What pitfalls should you avoid? Northfields, your multi-award winning agents share their top tips.
Due to the current state of the property market, many would-be home sellers are electing to rent their property rather than sell. These reluctant, or accidental landlords, will have to come to grips with the ins and outs of the lettings process. It may seem a daunting process, unless you are aware of the main issues. Take advantage of the expertise available from your local multi-award winning estate agent, Northfields Estates, and the process won’t be so intimidating. Northfields provides some help with how to let your property:
1. Be honest with your tenant
Many people are reluctantly renting out homes that they are having trouble selling. However, if you decide to rent out your home while you await that perfect buyer it is important that you are honest with your prospective tenant about your plans.
It is unfair to expect your tenant to go through the upheaval and expense of moving out of your house or flat simply to accommodate your plans.
And it could also cause you major problems if they refuse to move out when you need them to. Even if you don’t give them a tenancy agreement you will be bound by the terms of the Assured Shorthold Tenancy (AST).
And although it is now possible to give a tenant a contract of less than six months, you may not be able to evict them until the six months have passed.
However, if you are up front with your tenant from the outset you are less likely to encounter issues when the time comes.
2. Find out whether your property is right for the rentals market
This is where you need to make use of professionals with free valuation. You may find that a combine rental and sale valuation may give you a better idea of the best course of action. For example, if you’ve inherited a home, you may find that that you would be better off in the long term selling, even at a discounted price. Northfields, has over 20 years of experience in the West London property market and will be able to give you the advice you need.
3. Make sure you have the right tenant
Estate agents have distinct advantages over a private landlord; we have experience of the local market, and are experienced at filtering out unsuitable tenants.
Northfields also has contacts with corporate businesses who are looking to relocate their employees into the area.
A couple of months ago we had private landlord with a property to let in Cranmer Avenue, Ealing, W13 who was very reluctant to use an agent due to the costs of our fees. However, we were able to let the property at a higher rent than he was able to achieve, thereby covering the cost of our fees. He was also unaware of his legal responsibilities to register the tenants security deposit. By instructing Northfields as his letting agent, the landlord didn’t have to worry about it as Northfields registered the deposit on his behalf, free of charge.
Another element of worry for landlords that Northfields can handle is checking on ID and credit for prospective tenants.
ID and credit checks are essential, as well as written references from employers and previous landlords. Northfields uses a professional referencing agency to confirm all details provided are in fact true. Bad references for tenants are often hidden and the truth only found with extra probing.
4. Make sure the price is right
When you’re working out your finances make sure your calculations are based on a realistic rental return. Local up-to-date knowledge is vital as the property market is constantly changing. Again tap into your agent’s knowledge and experience of the area to ensure that your figures are on the mark. However, remember to factor in that having a property sit empty is when you really start to lose money.
Currently, the lettings market is very busy, rents in London, where supply has risen dramatically have suffered as potential tenants have more choice and buying power.
Research the rental market in your area or save yourself time and {cms_selflink page='47' text='ask Northfields '}to advise you on realistic rents in West London.
5. Understand your legal responsibilities
The list of rules and legal regulations with which landlords must comply is lengthy, and ever growing, and the risks you run by not complying are serious.
So, before you welcome your new tenant into their new home, make sure you have covered the following:
• Have you told your mortgage lender? If you don’t you could be in breach of contract and they could recall the loan.
• Have you told the freeholder? If you lease the property you will need the lessor's permission.
• Are you covered? Talk to your insurers, and consider changing to specialist landlord insurance that may cover loss of rent.
• Is their security deposit covered? As of last year, landlords now have to protect their tenants’ deposits in an official government-backed scheme. Northfields is registered as part of this scheme and can take care of this element for you, free of charge.
• How green are you? As of this year landlords have to provide energy performance certificates (EPCs) for most rental properties in England & Wales, and from January in Scotland. Again, Northfields can arrange for the EPC to be done for you at a competitive rate.
• Is the property safe? Fit smoke alarms and extractor fans, sweep chimneys, and have gas pipes & boilers inspected every year by a CORGI-registered engineer. Although it’s not compulsory, five-yearly wiring checks are advisable too. Remember any furniture given as part of the rental term, must comply with fire safety regulations. Northfields can arrange for all these concerns to be addressed as well.
6. Decide how your rental income will need to be spent
The amount of rental income you can achieve from your home may sound great, but before you decide how to spend it, make sure you have factored in all your expenses.
• Mortgage: As mentioned above, you will need to inform your mortgage company. While many lenders will allow you to stay on your residential mortgage deal, some may refuse the consent you need to let your home and you may have to remortgage to a more expensive buy-to-let deal. So be prepared for this possibility.
• Tax: Anything you earn from renting out your home is subject to income tax. However, there are many expenses you can deduct from letting income including interest on your mortgage, maintenance, letting agent’s fees and some legal fees. If you decide to sell your home, you may be liable to pay Capital Gains tax. However, you don't have to pay CGT on a property you have lived in, if you sell it within three years of moving out.
• Rainy days and voids: Expensive emergencies can crop up without warning. So make sure you can afford to put some money aside regularly to cover major expenses such as a new boiler or roof. Also, you may need to factor in a financial buffer to cover any voids when the property may be empty between tenants.
7. Get Advice
There’s no point struggling by yourself when there are experienced and knowledgeable people ready and willing to help..
If you decide to let your property through an agent, like Northfields, we will take over the marketing, tenant reference checks, legal implications, management, and even maintenance. It is important to choose an agent that is a member of a recognised professional body, such as the National Approved Lettings Scheme or the Ombudsman for Estate Agents. Northfields is a member of several professional bodies. Choosing an award winning estate agent also gives you some reassurance of the quality of the letting agent. Northfields has been recognized in the Estate Agency of the Year Awards as the Best Medium Agency for Lettings in 2008'.
8. Remember that letting your property is a business transaction
Renting out a home that you’ve lived in can cause attachments that are hard to get over.
And, just like when you’re selling, you can’t afford to be upset if someone doesn’t share your taste. Neutral décor is usually preferred by renters, and, in fact, once you’ve moved your furniture out you may find that you need to redecorate anyway. You can increase the rentability if the property ‘looks’ better. Northfields can arrange redecoration for clients if their property is looking tired or out of date and advise you on where to spend your money to give you the maximum return.
Need help renting out your property in West London? We’re happy to help, contact our Lettings Director, Silvia Eldawi on 0208 998 3111 or register for a free valuation.
