5 things to consider when becoming a landlord

Despite some tax and legislative knock-backs, the private rented sector is booming, and provides a potentially valuable source of income for new landlords.

But becoming a landlord for the first time can be daunting. There’s a lot to consider, and a lot to learn. In this guest post, Anna Delves from Simply Business has compiled a list of five of the top considerations for new landlords, from choosing a property to negotiating a tenancy.

1.  Choosing a property

 Your choice of property is one of the most important concerns facing any new landlord. If you’re an ‘accidental landlord’ this will be taken out of your hands, but if you have the choice, there’s a range of factors that you should consider.

First, look at average rental yields compared with property prices in your potential areas. You need to decide whether you’re investing with a view primarily to capital gains (that is, appreciation in the value of your property) or rental income.

You should also consider factors like proximity to transport links, amenities, schools, and demographics, such as a high number of students in the area.

2. Setting rent

You need to make sure that you set your rent competitively enough to secure tenants, but also high enough to make a reasonable income. Research is key here, so make sure that you look at average rents in comparable properties in your area.

Importantly, though, you also need to do some sound maths with regard to your mortgage repayments and the cost of maintenance, along with letting agent fees (if you’re using one.) Make sure that you have a full view of your outgoings, and that you are setting your rent with these in mind, adding on a reasonable margin.

3. Tax and legislation

The legislative landscape for buy-to-let landlords has changed dramatically in the last few months.

This year, the rules around mortgage interest changed, and now, landlords are no longer able to offset the full cost of their interest payments against rent. As a result, some landlords are choosing to operate their properties through limited companies.

You should make sure that you take professional advice to ensure that you’re both on the right side of the law and making the most of remaining tax breaks.

Whatever you decide, remember HMRC counts landlords as being self employed, so you’ll need to complete an annual self assessment tax return.

4. Tenancy agreements

The tenancy agreement is the most important document you’ll have as a landlord. It sets out the rights and responsibilities of both the landlord and the tenant.

In the UK, the most common type of tenancy agreement is an assured shorthold tenancy agreement – or short assured tenancy agreement in Scotland. Assured shorthold tenancy agreements can be complex, but luckily there are pro forma examples that you can use, and then customise to your needs.

You can download a customisable assured shorthold tenancy agreement here.

5. Insurance

Finally, it’s vital that you take out proper, tailored landlord insurance to help keep your investment safe.

A good landlord policy will protect not only the building itself, but also any of your own contents that remain in the property. Damage to buildings or contents is common in buy-to-let properties, so it’s crucial that your investments are properly protected.

Remember, though, that your landlord insurance policy won’t cover your tenants’ possessions, so you should make clear to them that they should take out their own insurance as well.

Simply Business is the UK’s favourite small business insurance provider. With over 1,000 trades covered, Simply Business offers tailored policies in minutes, from a range of insurers. They also publish daily articles to help you start, grow, and protect your business.

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