Martina Lees shares her top tips for Britain’s growing army of accidental landlords
I blame my husband. When Daniel and I got married — intentionally — we ended up letting his bachelor pad in southwest London — accidentally. It helped us to travel the world, start a business and buy our first family home.
It also made us landlords. There are now about 500,000 such accidental landlords in Britain: people who never meant to let a property, but have done so through circumstance, be it changing jobs or partners, moving abroad or inheriting a home.
We are a tribe on the rise. The number of older owners who keep their starter homes after trading up in order to let them has jumped since the recession, according to the London School of Economics. And, as Home reported last week, many owners of £1m-plus properties are struggling to sell, so are taking in tenants instead.
Yet there is surprisingly little help for people like us. We have had to learn the hard way, initially through letting Daniel’s first flat, then many of our friends’ former homes. In the end he started swift.property, a lettings agency that looks after the London homes of accidental landlords living in 13 countries. As well as handling the usual paperwork and broken boilers, he has had to close a neighbouring brothel and rescue a pet python.
Together, we have written The Accidental Landlord to help others like us out there. Here are our 10 top tips.
1 Be deliberate Though you may have started out accidentally, you won’t succeed if you carry on like that in a lettings market that has become more expensive, regulated and taxed than ever. Define your goal: do you want monthly rental income to pay school fees, for example, or long-term price growth to help you retire in comfort? And will your property give you what you want? If not, then you might be better off selling and investing elsewhere.
2 Get consents Your lender can call in your residential mortgage if you let your home without telling them — and yes, this is becoming more common. Ask for consent to let or switch to a buy-to-let mortgage, for which you will need at least 25% equity and rental income 125%-145% higher than the mortgage payment. Take out landlord buildings insurance — your standard cover will be invalid — and, for leasehold flats, inform your freeholder.
3 Get tax advice You must register with HMRC for self-assessment and complete the property section as part of your annual return. Speak to a tax expert upfront so you can use all your allowances. If you’re married, transferring ownership of the property — or part of it — to the lower earner may save you thousands in tax.
When selling, accidental landlords get two generous tax breaks: principal private residence relief on the capital gains during the whole time you lived in the home, as well as the last 18 months; and another £40,000 in tax-free gains under private letting relief.
4 Set a realistic rent The market, not the landlord, dictates the rent. If you ask too much — whether it’s to cover your costs or because your letting agent has inflated its estimate to win your business — the property will languish empty. Check for similar properties online, then call the agents and ask what those listings ended up actually letting for.
5 Dress for success Properties attract the tenants they deserve. We all think our children are the prettiest, but being blind to dog-chewed skirting boards will deter the professionals you desire. Fix all the snags and kit it out with your target tenant in mind: students want fully furnished, while families prefer empty houses to fill with their own belongings. Be flexible — buying a sofa or ditching a bed at a tenant’s request can make or break a let. The same goes for allowing children and pets — although you are within your rights to refuse either. Mitigate risk by following the Lets with Pets guide from the Dogs Trust (letswithpets.org.uk).
6 Vet all tenants Don’t let to friends. You’ll feel bad for charging a deposit or raising the rent, and they won’t like it either. Do thorough checks: a tenant referencing company will do the legwork for about £30. And go with your gut — would-be tenants who make lots of demands or constantly change their minds will keep doing so once they move in.
7 Make prompt repairs It will keep the tenants happy, it cuts your costs (one dripping boiler led to a £55,000 bill for dry rot) and it’s the law. Many landlords don’t know this, like the one who said: “Why do they need hot water? I shower in cold.” Fixing that boiler is not optional, and neither are repairs to a building’s structure, water, electricity and sanitaryware. Screen requests before you call an emergency plumber: the “broken boiler” might just be turned off.
Update tenants on progress — it’s the not knowing that makes things worse. Inspect the property for maintenance problems at least once a year.
8 Collect the rent on the dot… Unless there is genuine hardship, which happens in only 2% of lets. Ask tenants to set up a standing order so the money reaches your account on the first of every month. Check your bank account that day and call or email your tenant before noon if they haven’t paid. If you let things slip, slack or scatty souls will end up paying later and later.
9 Tick the legal boxes If you supply it, make sure it’s safe. By law, you must do an annual gas safety check and fit smoke and carbon monoxide detectors. You also need an energy performance certificate and possibly a landlord licence — check with your council. The buck stops with you, not your agent: their “Oops, my bad” is your unlimited fine, invalidated insurance or tenant who is almost impossible to evict.
10 Get the paperwork right In almost all lets, you’ll have an assured shorthold tenancy. That gives you and your tenant certain rights and duties that you can’t wriggle out of, even if you scribble “This is not a tenancy” all over your contract. Download the government’s free model at tinyurl.com/ast-contract. Hire an independent clerk to create a written inventory with photos of the property’s contents and condition (£100–£250; theaiic.co.uk, apip.org.uk) — without that, you’ll struggle to make deposit deductions.
The Accidental Landlord: The Keys to Letting Out Your Own Property with Complete Peace of Mind is out now at £12.99; accidentallandlord.info
If you forget to give your tenant these bits of paper, you’ll lose your automatic right to take your property back at the lease’s end.
• Copies of the gas safety and energy performance certificates
• The government’s How to Rent leaflet (gov.uk/government/publications/how-to-rent)
• “Prescribed information” from one of three schemes to protect your tenant’s deposit within 30 days
This article was published in The Sunday Times, Home, on 20 November 2016