The Lettings experts at Belvoir reveal six steps that anyone considering becoming a Landlord for the first time having inherited a property or because they can't sell, should take
The Lettings experts at Belvoir reveal a six-step plan for ‘Accidental Landlords’
“An ‘accidental landlord’ is someone who can’t sell their property (normally their own home or an inherited property) and has decided that renting it out is the only other viable option,” explains Belvoir Sunderland's owner Neil Whitfield. “Another less common ‘accidental landlord’ is someone who has inherited a property.
“In recent years we’ve seen a large rise in ‘accidental landlords’ due to the downturn in the Sales Market. In addition, a competitive employment market has meant we all have to be more flexible and be prepared to travel to work or take a job out of town... and letting your home enables this.
“An ‘accidental landlord’ differs from a professional landlord as they normally have emotional attachments to the property and this can make it harder for them to view the property as a mini business in its own right.
“However, if managed correctly, becoming an ‘accidental landlord’ can be beneficial for those struggling to sell and the property can potentially pay for itself until the market improves.”
Belvoir Falkirk owner Mike Campbell agrees that becoming a landlord can be a positive experience for homeowners who are finding it difficult to sell.
“The benefits of letting your property rather than selling at this current time are many-fold,” he says. “Renting out your property will help you buy time until the market picks up, potentially meaning you may achieve a better selling price.”
Renting a property from an ‘accidental landlord’ can have benefits for tenants too...
“The advantage for tenants is that properties where an owner has lived tend to be better presented or finished than a property that has been purchased specifically to let,” says Mike. “And the landlord’s emotional attachment to their ‘home’ also encourages them to keep abreast of maintenance issues.”
If you are a homeowner thinking of becoming a landlord, here are the first six steps you should take...
1. Financial Considerations
Find out how much rental income your property is likely to achieve by comparing similar properties currently available to let in the area... or by asking the advice of your local property management agent.
“An ‘accidental landlord’ can find out how much their property is likely to let for by inviting a professional agent into their home,” says proprietor of Belvoir Bury St Edmunds, Patsy Day. “They will assess the property’s potential rental income based on its condition, size, location and other benefits such as gas central heating, double glazing, parking and a garage etc.
“We will look at the whole property and give our opinion on its viability in terms of rental and what needs to be done to the property in order to make it rentable, plus to maximize the rent achievable. We’ll also advise what needs to be done from a legislative, decorative and aesthetics point of view.”
Given the potential rental return, ask yourself if it will be financially viable for you to rent out the property and consider the costs that you may incur, including advertising and marketing the property, on-going maintenance, specialist insurance, periods of void, management company charges (if leasehold), potential professional cleaning between tenants and an annual Gas Safety Certificate.
“Homeowners thinking about becoming landlords should consider the costs that are involved with renting out their property,” says Patsy. “They should ask themselves ‘how much is the mortgage versus how much NET income am I going to get and how can I cover any shortfall?’
“Remember it will be your responsibility to maintain the house, plus deal with repairs during the tenancy, from a leaking tap to water coming through the ceiling.
“You will also have costs to ensure the property maintains its legal status, such as a Gas Safety Certificate. Plus, you may incur costs for services, such as if you decide to provide a gardener for the duration of the tenancy or employ professional cleaners at the start of the tenancy.
“Additional costs can also come from specialist insurances, property management fees and covering any periods of void.”
2. Permission to Let
If the property is currently mortgaged ask the lender for their permission to let the property.
“An ‘accidental landlord’ should tell their mortgage company if they’re intending to let a property because they need the consent of the lender before they can let their home” says Patsy. “The mortgage may even need to be restructured or offered on a different basis or at a different interest rate.”
3. Management Matters
Decide whether you are going to self-manage the property or get a property management agent to do it for you.
If you choose to self-manage your rental property you will be responsible for inspections, rent collection, negotiating rental increases and organising contractors and repairs. But, if you choose full management through a letting agent all the hard work will be done for you.
“A property management agent has knowledge and expertise,” says Patsy. “They will have lots of experience in dealing with the sort of problems that can arise throughout a tenancy... plus know how to resolve them – whether it be problems with the property or problems with the tenant not abiding by the rules of the tenancy.
“Also legislation is being updated constantly. Because an agent is dealing with it every day they are able to make sure they keep up-to-date and ensure that the property and the landlord don’t fall foul.
“Having an agent can also give you peace of mind when it comes to maintenance matters. If you manage the property yourself you could get a call in the middle of the night if the boiler stops working, there is storm damage or a dreaded leak. But if you have an agent managing it for you then you can be confident that problems will be dealt with promptly because they have local contacts.
“Not only that, a really really important thing is that landlords who self-manage often become too close to the tenants which can cause complications when wanting to inspect the property, negotiate rental increases or discuss rental arrears.
“If you have your property managed by an agent regular objective inspections will take place and a rent review will happen every year, which will ensure that the rent keeps pace and your investment is not slipping behind. If you want to maximize your income from a property, an agent will know exactly how to do this.
“We deal with rental properties every day and are assertive and proactive in making sure the tenancy is running smoothly.”
4. Renew and Refresh
Empty the property and do any essential maintenance. Decorating throughout in neutral tones can also be beneficial.
“Before a tenancy starts it is vital to do all those odd jobs that you and your family have ‘learnt to live with’,” says Patsy. “You may have developed certain ‘work arounds’ for things that don’t work properly, such as a sticking window, faulty light fitting or broken fan in the bathroom. But when somebody else lives there you’ve got to fix it.
“Internally, from a decorative point of view, make sure that the rooms are presented as a blank canvas. You don’t want any heavy colours on the walls – they may have gone with your furnishings and might be to your taste, but your tenant will probably not have the furniture to match a red wall or a pink bedroom.
“Remember it’s not your home anymore, so you’ve got to make sure it appeals to a mass audience. We can test the market with the red wall or a the brightly patterned carpet in the back bedroom but, if a number of viewers comment negatively on this, then the landlord should be prepared to change it, negotiate with their new tenant or be open to the tenant wanting to do the work themselves (we will always ensure that any work completed by a tenant is done by a qualified tradesman).
“It sounds obvious but make sure you clear your belongings from the main living space of the property too. ‘Accidental landlords’ often want to leave their stuff – and if this is the case they can secure a shed, garage or the loft for this purpose as long as they are willing to accept the potential risks in doing so.
“Also, you need to make sure that the property is spotlessly clean. If you let a tenant move into a house that is dirty they are unlikely to take pride in their home and won’t then necessarily keep it to the standards you would expect. A beautifully clean and well-presented property motivates a moral commitment to keep it that way. Make sure the lawns are cut and the hedges are neat too because that’s the standard by which the tenant has to maintain them.
“Always leave the property as you would like to find it at the end of the tenancy.”
5. On the Tenant Trail
Once you have made sure that the finances add up, your mortgage company has agreed to your plans and you have refreshed the interior of the property, you are then ready to find your first tenant...
“Tenants can be found in many ways,” says Patsy. “Private landlords can ask around where they work, ask friends or family, put up notices or take a private advert in their local paper. Please note, these adverts can sometimes attract the ‘wrong’ type of tenant as your background checks may not always be as thorough as an agent’s would be – always do your background research thoroughly before committing to the tenancy.
“Alternatively you can ask a property management agent to find a tenant for you. They will be able to advertise the property on web portals, in the local press, in their shop window and often on their own website too. They will also put up a ‘to let’ board to attract more attention, plus possibly already have a waiting list of tenants looking for properties just like yours.
“And, of course, when we have found a tenant we check that they are viable, making sure they are who they say they are and both the references and credit checks add up.”
6. Exit Strategy
You may have only just found your first tenant but even at this stage it’s important that you have a plan for the future...
“Particularly pertinent to an ‘accidental landlord’ is their get out strategy,” says Patsy. “A lot of ‘accidental landlords’ may only be letting because they cannot sell so they need to ensure that they can sell at a point that they want or need to.
“This is about flexible tenancy agreements with break clauses – or perhaps just allowing the tenancy to run month-to-month after the fixed term has ended.”
Benefits of letting instead of selling – at-a-glance
- It’s a quick-fix solution
- Demand for rental property is high
- You may achieve a better selling price when the market picks up
- You’ll have the freedom to become mobile without having to sell
- You may make a monthly profit – with current low interest rates, the monthly rental income may be higher than your mortgage payments
- You’ll still own your property should you wish to return to it at a future date
Costs to consider...
- Advertising and marketing
- On-going maintenance
- Specialist insurance
- Periods of void
- Management company charges (if leasehold)
- Professional cleaning between tenants
- Gas safety certificates
- Agency fees (if Fully Managed)