Essential Guide: What 1st Time Landlords Must Know For Success


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Embarking on the journey of becoming a first-time landlord is both thrilling and daunting. As you step into the world of property management, a myriad of questions and considerations flood your mind. From navigating legal obligations to maximizing rental potential, the path ahead may seem overwhelming. But fear not! In this blog post, we’ll guide you through the essential steps and offer invaluable insights to help you embark on this exciting new chapter with confidence.


Buy to Let Mortgage

When considering a buy-to-let mortgage, your monthly repayments will likely stand out as your primary recurring expense. The size of your deposit significantly influences the quality of the mortgage deal you can secure, with a minimum deposit requirement typically set at 25%. Opting for a variable-rate mortgage, such as a tracker, subjects you to fluctuations in the Bank of England base rate; any increase in this rate will consequently raise your mortgage payments

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Landlord Costs

Entering the realm of landlordship requires a comprehensive understanding of the financial commitments and pivotal responsibilities tied to owning a buy-to-let property. From initial acquisition to ongoing maintenance and potential sale, the expenses associated can be significant. It’s crucial to grasp the full scope of these costs before embarking on your journey as a landlord. Below, we outline the primary expenditures involved, while also recommending the importance of maintaining a contingency fund to address any unforeseen or heightened expenses.

Property Maintenance Costs

Determining maintenance costs isn’t an exact science, but if you’re a homeowner, you likely have a grasp of the typical maintenance needs. Seasoned landlords advocate for a ‘little and often’ strategy, which can help mitigate long-term expenses. As a baseline, budgeting around £250 per year per property is advisable.


Refurbishment Costs

You’ll likely find yourself redecorating or refurbishing parts of the property every few years. A helpful approach to estimating costs is to recall similar projects you’ve undertaken in your own home. As a general rule, budgeting around £2,000 over a five-year period can serve as a rough guideline.

Letting Agent Fees

If you opt to enlist the services of a letting agent to secure tenants and manage rent collection, anticipate a fee of no less than 10% of the monthly rent. Should you prefer comprehensive property management, encompassing rent collection and tenant inquiries, expect this percentage to increase to approximately 15-20%.

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Landlord Insurance

Securing landlord insurance is a prudent step, often required by lenders if you have a mortgage. Insurance plans come in various tiers, offering coverage for the building and its contents if furnished. Costs for these plans can fluctuate.

Void Periods

Void periods occur when your property is unoccupied, such as during transitions between tenants or while undergoing refurbishments. These intervals can incur significant costs for landlords. Maintaining a contingency fund can be invaluable in mitigating any unforeseen loss of rental income.

Tax on Buy to Let Properties

Income tax may be applicable on the profit generated from letting out your property. Your profit is calculated based on your rental income after deducting allowable expenses. These expenses typically include letting agent fees, landlord insurance, maintenance and repair costs, legal fees, and interest on buy-to-let mortgages.

Mortgage Interest Tax Relief 

Numerous landlords have experienced an uptick in their tax liabilities owing to alterations in mortgage interest tax relief. Since April 2020, the deduction of mortgage expenses from rental income to lower tax bills has been discontinued. Instead, landlords now receive a tax credit equivalent to 20% of their mortgage interest payments. This new system is less advantageous, particularly for higher-rate taxpayers, who previously enjoyed a 40% tax relief on mortgage payments.

Wear and Tear allowance

The wear and tear allowance ceased in 2016, meaning landlords can only claim the actual cost of replacing furnishings when filing their tax returns. Property tax regulations can be intricate. What may seem like a repair or furniture replacement could potentially be classified as a capital ‘improvement’ by HMRC. In such cases, landlords may not be eligible for tax relief.

Buy-to-let Stamp Duty

The buy-to-let stamp duty surcharge is a crucial aspect to weigh when investing in property. Introduced in April 2016, this surcharge imposes an additional 3% levy on top of the standard stamp duty rates for buy-to-let properties and second homes. For instance, if the standard stamp duty rate is 2%, landlords would pay 5% in total. This surcharge can substantially inflate the overall cost of acquiring a buy-to-let property, necessitating careful financial planning and consideration.

Landlord Licensing Responsibilities

There are a number of rules and regulations which come alongside letting out your property.

Gas Safety

Landlords are obligated to guarantee that all gas equipment is installed and serviced by a certified Gas Safe engineer, who should conduct an annual gas safety check on appliances. Prior to occupancy, or within 28 days following an inspection, tenants must be furnished with a gas safety check record.

Electrical Safety

Ensuring the safety of the property’s electrical system, including wiring, fittings, and appliances, falls under the landlord’s jurisdiction. Additionally, obtaining an Electrical Installation Condition Report (EICR) certificate is mandatory and will need to be sent to tenants prior to occupancy.

Energy Efficiency

When letting a property to new tenants, obtaining an Energy Performance Certificate (EPC) is essential. This document outlines the property’s energy efficiency and provides recommendations for enhancing it. Failure to provide an EPC to prospective tenants may result in fines, except for Houses in Multiple Occupation (HMOs), which are exempt due to stricter regulations. Rental properties must achieve a minimum EPC rating of E. Non-compliance, providing false information, or letting properties that don’t meet regulations can lead to fines of up to £5,000.

Right to Rent

Landlords must conduct ‘Right to Rent’ checks when initiating a new tenancy agreement. This involves verifying that tenants possess the legal right to reside in the UK by examining and retaining copies of immigration documents like their passport. If you engage a letting agent, they can undertake these checks on your behalf. 

As of this year, fines for breaches of ‘Right to Rent’ regulations have escalated significantly. Initial breaches now incur fines of £5,000 per lodger and £10,000 per occupier, compared to previous penalties of £80 per lodger and £1,000 per occupier. Repeat breaches carry even heftier fines, soaring from £500 per lodger and £3,000 per occupier to £10,000 per lodger and £20,000 per occupier. For more details about conducting right to rent, click here 

House in Multiple Occupation (HMO) Licensing

A House in Multiple Occupation (HMO) is a property rented by at least three individuals from different households, who share facilities like bathrooms and kitchens. If you’re considering letting out an HMO, it’s advisable to consult your local council regarding the necessity of obtaining a licence.

Licences are obligatory for ‘large HMOs’—properties occupied by five or more individuals from multiple households. Each HMO you let must have its own licence, valid for five years. Further information and application procedures can be found on the government’s website.

Selective Licensing

The discourse surrounding the implementation of a nationwide landlord licensing framework in the UK has sparked debate. However, the current landscape leaves it to the discretion of individual councils to determine whether landlords must secure a licence or comply with a prescribed code of conduct.

Certain licences exclusively pertain to landlords letting out Houses in Multiple Occupation (HMOs), while others are mandatory for all landlords within a specific locale. To ascertain whether you require a licence, it’s recommended to consult your local council’s website for relevant information and guidelines.

We understand that navigating through rules and regulations can be overwhelming, but fear not – we’re here to assist you every step of the way. Our team of experts stays vigilant, keeping abreast of the latest regulations, and is committed to providing unwavering support and advice throughout your journey with My House. Your peace of mind and success as a landlord are our top priorities.

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