Accidental Landlord - Advice & Tips for starting out

[incognitodorrito]

I purchased a very run down property in 2020 and over developed it slightly as was planning to stay here for 20+ years. It’s round the corner from both an outstanding primary & very well regarded secondary. House is also within walking distance to the town centre but on a quiet (yet run down) road. Happily, the husband I was divorcing at the time and I have decided to get reunite and have had an offer accepted on our „dream home“. We do not need to sell my property but I never intended to become a landlord. However we will most definitely make a large financial loss if we sold this house, so have decided to rent it out. House is owned outright. Due to location and size, 3 bed semi with huge garden. Can anyone advise on the best insurance policy to take out, is it better to go via a lettings agency ? Do you put a percentage aside each month as saving for repairs etc ? I have had the property valued as a monthly rental and an agency that can place it on the market and vet potential renters. Landlords & ladies please advise !

Get your hard hat on. Calling yourself an accidental landlord on MN is akin to throwing a brick at a tiger.

That’s because @incognitodorrito isn't an accidental landlord but is making a choice!

@incognitodorrito are you aware of all of the tax and other implications? If you haven’t I’d recommend taking independent financial advice. I’d also recommend thoroughly looking into your responsibilities if you become a landlord and given how onerous these are (gas, electric checks, energy certificate, need to ensure timely repairs, deposit protection, full inventory on move in and out etc etc) looking at a full management arrangement with a reputable letting agency - you’ll need to manage them as ultimately it is you bit them who are liable but it would be less work. If you rent this house put it will become someone else’s home.

Just sell it and save yourself a lot of tears

Whether you go through a lettings agency depends on how much work you want to do personally. Are you prepared and have the time to do all of the legal side of renting? Legal checks, protecting their deposit etc? Will you want to manage any maintenance issues that come up, so do you have good contacts or are able to do most things yourself if there's a leaking pipe or an electrical fault or the kitchen cupboard door falls off? Have you read as much as you can about your responsibilities? Have you had got a gas safety certificate, an electrical check and an EPC rating of E or preferably C or above? Have you installed smoke detectors and a carbon monoxide detector?

I use a broker (Protect my Let) to get house insurance, but you may be able to get cheaper if you're prepared to spend several hours filling in endless questions online. I would recommend keeping at least 10% of the rental income aside for repairs, and not starting off until you've got at least a couple of months rent in savings to pay for any urgent things that come up straight away. Are you renting furnished or unfurnished? Be prepared that (most) renters will not look after your property as well as you, and you have to mentally remove your emotions from the house and accept that the house is no longer "your home", but just a business.

Being a landlord is a job. Only part time, but still something that you need to approach with a professional mindset.

First you need to understand your obligations and what being a LL actually involves. The government's How to Let and How to Rent Guides are useful starting points. Also check out the Shelter and DPS websites and read some of the Residential Lettings posts at LANDLORDZONE - a very useful forum.

As a new LL you'll probably want to find your tenants via a reputable letting agent. However, I have found their management services to be less than stellar and therefore prefer to manage my properties myself. To be able to do this, you need to be responsive when tenants report an issue, and have ready access to tradespeople who can do the work: plumber, CH engineer, electrician, handyman , etc.

You also need to keep accurate records for doing your taxes, though this is actually quite straightforward.

I used „accidental“ as didn’t purchase the house to rent it out. However, now I’ve invested ££££ and made it beautiful, I don’t need to live in it anymore. The house was stripped back to brick during renovations so everything (boiler, rads, plasterwork, windows, fire doors) etc etc is upto standard. I also have smoke alarms wired in. Good shout re financial advisor and thanks for all other tips so far.

If you have child/ren OP, I'd rent it out until they are of age to have the house. But that's me being a softy.

Don't you just hate it when you stumble upon owning a house and have to Charge people to live there!

Bear in mind, that if you become a LL, in order to market effectively to sell and to exchange, you need vacant possession.

Getting vacant possession can take over a year. Firstly, you cannot give notice until certain points in the contract. Then you need to give at least 2 full rental months if notice, even if tenants are beyond he fixed term, and if on a fixed term, won’t be able to give notice for before the end of that. Tenants do not have to move out at that point and are entitled to a legal eviction process which can take months. Your property becomes their home and legally they have lots of rights. People often think letting is a quick buck and don’t realise the implications, rights of tenants and responsibilities of LLs in rerun for rent.

So, if you’re wanting to sell relatively quickly bear this in mind. There’s no quick sale with tenants in situ. Therefore letting a property needs to be at least a medium term thing.

Don’t think of selling as something you can’t afford to do and think the default is letting it out. Know that letting it out could involve significant costs to you - you cannot delay any maintenance that needs doing when you have a paying tenant, plus if you have a void or a tenant who doesn’t pay, you’ll still have to pay your mortgage. With the latter you won’t be in a position to sell and there can be damage.

I’d only advise doing it if you will do it for several years and after joining the NRLA and going in a course about LLing so you can make an informed decision. Lots of LLs get burned through starting to let without enough knowledge and of course, their ineptitude has serious consequences for their tenants too.

But you've said it now and the "Accidental Landlord" police are onto you. You've made a series of adult, presumably well thought out decisions, on purpose, which have led to you becoming simply... a landlord. Not an accidental one.

What makes you think you aren't going to make a large financial loss if you rent it out ?

Join a landlord forum, and don’t rush into it.

Sell it. Despite your best efforts it will never look as good again and tenants can make it very difficult to sell in future. The money may well be better in the bank or used towards your new home

@WombatChocolate is right @incognitodorrito . There are legal requirements when you are a landlord.

The government had considered making no fault evictions illegal. In other words you wouldn’t be able to get a tenant out because you went to sell and need the money. Loads of small time landlords are selling up due to this worry. Just recently Gove has seen some sense and it might not be included in future legislation. The bigger issue might be that Labour might if they get in. Rental housing is a political bun fight. It’s difficult to know if keeping a property is the right thing to do if you might want the money in the future.

Also you cannot rely on a tenant looking after it. Some will, some won’t. You must not be attached to it. It’s going to be a business, not your home.

Lastly: get an agent to do everything!!! All marketing, financial checks, selection of tenant, checking of condition, dealing with maintenance issues, gas and electricity checks etc. You will pay more but it’s easier to do this as a non expert! Believe me!

An adequate insurance policy to cover damage and loss of rent ? I own outright so don’t have a mortgage on the property and as everything is new (plumbing, electrics, etc etc) in the house, it won’t need replacing / repairing too quickly.

@TizerorFizz thank you for this. This is a concern as it’s been completely renovated to suit me & Kids. If I’m being honest, I love what I’ve done to the house and it’s ideal for a single parent + 2 kids ! I need to fall out of love with it if I want to rent !

You can use comparison sites to compare different insurance companies.
You will get less income with fully managed - but they provide support ( in theory) that you wont get if you manage it yourself.
As a minimum i would use an agent to do credit checks, check in, inventory.
So it really depends how much you want to do.
You need to see it as a revenue stream. Not as a beautiful possession. Otherwise it becomes much more emotionally difficult.

@WombatChocolate excellent advice - I’ve just signed upto the LL for beginners e-learning course.

@Springisclose & @TizerorFizz I had a rental agency round. They would market property & vet potential renters for me. I was thinking I’d get a premium LL insurance & tradespeople round when needed (everything has recently been renovated so hoping nothing will pack in too quickly).

As soon as you rent it out, it will become liable for Capital Gains Tax as it is not your primary residence.

I would sell.

Don’t forget to declare the income to HMRC on a self assessment tax return
They will catch up with you and the penalties can be up to 100%

Given she’d make a loss if she sells now doesn’t sound like CGT will be a worry for a while

If you’re determined to keep it, I’d let it as a holiday home if it were possible. Less of the landlord grief, have it fully managed by an appropriate agent and no chance of getting some tenant who trashes the place for fun and doesn’t believe in paying rent. I understand you’ve said about using an agent, but there’s no guarantee that you’ll end up with a good one. With all the changes being floated around regarding being a landlord, I wouldn’t bother currently, and I’m not, I’m getting out of it.

Join the landlord association. The law & legislation changes constantly and it’s your responsibility as a LL to adhere to the rules & regulations.