How to become a landlord
Whether you’re looking to rent out one property or many, there are several points to consider when becoming a landlord. Learn how with our guide here
If the idea of renting out property sounds appealing to you, then you’ll need to learn how to be a landlord. But what exactly is a landlord and how do you go about becoming one?
In this guide, we’ll provide landlord advice concerning these key questions, as well as the practical steps you should take to create a property portfolio and start renting.
A landlord is a person or business who provides accommodation to another person or group of people for money on a contractual basis.
Rental properties are in demand in many areas of the UK. So whether you intend to get a buy-to-let mortgage or you’re what is known as an ‘accidental landlord’ (through, for example, inheriting a property or renting out your home while waiting for a buyer), being a landlord could be ideal for you.
Note that this guide will focus on renting out a property that is ready for tenants to live in. If you’re interested in acquiring and renovating properties, check out our guide on how to become a property developer first.
In this article, we’ll cover:
It may be worth considering seeing if you can get a Start Up Loan (external partner site, link opens in a new tab) to help you with financing, and mentoring to start this business idea. You'll also need to think about registering your business, either as a sole trader or as a company - if a company, then Smarta Formations (external partner site, link opens in a new tab) are an organisation that can help you set up.
1. Landlord responsibilities in the UK
As a landlord, your responsibilities are likely to fall into the following themes: deposits, finances, property, safety and tenants.
Within each of these categories, the landlord responsibilities you’ll need to adhere to in the UK are as follows:
- You’re required to hold tenants’ deposits in one of three government-approved schemes: MyDeposits, Deposit Protection Service or the Tenancy Deposit Scheme.
- You have to let your tenants know which scheme their deposits will be held in at the time of signing or up to 30 days after.
- There may be fees for putting the deposit into the scheme. If you’re using a letting agent, check if they will do this for you.
- Note that if the deposit isn’t put into a scheme, you may face penalties and may not be able to evict your tenants.
- It’s useful to know that the deposit protection schemes are for the repairs and maintenance deposit, not for holding deposits to secure a property.
- You should keep financial records – you can do this yourself or use an accountant. These will also be necessary when completing self-assessment tax returns.
- If you didn’t purchase your property with a buy-to-let mortgage, then you’ll need to inform your mortgage lender and ensure they agree to this. Agreement is usually given for a few years at a time, for a fee.
- You should also keep inventories of what’s in your property, particularly for furnished rentals.
- You may be required to pay income tax and Class 2 NI contributions (this depends on whether your rental property is counted as running as business).
- You’re responsible for any repairs that are required, both to the structure and the exterior. Similarly, maintenance of the property, including heating and hot water systems, as well as bathroom installations, fall within your remit. Overall, you’re responsible for ensuring the property is safe and fit to live in.
- Repairs must be completed in a reasonable amount of time, depending on the severity of the problem. You have to give tenants notice (usually at least 24 hours’) and gain their permission before entering the property.
- Note that as a landlord you’re responsible for the actions of letting agents if they’re acting on your behalf.
- If your property will be empty for more than 45 days, unoccupied property insurance is required.
- If renting to a person with a disability, you may be required to make reasonable adjustments, such as providing hand rails, a walk-in shower or a temporary ramp. This doesn’t include making structural changes, such as to the layout.
- If your property has gas appliances, you’re required to provide an annual gas safety check by a registered Gas-Safe engineer.
- You’re responsible for fire safety, including ensuring that there are fire escape routes, making sure you comply with fire safety regulations for furniture, and ensuring that the property has fitted, working smoke alarms.
- It’s also your responsibility to ensure electrical safety by making sure electrical equipment and appliances are safe and meet standards, for example, by only using appliances that have the European CE electrical mark.
- You’ll need to make sure your property has a working, fitted carbon monoxide alarm.
- You should provide operating manuals and guides for appliances.
- If your tenants are experiencing health and safety problems (such as a gas leak, mould or vermin) they can report you to the local environmental health department.
- You’re responsible for enabling health and safety inspections. These can be issued by the local council if asked for by tenants or if the council think it’s necessary.
- In England, you must ensure each tenant has the right to rent. This involves checking original passport and identity documents, as well as making copies and notes of when the checks took place.
- All tenants aged 18 and older that will be living in the property have to undergo the right to rent checks, including those not named on the tenancy agreement.
- Renting to those without the required rights is a criminal offence and can incur a fine of up to £3,000.
- The most common type of tenancy is an assured shorthold tenancy (AST). Usually, it last for six-12 months and requires the tenant to pay a damage deposit. Other options include an assured tenancy, which offer tenants long-term rights. These agreements were created between 15 January 1989 and 27 February 1997. They can exist after this date if notice was provided in writing by the landlord or an assured tenancy was already in place with the same accommodation and landlord. A regulated tenancy is another long term tenancy agreement – these would have been arranged prior to 15 January 1989.
- When each tenancy begins you must provide: the EPC, the gas safety certificate (if there are gas appliances in the property). Also, you should provide a copy of the most recent How to rent government guide (for ASTs that started on or were renewed after 1 October 2015).
- There are different processes for evicting tenants in England and Wales, Scotland and Northern Ireland. Generally, you’ll need to provide written notice and have a court order to evict tenants.
- AST tenants must have deposits protected by one of the three government-approved schemes we mentioned earlier. If this isn’t done it can be more difficult to evict tenants or end the lease, if need be.
- Tenants’ responsibilities include keeping the property clean and liveable on a day-to-day basis. For example, changing light bulbs and being responsible for any damage they cause.
You can find further information on landlord responsibilities in England and Wales in the government’s guide to renting out a property.
2. Landlord registration and regulation
The registration and regulation processes you’ll need to comply with will depend on where the property you rent out is located. There are different processes for England, Wales, Scotland and Northern Ireland.
In England,your regulations will be determined by your local council, whereas in Wales, Scotland and Northern Ireland it’s the local parliament or assembly that governs this.
Take a look at the below table to find out how you’ll need to get set up as a landlord based on where your property is:
|England||Check with local council||Follow process as instructed by local council, if required|
|Wales||Yes||Register with RentSmart Wales
A licence is also required if you’ll be involved in managing the property; if not, you must use a licenced letting agency
|Scotland||Yes||All private landlords are required to register
Letting agencies aren’t legally required to do so but are encouraged
Landlord registration is in addition to a licence for a house of multiple occupation (HMO), if applicable
|Northern Ireland||Yes||All private landlords must register
The exception is if you’re renting to someone who isn’t classified as a tenant, for example renting out a room in your house to a lodger
While landlord registration in England isn’t compulsory in all areas, you may consider voluntarily joining an organisation such as the National Landlords Association (NLA) or Residential Landlords Association (RLA).
They can provide advice and assistance, usually for an annual fee. Plus, being an NLA accredited landlord suggests professionalism, and tenants can search for you on the NLA website. This could be particularly useful is you’re going to self-manage your property and want to show prospective tenants that you’re credible.
Note that your landlord registration will need to be renewed. The length of time varies depending on where you’re situated, however it’s generally between three and five years.
Also, if your property is in an area that requires landlords to register and you haven’t, you won’t be able to rent out the property. If you do so while unregistered, you can face fines and bans from renting.
HMRC – this stands for Her Majesty’s Revenue and Customs; the tax department for the UK. You’ll need to contact them to find out more about completing tax returns and paying National Insurance contributions as a landlord.
Insurance providers – when you rent a property out, you’re required to have specialist landlord insurance so that the property, as well as your income and investment, are protected. Providers can offer cover for buildings, contents (for furnished rental properties) and loss of rent as well as legal protection.
Your local authority – your local authority is responsible for key services such as council tax and rubbish collection, so you should inform them that your property will be rented out.
3. Costs and making money
How much to charge for rent and the amount of potential income you can make are two key considerations for every landlord. Here, we offer a guide to some of the most common financial concerns you’re likely to face.
Some of your main expenses are going to be mortgage repayments, insurance premiums and letting agency fees (if you choose to use one). Occasional repairs and a more extensive refurbishment of your property every few years should be factored into your budget as well.
In addition, it’s wise to plan for periods of time when the property may be empty, such as in between tenancies or while undergoing repairs.
Once you have an idea of what your expenses are going to look like, you can factor this into the rent price. You’ll also need to compare your properties to other similar ones in your area.
Plus, be sure to factor in any additional features that make your property stand out, such as being recently renovated, or having a balcony or garden, to help ensure you’re charging competitively.
Additionally, whether your property is offered on a furnished or unfurnished basis will also affect the price.
In time, you may consider increasing the rent as and when your expenses go up. You should balance the need for making a profit with retaining reliable tenants and the process of finding new tenants.
If you’re renovating, choose plain, neutral colours for decoration, as well as fittings and furnishings (if applicable). These tend to work best as they’re likely to appeal to the most amount of people.
You may be required to pay tax on the profit you make from your property. This is what’s left from the rent after your allowable expenses (such as letting agency fees as well as insurance and repairs) have been deducted.
Property law and tax can be complicated, so it’s wise to seek advice from a specialist legal professional.
You should consider how much profit you’re left with and assess how you plan to manage it.
For example, if you’re looking to build your property portfolio, you may want to reinvest this into other properties. Alternatively, you may plan to put it into a savings or pensions account.
It’s always wise to have a plan for worst case scenarios, such as tenants leaving or your property being damaged. Assess how you would deal with these situations and what their financial impact may be.
One of the key decisions you’ll need to make is whether you’ll manage the property yourself or use a letting agency to do it on your behalf. Generally, agents’ fees are around 10% of the rent. Usually, they offer three types of services:
|What’s the type of service?||What does it include?||How much does it cost?|
|Letting only||The process of finding a tenant only. The rest of the process is managed by the landlord after this.||A one-time fee.|
|Letting and rent||The above, plus collecting the rent on your behalf. Repairs and maintenance are still the responsibility of the landlord.||A singular fee and a percentage of the monthly rent.||Full management||Finding a tenant, collecting rent and property maintenance.||A percentage of the rent on an ongoing basis.|
How you decide to manage your property will depend on what you value more – your time or your money. Also, it’ll depend on your circumstances – will this be your main work activity or is becoming a landlord a side hustle?
Similarly, self-management may be possible with one property, however if you intend to have multiple properties then using a letting agency may be more viable.
4. Finding tenants
Now that you’ve learned more about the regulations you may need to comply with as a landlord, as well as how to budget and market your property accordingly, you now need to focus on finding people to live in it.
The first step is to ensure that your property is suitable for renting. You might opt for a buy-to-let mortgage specifically in an area where rental properties are in high demand.
Or, if you’ve inherited a property or it’s your own home, this means ensuring it meets health and safety requirements, as well as looking like a nice place to live in.
Next, you should focus on the local area – what facilities and amenities does it have? If the property is situated in the city centre, you’re likely to have public transport connections and shopping centres, whereas a suburban property may benefit from motorway links and green spaces.
After this, you need to consider who your target audience is – different types of renters will require different elements from a property. Your property will often dictate which type of tenants you’re likely to rent to.
For example, a house with a garden is likely to attract families. Other types of tenants include local housing authorities, professionals, students and workers.
If you rent your property to students or as a HMO, be sure to check which specific rules and regulations apply to these types of tenants.
Research your target audience to get to know them better. For example, websites such as RightMove and Zoopla can show you what other properties in your area and price bracket are like.
Similarly, speaking with letting agents and other landlords can offer insight into how to find the right tenants for the type of property you have.
Of the several types of tenancy, an assured shorthold tenancy (AST) is the most common. Whichever type of tenancy agreement you go for, you should also be aware of letting agency management contracts too.
Be sure to check exactly what you have to pay for and do, both in terms of finding tenants and managing the property more generally.
Where your property is located will also be crucial to finding tenants, both in terms of the type of tenant and what the supply will be like.
While major cities may have a higher number of prospective renters, tenants have more properties to choose from too. Alternatively, smaller towns and rural locations may have fewer potential tenants but a limited number of properties.
What are the next steps?
From reading this article, you’ve learned more about what a landlord is and what landlord obligations in the UK are. Plus, we’ve offered tips on making money and finding tenants.
So where do you go from here? The next step is to actually get going and market your property – good luck!