Arla’s ten top tips for first time landlords
Increasing demand for rental properties is creating a new investment opportunity for first time landlords, as figures from the Association of Residential Letting Agents (ARLA) show 55 percent of lettings agents believe demand for rental property is now outstripping supply.
Ian Potter, operations manager at ARLA, said: “Investing in a buy-to-let property has always been an attractive opportunity, and the high demand for rented property means there are a growing number of first time landlords in the market.”
However, letting out a property can be a complicated and daunting process. So today ARLA has set out the essentials for all first time landlords on what they should consider before investing in a buy to let property.
Mr Potter said: “Making sure that your investment pays off takes hard work and commitment, but can be rewarding in the long term. If you’re a first time landlord, it’s crucial that you look for a licensed local agent to promote your property, and potentially also manage it.”
For anyone considering renting out their property, ARLA has the following top tips to help make the process as smooth and trouble-free as possible:
n Invest wisely: Do your research and make sure you find properties that are in demand in the local market. You’ll also need to compare rents with similar properties in the area, taking into account any points of difference or factors that may have an impact on the likelihood of you receiving that monthly return, such as proposals for new roads or housing in the area.
n Find a licensed agent: Particularly if you’re new to renting, but even if you’re not, it’s crucial that you look for a local agent who abides by a code of practice and importantly, is subject to a redress scheme, and offer client money protection like all licensed ARLA members. This will ensure you receive strong and independent advice and, equally importantly, that your money is protected.
n Be realistic about void periods: ARLA data shows that rental properties are untenanted for an average of 3 weeks. But, it is advisable for first time landlords to budget for 8 weeks per year to cover times between rental agreements. If your void periods are less, the extra return is a bonus.
n Be competitive: Make sure the property presents itself well to the market in terms of the décor, the condition of the furnishings and also the mechanics of the house – such as the heating. You’ll be amazed at how many properties fall down on simple things like this so it is wise to make the most of the opportunity and get the property to the best standard. You’ll also need to ensure you comply with all health and safety requirements for gas, electricity and furniture and furnishings
n Check up on tenants: Make sure you have sufficient information about your prospective tenant to ensure you can assess the risk in accepting the tenancy. You should also check the current and previous employment status of the individual(s), as well as their renting history and any references provided
n Insure yourself against risk: Ensure you have specialist buildings and contents insurance covering the items you own in the property - without a specific reference to letting you may be uninsured. Also, consider insuring against the tenant defaulting. This normally covers both rent and legal expenses.
n Compile an inventory for the property: Prepare a full, detailed inventory of the property to include a schedule of condition of all the contents as well as walls ceilings doors and other fixtures and fittings - just to make sure there are no surprise claims, or better still get a professionally prepared independent inventory from a member of the Association of Professional Inventory Providers.
n Don’t be lazy: It’s important to hold onto tenants for as long as possible - but that won’t happen if they receive bad service. As a landlord, you are essentially a caretaker for the property, and need to service it when required accordingly
n Do you need a licence?:If the property is to be used for sharers, check whether you require a licence from the local authority. If the property is in Scotland you must register as a landlord for any property with the local authority
n Deposit protection: Since April 2007 it has been mandatory for landlords to comply with Tenancy Deposit Protection legislation, which requires all deposits to be held by a third party and not by the landlord. For more information, visit the DirectGov website www.directgov.uk. This requirement is likely to be introduced in Scotland very shortly.
Says Leaders’ Mid Sussex senior branch manager, Gail Scannell: “With the exceptionally strong demand for rented accommodation, we are certainly seeing more interest from people considering investing in a property to rent out. Buy-to-let is an appealing option - the stock market is alarmingly volatile and interest rates are very low, giving poor returns on savings. In contrast, rents are strong, yields are good and there are many opportunities for making a good, solid investment in the current slow sales market. Landlords are seeing good rental yields and many tenants are choosing to rent for longer now, giving landlords greater security.
“However, we would stress that new landlords need to consider buy-to-let as a medium to long-term investment and certainly not a way to ‘make a quick buck’. They also need to be aware that there are many laws and regulations governing residential lettings that will need to be complied with. This relates to things like gas, fire and electrical safety, holding tenants’ deposits, serving the correct legal notices to your tenant at the correct time to obtain possession of your property at the end of the tenancy, and much, much more. There are serious penalties for landlords who do not comply with legislation, particularly with regards to tenant safety. For new and experienced landlords, this is a key area in which a knowledgeable ARLA letting agent can help: by ensuring that you stay on the right side of the law in every aspect of letting your property.
“Finally, it is important to be aware that letting agents are not regulated, so if you are relying on one for advice and to look after your tenancy, protect yourself by making sure they are experienced, reputable and a member of a self-regulating body such as ARLA. Anyone can set up as a letting agent, with no qualifications, and we are seeing many new and inexperienced letting agents continually entering the market, with little, or worse, no experience or knowledge of lettings! Never be tempted to choose an agent based on cheap fees alone as this can lead to you receiving a poor service, bad advice and ultimately the risk of losing money or breaking the law.”