

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