Buying a property to rent out to tenants can be a great investment.
The rental income you receive can be used to pay off the mortgage on the property, or become pure profit if you already own the property outright; you can profit again later on by selling when it is at a higher value than when you bought it; or, if times are tough, you can move into the property yourself (depending on any existing contracts with tenants).
Being a landlord is like running a business
But don’t be fooled into thinking it’s an investment where you can just sit back and relax as you watch the rental income flow into your bank account.
Being a landlord is like running a business – as well as filing tax returns, you need to take an active role in ensuring your property is fit to live in and that your tenants are safe.
How to be a responsible landlord
This short guide gives an overview on rules and regulations, and shows you how to be a responsible landlord.
Keeping your tenants safe
Tenants have a right to live in a safe environment, and it falls to you as the landlord to ensure the property is up to scratch.
This essentially comes down to making sure there are no hazards, such as from faulty gas and electrical equipment, or potential for fires.
What happens if your property is hazardous?
Your property could be liable to a health and safety check by the council if your tenant asks them to carry one out.
If the council do perform what is known as a Housing Health and Safety Rating System (HHSRS) inspection, they’ll check for things such as damp, poor water supply, and pollutants (asbestos, carbon monoxide, etc.).
The council could also choose to perform an HHSRS inspection if they’ve surveyed the local area and believe your property could be at risk – however, if you know your property is up to health and safety standards, you should have nothing to worry about.
Failing an HHSRS inspection
If your property fails an HHSRS inspection, it’s not the end of the world – they aren’t going to take the property from you and ban you from being a landlord.
They will, however, issue you with an enforcement notice demanding that you make any necessary repairs, or pay the council the cost of any repairs they make themselves.
The government website features a more in-depth guide to HHSRS guidelines.
Entering your property to carry out inspections or repairs
If you do need to make repairs to a property, as the landlord you have the right to enter your property, but you need to give your tenants at least 24 hours’ notice, and your tenants are legally allowed to remain in the property while repairs are made.
What about bigger property repairs?
If you need to make bigger repairs, ones which require a tenants to move out, you need to agree in writing how long the work will last, the tenant’s to return, and details of any alternative accommodation.
And what about redeveloping your property?
If you want to redevelop your property (such as adding an extension) to enable you to charge higher rents or increase your property’s sale value, the changes will probably require your tenants to move out.
This is possible, but you’ll need permission to do so with the courts. If you want the biggest chance of success, organise alternative accommodation for your tenants.
Once you’ve redeveloped your property to make it more valuable, it’s only natural as a landlord to want to increase rent.
However, you can only increase rent if it’s allowed under the tenancy agreement.
You’ll also want to make sure any rent increases are fair – if you charge too high (especially if it’s higher than the local average) you might scare off potentially great and reliable tenants.
Choosing the right tenant
When looking for a tenant to live in your property, remember that you aren’t looking for a friend. You’re looking for somebody who you think is reliable enough to pay the rent on time each month, and somebody who will take good care of the property.
You need to be fair, and not choose a tenant based on their race, religion, or beliefs.
Since renting out a property to tenants is essentially running a business you’ll need to do what all businesses do and pay tax each year. You can hire an accountant to do much of the work for you here, ensuring your tax returns are filed on time each year.
Specialist landlord advice
As you can see, being a landlord is about more than just sitting back and relaxing as you watch the rental income roll in. It’s actually more like running a small business.
But you don’t have to go it alone. As part of Pearl’s comprehensive accounting service, we provide landlords with specialist advice and tax assistance. Give us a call on 020 8582 0076 to find out more.