Becoming a landlord...

[NotADragonOfSoup]

I am thinking about buying a flat to rent out. There will be no mortgage. Part of the plan will be that there is then a property for my children to "rent" from me when they first leave home. DS1 is only 14 so there is a long while before that would happen!

What do I need to know about being a landlord?

Is it better to manage it myself or pay someone to do it?

this is a BIG subject and if you are a novice, you really really need to get a decent agent. Before that, get to the library or a bookshop and get an up to date book on the subject. Also try the landlordzone website among others.

tenant referencing....gas certificates....electrical checks...suitable insurances (house, legal, non-payment, anti-vandalism)....inventories....maintenance...deposit protection....

all perfectly possible but not to be answered in one MN reply!

Best to manage it yourself. But I would suggest going through a letting agency to find the tenant and do reference checks.

We had a leak recently and the insurance company wanted to know if the tenants had been reference checked, before paying out. Luckily we had used an agency so were fine on that front.

Well, yes, I know it's a big subject! :) I would hope that the estate agent would spell out all the fine detail to me.

I guess I just need a basic intro to judge if it is a good idea or a mad one :)

I rented my victorian terrace out when I couldn't sell it and used an agency to do the contract, find the tenant, check references, and collect/chase for the rent. But the maintenance, yearly gas check, 6 monthly inspections were down to me. It was a good way of earning money, and I was lucky that my tenants were generally prompt at paying the rent and keeping the place in a good state. The hassle comes when something goes wrong e.g. the boiler stopped working so I had to get it fixed asap, so I'd recommend asking around for reliable tradespeople you could use if you have to, so you're not choosing blind in a hurry. Be prepared for the place to be quite knocked about and grubby by the end of the tenancy - get an independent check in and check out inventory done so that you and your tenants know where you stand. I also included a final carpet clean to be arranged by the tenants in the contract - I didn't use it in the end, but good to have it agreed up front. If you use an agency watch out for fees incurred for renewing existing contracts - with mine, the contract automatically became a rolling contract rather than fixed term without this renewal process. Good luck!

I have a "pet" gas/plumber and electrician in mind.

I need to invest some money and gain an income to replace my tax credits, which I think are doomed! A flat to rent out seemed ideal.

I think the only time I would be prepared to find tenants myself is if they are personally known to me. Other than that it would be agent all the way.

I am just scared about the whole thing - not least because I've not bought a property by myself for 20 years!

ANd thanks :)

the letting agent (not the estate agent) will help you IF you pay for their service. Choose an ARLA agent - no guarantee of service (expect a fair amount of keeping a dog and barking yourself) but they take responsibility and this provides protection if they run off with your money.

for buying a place, you are really on your own - the selling agent will always tell you that it is suitable for rental. Anywhere will rent at the right price, but it may be lower than you want.

job loss is of course a big thing for everyone, and you need to have insurance (if you can get it) to protect you if a tenant stops paying rent, it takes months to get them out. Also allow for some void periods.

I've looked at properties up for rent that are similar to what I have in mind (2 bedroom, near 2 stations so great links to London, catchment for great primary). I will ask what similar properties they have actually rented out recently. It's likely that I'd be buying from and letting through the same agent.

WRT void periods, I'm lucky in that there will be no mortgage to cover and I can do without the income. Not ideal but at least it wouldn't be a huge financial disaster.

Hopefully I can at least start out with a basic idea of what's going on :)

Are you aware your rent will be taxed? Have you looked at other investment options to check you couldnt get same yields with significantly less hastle.

Yes I do realise it will be taxed.

There are other reasons for buying a property, as mentioned in the OP.

Your children's notional rent will still attract tax otherwise it is seen as a gift on which their are limits before tax is again attracted. When I have done sums for friends who want to do this without a mortgage and taking into account stamp duty and on going costs, it does end up being a very low yield investment. With significantly more hassle.

The voids may be manageable with no mortgage to cover but you will have ongoing expenses during those periods as well. For example my council has just announced that vacant properties will still be liable for Council Tax. The utilities have to be paid, etc.

Not a reason not to go ahead of course, but you need to get a realistic idea of your expenses. Professional landlords will do all these calculations before even considering a property and if the yield isn't right, will walk away. You do need to be looking for a property not through the eyes of 'what would I like to live in' but 'what is most marketable'. For example, I (DH) own a two bed flat which is a fantastic place to live, it has an enormous living room and is literally twice the size of the other two bed flats in the building. But the rent is not much higher because the market is full of two-beds and a huge living room is not enough of a premium feature.

I'd be looking for a place with good, basic fitting, unless you want a doer-upper.

I use an agency to do everything for me - expensive but necessary as the flat is many miles away.

The tax return is not too hard to do. Herhonesty is right, there are better investment vehicles, and it seems odd that you think you know where your children will want to live when they leave home I guess you just mean it will be an option for them. But you could invest the dosh and use some of the resultant income to co-fund rent for them on a place of their choosing? It would be a lot less hassle.

Yes, I know it will attract tax. Thank you.

I don't think I know where my children will want to live. However, the chances are they will be working in London and would like something hassle free to start out with, somewhere which isn't living with me.

This is an additional investment vehicle, not the only one.

What are these other attractivevinvestments? The only investment where I am getting a 5% cash return is property.

It is a hassle, not a huge one though.

Hi Dragon.

I bought a rental flat for investment purposes last year. I found this book enormously helpful - I have it on my Kindle and refer to it frequently:

www.amazon.co.uk/Successful-Property-Letting-David-Lawrenson/dp/0716030152

I have chosen to go with a lettings agent as I am a novice. If i feel confident in a couple of years will go it alone (I live about 3 mins drive from the flat) but am a single working mum with 2 kids aged 12 & 10 so not lots of time to manage a property too. If you have more time then I think managing it would be feasible but I am cautious and don't really want to learn on the job by making lots of mistakes!

I bought from and am letting through the same agent and they have been enormously helpful. Have also found a good accountant who sorted me out with an income/expenditure spreadsheet and who will do the tax returns.

Really good luck!