How to Become a Landlord

Becoming a landlord isn’t as simple as buying a property, finding a tenant, and effortlessly making a fortune through rent payments. It’s a role full of responsibilities and can be much more time-consuming than people realise.  In this guide, we’ll cover everything you need to know about becoming a landlord. From the complexities of finding tenants to understanding tax, rent, and more. If you’ve found yourself wondering how to become a landlord, you’ve come to the right place. 

Is it Worth Becoming a Landlord? 

Let’s start with a very important question: Is it worth becoming a landlord?  If you have the money to buy and rent out a property, you can create a new stream of income for yourself and provide housing for somebody who needs it. However, instead of a passive way to make money, you should think of becoming a landlord as starting your own business. Why? Because it requires dedication, time, and money.  However, while there are lots of administrative hoops to jump through and surprises along the way, if you play your cards right, you can become a good landlord who finds great tenants, sees a positive return on their investment, and has minimal issues. 

The Steps to Becoming a Landlord 

Here is the typical process to become a landlord in the UK.

1. Ensure You Have the Right to Become a Landlord

If you own a home, you might think you’re automatically within your right to rent it out. However, this isn’t always the case, and you need to make sure your mortgage provider allows it.  Not only might you need to switch your product to a buy-to-let mortgage, but there can be other restrictions in place for leasehold agreements. These will be listed in your mortgage agreement, but to get the best picture, it’s probably wise to get in touch with your lender. 

2. Understand Your Responsibilities as a Landlord

Becoming a landlord can be a minefield of legal obligations, but here are the key responsibilities you need to account for. 

• Make sure your property is in a liveable condition. This means that all safety requirements are met regarding electric equipment, heating appliances, and furniture.  
• You’ll need to take a deposit from your tenants and keep it in a government-protected scheme. 
• An annual gas safety check should be carried out by a qualified gas engineer. Failing to do this can land you with up to a £6,000 fine and prison time. 
• Smoke alarms are mandatory on every floor of your rented property, and you’ll need a carbon monoxide detector in rooms that have a log burner or fire. 
• You’ll need to pay income tax on your rental income. 
• You should ensure your tenant has the right to rent if your property is in England. 
• You may also need a license, depending on your property and who you rent it out to. This is common for renting to students or groups of people, which are known as houses in multiple occupation (HMOs). Some local areas have restrictions on these. 

3. Checks and Certificates Required of Landlords

Here are the most common certificates required as a landlord: 

• Gas safety certificate 
• Electrical safety certificate 
• Electric Installation Condition Report (EICR) 
• Portable appliance testing (PAT) 
• Energy Performance Certificate (EPC 
• Proof of deposit protection  
• Legionella risk assessment

Find out much more about the certificates which landlords need.

4. Think About the Property You Want to Rent Out

Once the above checks are in place, it’s time to think about your property in detail.   Start with its overall condition and compare it to other rental properties in your area. If there are problems like dampness, roof damage, or structural issues, you should take care of them before a tenant moves in. You should also consider sprucing up the place and making it appealing to potential tenants.  Whether or not to leave furniture in the home is another consideration to make, and you should decide whether you want to leave items like sofas, tables, beds, and wardrobes for tenants. Letting out a furnished property might encourage more interest, but it may lead to damage and other issues. Unfurnished properties should include kitchen fixtures and white goods, as well as carpets, flooring, curtains/blinds, and other basics. Find out more on what a landlord should provide in an unfurnished property.  Then, there’s the important factor of demand for rentals in your area. Some locations are more popular than others and it’s worth speaking to an experienced letting agent who can help set your expectations in terms of demand. 

5. Understand the Kind of Tenant You Want

Property covered, it’s time to consider your perfect tenant or tenants. Of course, this is somebody who pays their rent in full every month, flags any issues promptly so you can resolve them, and has an open line of communication with you.   But how do you find this dream, tenant or tenants? 

Use a Professional Tenant Finder Service 

You can use a professional tenant-finding service from a letting agent to help narrow down your search. This service typically covers:  

• Advertising your property to tenants 
• Carrying out viewings 
• Conducting references 
• Creating tenancy agreements 
• Securing deposits 
• Ensuring tenants have the right to live in the UK. 

There are costs associated with a professional service, and you can expect to pay around 10% of a yearly amount of rent. Some agents also charge you every time your tenant renews their contract, so it’s best to do your homework. 

Find a Tenant Yourself 

Alternatively, you can find tenants yourself which eliminates the fees but adds a layer of risk. It’s not easy compared to having it all handled for you, but you do have the luxury of conducting viewings personally and speaking directly with potential tenants. This helps you judge their character for yourself before making a decision.  Check out or guide on finding a good tenant. 

Important Considerations for Landlords 

If you decide you want to become a landlord, there are many considerations which you need to take into account. 

The Importance of Understanding the Local Property Market, and Advertising Reasonable Rent  

By having a firm understanding of your local property market, you can understand the rent you can expect to receive from tenants.   A property’s proximity to schools, transport links, and other important amenities will also influence rental rates, as will negatives like local crime rates and, potentially, your neighbours. Then there are amenities unique to your property, like outdoor space and off-street parking, that can entice tenants and boost rental prices.  All in all, understanding the local market helps you advertise your property at a reasonable rental price, which will help you attract more interest. Failing to do so will result in wasted time and a lack of viewings for your property. This can be expensive as you’ll have to keep up with mortgage costs and other outgoings while your house remains empty, and you find a tenant.   Of course, a reputable letting agent can likely eliminate these concerns for you and find you a tenant much quicker than you can yourself. 

Decide Who Will Manage Your Rental Property  

When it comes to managing your property, you have two main options. The first is doing it yourself, which might sound logical, but there are lots of drawbacks to this route.  For starters, you’ll essentially be on call 24/7 when it comes to your tenants’ needs. If a boiler breaks in the middle of the night or there’s a leak, for example, you’ll be the one to receive a text or phone call and will have to deal with it yourself.   You’ll also need to collect rent and deal with the consequences of late payments and non-payments, which can be stressful, expensive, and incredibly time-consuming. If you’re hoping for a passive stream of income in the form of regular rental payments, these kinds of issues will be unwelcomed. Also, keep in mind that any repairs and issues that arise from your tenants will be on your shoulders.  The alternative is using a professional lettings agent. This removes the burdens associated with renting a house out and all the things we’ve mentioned above are handled by an expert.   At Chancellors, we offer a full property management service and ensure rent is collected, issues are dealt with, and peace of mind is provided to landlords.  

Joining a Deposit Protection Scheme  

Every landlord in the UK must keep their tenant’s deposit in a government-approved tenancy protection scheme within 30 days of receiving it. You also need to provide tenants with information about the deposit and scheme, your name and contact details, and a copy of the government’s “How to Rent” guide.  Deposit schemes are in place to guarantee that tenants get their deposits back when they move out, as long as they don’t break the rules of your tenancy agreement. It also protects you if tenants damage your home.  The three British government schemes are The Deposit Protection Service, mydeposits, and the Tenancy Deposit Scheme.   

Landlord Insurance  

Another way to protect yourself from some of the difficulties of being a landlord is landlord insurance. Covering you against fire, storms, flood damage, and more, you’ll also be protected against accidental damage caused by your tenants, legal expenses, and repairs to your home that are considered emergencies.   There are lots of extras to add to this kind of insurance so you can tailor products around your property and concerns. 

Consider Costs Against What You Will Earn 

The first question most potential landlords ask is how much rent to charge. Some lenders suggest charging 125% of your mortgage payments, but you should ensure your rent is fair whilst still covering your outgoings. These outgoings include your mortgage, insurance, and things like management fees you pay professional letting agents.   You should also factor in repair costs and unexpected outgoings that can occur. As we’ve covered above, landlord insurance can help with this, but remember that you’re responsible for any costs, so you need to have enough to cover them. 

Consider Rental Yields  

The term rental yield refers to the rental income of your property divided by its value. It’s essentially a way of calculating your return on investment, with higher rental yields meaning a better ROI. Generally speaking, a rental yield between 5% and 8% is the standard.   However, while this sounds like good news for landlords, you should consider all costs of purchasing and maintaining your property, as well as mortgage and service fees.    

At Chancellors, we offer full property management support for landlords.

Tax Obligations as a Landlord 

Paying taxes is an inevitable part of being a landlord, and you need to be mindful of the tax that will be due on your rental income and property in some situations. Let’s explore some of the key tax implications of letting out a property in the UK.  

Income Tax 

Tax is an often-misunderstood aspect of being a landlord. As a landlord, you need to pay income tax on the rent you receive, and yyou'll also need to complete a self-assessment tax return. The amount of tax you’ll pay will depend on your rental income in addition to all sources of income you have.   Some costs are deductible from your tax bill such as utility bills you pay, insurance, letting agency and accountancy fees, service charges, and direct costs like advertising. Mortgage interest used to be included in these deductible costs, but this has been replaced by a 20% tax credit.   Tax relief may also apply to furniture, carpets, curtains, and appliances if your house is rented as furnished.  

National Insurance 

Class 2 National Insurance payments need to be paid if your rental profits are your main income source and exceed £6,725 per year.  

Stamp Duty 

Stamp Duty might apply if you’re buying a second home to rent out, with buy-to-let properties subject to a 3% Stamp Duty surcharge. This applies to £125,000 or less of the purchase price, with 5% due on £125,001 - £250,000, 8% for £250,001 - £925,000, 13% on £925,001 - £1.5 million, and 15% for over £1.5 million.  

Capital Gains Tax 

Only those who sell their rental property in the future are liable for Capital Gains Tax, and this will only apply to the profits you make on the property. The Capital Gains Tax rate is 18% for basic-rate Income Taxpayers and 28% for those in higher or additional tax bands.  You also have a Capital Gains Tax personal allowance and can offset stamp duty charges from your original purchase, improvement costs, and estate agent and legal fees that arise from the sale.   Find out more about allowable expenses for landlords. 

How to Be a Good Landlord  

With good tenants in place, the onus is on you to be a landlord they’re happy with. This helps you hold onto your best tenants which means less damage to your property, fewer issues to deal with, and less time when your house is empty and mortgage payments are falling solely on you.  

Regular Communication and Checks  

Communication is paramount for landlords if you want a harmonious relationship with your tenants. Checks are also necessary to complete, but don’t overdo it and show up too regularly.   Instead, show trust in your tenants and communicate your inspection dates with them in advance. A good idea is to set these out before they sign a tenancy agreement, so they know when your inspections are due.  In terms of frequency, most experts recommend a property check every three months but give your tenant at least 24 hours’ notice in writing of your visit. Also, never show up without permission if your tenants aren’t home. 

Resolve Issues When They Arise  

When you’re a landlord, your key responsibility is to your tenants. This means ensuring your property is safe to live in and that you’re providing adequate housing for them. As a result, you should deal with any issues and repairs as soon as possible, particularly if they relate to water or heating.  Ignoring these kinds of issues can land you in trouble with local authorities and can lead to a breakdown in the relationship with your tenant/s. This can result in all kinds of problems such as non-paying of rent and legal consequences.   So, the best thing you can do is be open with your tenants and if there’s an issue that needs your attention, get it seen to immediately.  

Maintain Goodwill With Tenants  

Keeping your tenants happy will mean they pay rent on time and take care of your property when you aren’t there. Having a difficult relationship can lead to sleepless nights and add to your stresses as a landlord.  

Know Your Tenant’s Rights  

Most importantly of all, your tenant has the right to live in a safe property that’s in a good state of repair.   Their deposit also needs to be protected and they need to know who their landlord is. The property also has to remain “undisturbed” by the landlord so they can live in peace without worrying about their landlord dropping in unannounced.  

Protecting Yourself as a Landlord 

Of course, you also have rights as a landlord, such as having rent paid in full in line with the tenancy agreement, your property to be taken care of by tenants, and the chance to make repairs and conduct checks if you’ve given adequate notice. You also have the right to gain access at the end of the tenancy and sell the property when the tenancy is over.    To protect yourself against problem tenants who may prevent any of the above, you can use a professional tenant reference service and carry out regular inspections. A written tenancy agreement is also a must-have for landlords.  Explore your rights and responsibilities as a landlord. 

What to Consider if You Purchase a Buy-to-Let Property 

If you are thinking about purchasing a buy-t0-ket property, there are some points which you should consider.

Surprising Costs 

When purchasing a buy-to-let property, you need to make sure you can afford it. This means factoring in maintenance costs, repair costs, and the fact that you may not always receive regular rental income.   For example, most UK properties are vacant at some point during the year, in between tenants, so you need to know that you can keep up with your mortgage payments before you consider a buy-to-let.  

Previous Issues and Warranties 

You should also find out if the property had issues in the past and that you understand what’s included in the sale. Warranties and guarantees, for example, may be passed to you for certain items in the house. 

The Location of the Property 

Location is also important and should be a key consideration if you want to purchase a buy-to-let property in a desirable location. Do your research to find places attractive to tenants. Better yet, consider your ideal tenant and buy a place that suits them.   This helps you appeal to the kinds of people you want to attract as tenants and will make your landlord experience simpler.  

What Kinds of Property Management Services Are Available? 

Becoming a landlord isn’t as easy as some people think, and there are lots of rules and regulations to adhere to. However, if you follow the advice we’ve covered in this article, you’ll be well on your way to becoming a good landlord. You’ll also provide a place to live for somebody who needs it and make a steady income stream for yourself, not to mention a return on investment when it’s time to sell.  Property management can help you with many of the responsibilities you have as a landlord. Managing a rental property, yourself is time-consuming and often stressful, so by hiring a professional who has experience in the industry, you can reduce your workload and ease the burden substantially.   At Chancellors, we offer a range of services for landlords that help you make the best of your property and build a strong, trusting relationship with your tenants.  Our property management service includes: 

• Gas safety and electrical safety certificates 
• Electrical installation safety assessments and certificates 
• Full compliance with all tenancy laws and regulations 
• Rent collection and chasing arrears if needed 
• Tenancy renewal 
• Property inspections 
• Arranging maintenance and repairs 
• Finding a tenant in the first place using a vast database of vetted, suitable tenants 
• Serving possession notices 
• Cross-checking references. 

Get in touch with us for more information on how we can help you to become a landlord. 

Frequently Asked Questions 

 

Can You Earn a Good Income as a Landlord? 

Yes, if you charge sufficient rent and consider your costs in detail, understanding that there will be times you don’t earn money or have to spend your own on maintenance/repairs, you can earn good money as a landlord.  

How Do I Become a Landlord With No Experience? 

On paper, it’s as simple as going to a mortgage lender and enquiring about a buy-to-let mortgage, or even switching your current mortgage to one that’s suitable for letting. However, as we’ve covered, there’s much more to it than that. Your best bet is to speak to a mortgage lender or broker. 

Do I Need an Inventory as a Landlord? 

A detailed inventory helps you prove the state of your property before the tenancy to compare it afterwards. It should include fittings and lots of detail, with photos to prove the state of things before your tenant moved in.  

How Quickly Do I Have to Complete Repairs as a Landlord? 

It’s not a set-in-stone period, but it’s in your best interests to be as fast as possible. This is particularly the case where heating or water are concerned. By keeping tenants happy, you can save money in the long run and prevent issues before they become worse. You may also be reported to the local authority’s environmental health department if you fail to make certain repairs.  

Can I Visit My Property When My Tenants Aren’t Home? 

No. You need to give at least 24 hours’ notice, in writing.  

Do I Need a Tenancy Agreement? 

Absolutely. This should include tenancy start and end dates, rent payment amount and frequency, deposit amount and the associated protection scheme, the obligations for yourself and your tenant, information about bills and repairs, and more. Lettings agents can help you create a tenancy agreement.