Landlords FAQs
There’s a lot of work involved in being a landlord, so we’ve compiled a list of some of the most frequently asked questions to help you understand what to expect when letting out your property.
Do I need to set up a Limited company if I want to be a landlord?
You do not have to set up a Limited company to become a landlord. However, there are some advantages to setting up a Limited company, such as not having to pay income tax on rental profits. Instead, you will have to pay corporation tax at a rate of 25%, which could save you a considerable amount of money if you are in the higher earning 40% bracket.
Does my mortgage broker need to know I’m letting out my property?
If you use a mortgage broker to help you find a mortgage deal on the property, they will need to know that you are letting it. This is because letting out a property may not automatically be allowed on the mortgage policy. In some instances, it could even lead to the recalling of the entire loan if you secure a mortgage and are caught letting the property. Talk to your broker about a buy-to-let mortgage.
How do I work out the correct rent for my property?
When working out the correct rent for your property, there is a simple formula you can use to calculate the yield. First, take the monthly rental income or the amount you expect to receive and multiply this figure by 12. Next, divide this larger amount by the property’s purchase price or current market value. Finally, multiply this figure by 100, which will give you a final percentage. In general terms, a good rental yield is considered to be at least 7%.
What costs are involved in renting out a property?
When you are renting out a property, you will need to account for costs like:
Professional fees
These cover letting agent fees, accountant fees, and legal fees.
Mortgage
The mortgage repayments will likely be your highest ongoing cost. The amount due will be agreed upon at the start, and there may also be associated charges, such as arrangement and valuation fees to pay.
Tax
You must pay tax on any surplus earnings made from your buy-to-let property. However, some allowances are deductible, such as repairs, maintenance, professional fees, and insurance premiums.
Landlord insurance
There is no legal requirement to take out building insurance, but a mortgage lender will likely request that you have some in place before authorising the loan.
Repairs and maintenance
Another significant expense as a landlord will be maintenance and repairs needed for the property. It can be anything from fixing windows and doors, to redecorating or installing a new boiler.
Mandatory costs
Some costs are unavoidable, such as paying for gas and electrical safety checks, Energy Performance Certificates, smoke, and carbon monoxide alarms and, in some instances, a landlord licence (this depends on your location in the UK).
What ongoing costs are paid by me, and what is paid by the tenant?
You can see the full list of landlord costs above, which will vary depending on the type of property, mortgage, and tenants you have in place. In most cases, tenants are responsible for paying for things like water, gas, and electricity, although some landlords do include this as part of the rent. The same is true of council tax charges, which are linked to the property value and typically paid by the tenant.
Why should I use a managing agent?
Being a landlord requires a lot of commitment in terms of time and money. You are fully responsible for the upkeep of the property. It must remain in a ‘liveable’ condition during a tenancy, which means keeping up with the introduction of new laws and regulations.
Using a reputable managing agent like us can make it much easier to take care of your rented property, as we step in and become the first point of contact for the tenant. We can also collect rent on your behalf, deal with any issues and queries, oversee required repairs and maintenance and ensure the property is legally compliant. At the same time, you are always in control and have the final say over any important decisions related to the property.
What happens to my tenant’s deposit?
If you are using an assured shorthold tenancy, the tenant’s deposit must be placed in one of three government-backed deposit schemes within 30 days of receipt. It must remain there untouched until the end of the tenancy and returned to the tenant within 10 days after you have reached an agreement on how much to return.
Why should I have an inventory?
Having an inventory for your property ensures both parties an accurate assessment of the property’s current condition. Once completed, both parties review and agree to the report, and it can be checked at the end of the tenancy for any discrepancies. This ensures that both the tenant’s deposit and your investment are protected.
What checks should be conducted on a tenant?
Before letting a property to a tenant, several checks should be carried out, such as:
Credit checks
This looks at the tenant’s economic stability and ability to afford the rent for the duration of the tenancy based on their financial history.
Bank statements
Request to look at bank statements to see how much they get paid and when and how much disposable income they have.
Employer reference
Ask for an employer reference to verify they are employed, how long they have been in their current role and the salary amount they receive.
ID check
By law, a ‘Right to Rent’ check must be carried out to ensure they have a legal right to live in the UK. They must provide photo ID such as a passport or driving licence.
Proof of address
To confirm the tenant’s current address, you can ask them to provide a recent utility bill, council tax bill, bank statement or current tenancy agreement.
Are you thinking of becoming a first-time landlord?
Whether you are a first-time landlord or have already let out your property in Islington, Stoke Newington or Clapton, our team is ready to help you get more from the experience. We can guide you through the entire process and ensure everything is handled along the way. To find out how Next Move can help, email n16@nextmove.com or call us on 020 7254 9709.
Get In Touch
Contact our letting experts team to start the process of becoming a Landlord and to discuss your options today.