Property Letting UK

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Setting The Rental Value - rent, by law, should be able of being calculated easily and is normally expressed in UK Sterling - it is a sum paid to the landlord in exchange for the tenant's right to possession during the term. Rent should always be paid up front (not in areas) and is usually paid monthly in line with people’s salary payments. In planning to advertise and set the rent at a certain value, investigate the going rate for similar properties in the area, to the one you have purchased. Track the rental values over a period of two months – so begin early. Make sure you are confident in the stability of the area. There is no real guarantee you are going to achieve the rent you hope unless you do your homework. Please note that under the Housing Act 1988 you will not be able to use an AST agreement if you are planning to charge more than £2,083 per month or less than £250 per annum.

Factors That Determine Rental Value - when comparing your property letting uk with similar ones in your local area, consider the following factors:-

• The Property - consider the number of rooms, the quality of the decoration, and quality of kitchen and bathroom features. Clearly a five-bedroom luxury family home will let more than a one bedroom flat. However, the quality of the general condition, interior decoration and furnishings can greatly vary the rent between similar properties.

• The Location - consider transport links – is the local train/ tube station or bus stop within walking distance? How close are motorway junctions in driving distance minutes for commuters? Are there local shops, supermarkets and service providers? What about leisure and social facilities - restaurants, sports centers, pubs etc? The closer your property letting uk to these amenities the more rent you can charge.

• Seasonal Factors – can the property be targeted to seasonal tenants and rent set accordingly? Over the same period Short Term lets, Corporate Lets and Holiday Lets will generally command higher rents than professional, DSS or HMO lets. However, HMO lets can achieve high rent/ high yields as discussed previously (albeit with a greater risks and higher wear and tear costs to incur).

Thorough Research - check local sources of information to find the average rent in your local area. These sources include:-

• Property Web Sites – these are a great way of finding information fast and comparing properties of similar nature to your own in your specific area.

• Local Papers – similar or same information as the Internet but may also include privately advertised properties for rent – typically rent a room, short term lets or sharers.

• Local Estate Agents - pretend you are a prospective tenant and ask the local estate agents about rental prices and what you could get for your money (agents are naturally optimistic). Ask about local trends, any major building works, (like motorway extensions, factories or new offices plans) – anything that may increase and decrease demand for rental property in the area.

• Planning To Avoid Rental Voids - don’t be a greedy landlord in setting your rent too high. It is tempting to set the rental at the highest you think you can get. However, it is usually better to have a lower rent (with no rental void periods) than to suffer voids periods. Plan.

• Obtain Relevant Letting Insurances & Income Protection – it is vital you obtain the appropriate level of insurances otherwise you risk losing all of your investment. In particular the following should be obtained:-

Building & Contents Insurance - your mortgage company will make it conditional that you insure your new property for potential complete rebuild (straight after exchange and before you to complete). You may be offered or required to use your Mortgage Companies insurance package or alternatively they may let you buy your own. In addition, a certain amount of Contents (limited by value) will be protected i.e. furnishings and fixtures. Ensure this is paid before tenants enter the property. Many insurers regard let property as representing a higher risk than owner occupied property; therefore insurers may decline to provide any cover for let property. Some insurers provide restricted cover and will require higher premiums for properties let to students or tenants in receipt of housing benefit. Policies should provide cover for loss or damage caused by:- fire, burst pipes or leakage of oil, lightning, storm or flood , aircraft, malicious damage, explosion, subsidence, smoke and theft. If you are planning to let to tenants that receive Housing Benefit, make sure you check and get written approval from your insurer who may have a policy not to insure properties with tenants receiving Housing Benefit.

Income Payment Protection - you may wisely adopt an optional landlord insurance known as “rent guarantee” insurance. This is an optional insurance that protects against loss of rental income. There are usually caveats and limiting conditions attached to these generic policies. This is for the conservative investor. Typically, if you are planning to use an Agent, part of their service package should ideally include a three-month guarantee of payment equivalent to rental income, in the event of the agent not finding tenants. In practice, a letting should be able to find new tenants very quickly (certainly within three months) anyway. Make sure this insurance is paid for and set up before the tenants enter property. It costs (roughly) around £300 a year to cover rental income of £10,000 or so – not a bad investment. As this is a letting expense you can offset it against taxable income as well (see section 9.0).

Legal Expenses Cover - this insurance expense pays for legal expenses in the event damage caused by the tenants (deliberate or accidental) that needs to be resolved through legal means. The use of legal process should be a last resort but if that worst case did arise, this insurance covers the potentially large cost of using a solicitor. This is an optional insurance but very worthwhile.

Public Liability Cover – it is prudent to obtain protection against liability from the risk of a member of the public suing as a result of your property causing them injury. For example, one of you loose slates on your roof falls off onto a passer byes head - they then sue you for damages. Or perhaps your tenant falls down the stairs and breaks their legs. These are minor risks in terms of them occurring, but ones, which you must protect yourself against because it could end up so costly if you don’t.

Sign Landlord Agreement with an Agent – if you plan to use a letting agent to manage your property, try to use an agent that is a member of the Association of Residential Letting Agents (ARLA). This is the UK’s professional self-regulating body concerned with lettings. It keeps members up-to-date with changes in legislation and the many other requirements for a successful lettings practice. A framework of professional and ethical conduct at a level governs members – a framework which is higher than the law states. Members are examined and audited to ensure their business process meets the ARLA code of conduct. Once you have made contact, make sure the agent knows his stuff ask some basic questions on the phone:-

What are your fees and are there any additional costs of ‘administration’? Does your agreement provide rent protection payment in event you cannot find me tenants quickly? How often will you visit the property and/ or contact my tenants? Where is the rent physically held – in your bank account or mine? How much notice must I give to terminate the landlord agreement?

Full Management Service - remember, deciding to use an agent obviously means budgeting, and paying for, agent commission which will represent a large expense item (typically 10%-15% of your gross rent plus VAT) within your Profit and Loss account. Some of this expense is usually payable in advance, negatively impacting your cashflow. If you do decide to use an agent, their typical ‘full management service’ package is likely to consist of: -

An initial visit to your property to discuss the type of tenant sought, terms of maintenance and agency contractual terms as well as reviews their tenancy agreement. Advertising for new tenants in local newspapers and on the Internet Arranging viewings / interviewing prospective tenants for your property Drafting a standard Short Term Tenancy Agreement Obtaining credit references of prospective tenants Arranging for an inventory check in and ensuring utility companies are notified and bills paid by tenants Facilitating the payment of the initial deposit, hand over of keys, check in and regularly collecting rent Making regular inspections to ensure tenants are meeting their obligations Sorting out problems like broken washing machines (maintenance type issues).

Self Managed Let - to save around 15% of your monthly rent (check the Buy to Let Calculator) you might want to just limit the use (and cost) of an agent to find prospective tenants and you do the on going management tasks. It’s a simple balance of hassle/ time versus money. One of letting agents biggest strengths is that they have a steady stream of prospective tenants at their window or in their office – they will have professional processes to vet and process these prospective tenants quickly. To advertise and vet prospective tenants yourself wastes time – which costs you money. In particular you will not be able to access a Corporate market unless you deal through an agent; corporate organisations want a reputable single point of contact. Use the Buy-to-Let Calculator to forecast profitability with, then without, the use of an agent. For the first six months of your buy-to-let mortgage, it is probable your lender will conditionally demand you use an agent anyway, and one, which is ARLA accredited.

If you plan that you don’t want to use an agent (i.e. you plan to advertise your property yourself and/ or just use an ‘introductory service’), from this point, this e-book includes activates you must do yourself to prepare and manage your investment property

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