Becoming a landlord is a huge decision to make. Therefore, knowing what being a landlord entails, your responsibilities, and whether this path is right for you is essential.
There are a lot of decisions to make before you become a landlord and lots of work to be done along the way – so read our guide for everything you need to know about becoming a new landlord in Wimbledon Village, Wimbledon, Raynes Park and Coombe Hill.
There are many reasons why someone may want to become a landlord. Most people become a landlord to receive a steady monthly income from rent payments. Making money from the property’s capital growth when it’s time to sell is also an incentive.
Our guide below outlines some of the key considerations for anyone wanting to become a landlord. Make sure you understand the actions you need to take before jumping in, and this will save you a lot of trouble (and money) further down the line.
Renting out a property to earn money is a business and should be treated as such. There are responsibilities and legal obligations that a landlord must uphold, and you could be at risk of hefty fines or even jail time if these are broken, so it’s certainly not something to be taken lightly.
Regulations vary depending on whether your property is in England, Wales, Scotland, or Northern Ireland and the type of lease. Hence, it is essential to check the regulations that apply to your property.
You should consider whether you want to take on the full scope of being a landlord and managing tenancies or prefer to pay a letting agent to do most of the work.
A lot of work can be involved in managing a tenancy, so you should decide whether you have the time and are happy to take on the additional hassle of landlord responsibilities such as conducting viewings, arranging repairs and dealing with any problems that arise.
The three main choices you have are:
Before renting out your property, you must check that you have permission from your mortgage lender to do so. If you have a residential mortgage, you must switch to a buy-to-let mortgage before letting out your property (you may get consent to let if you are only letting out the property short-term).
The requirements for a buy-to-let mortgage are generally stricter due to the added risk involved. The lender must know that you can realistically afford the monthly repayments even if the property is vacant for a few months. They will consider how much you plan to charge in rent, your current income, and your credit rating, among other criteria.
You are expected to have a much larger deposit on a buy-to-let mortgage, with the minimum amount usually starting at 25% of the house’s value. Most buy-to-let mortgages are interest-only, so you will only pay the interest on the loan each month. The principal amount will be due at the end of the mortgage term.
If the property is a leasehold flat, you may also need permission from the freeholder to let the property out. Your lease agreement usually includes guidelines regarding whether you are entitled to let out the property and any conditions or clauses. If no details are included in your lease agreement, you should contact the freeholder and ask for written permission to rent the property.
As a landlord, you have specific responsibilities to comply with, including checking the tenants’ right to rent, placing their deposit in a deposit protection scheme, and giving them a copy of the government’s ‘how to rent guide’.
Landlords must ensure that the property is safe and in a good state of repair, allow the tenant to live in the property peacefully and undisturbed, and refrain from unfair evictions or excessive charges.
These are some of the most important responsibilities to be aware of:
You must have an EPC certificate to put your property on the market, and the EPC rating must be E or above. If the rating is below this, you would need to arrange for some of the recommended energy efficiency improvements to be carried out to increase the rating. The government will likely raise the required minimum rating to C, meaning more landlords will need to pay for energy efficiency improvements.
Landlords must have annual gas safety checks conducted by a GasSafe engineer who will issue a gas safety certificate. Tenants should be provided with a gas safety check record when they move in or within 28 days of completing the check.
A qualified and competent electrician must inspect electrical installations at least every five years. A copy of the electrical safety report should be provided to the tenant and the local authority if required to do so.
A smoke alarm must be provided on each property storey, and a carbon monoxide alarm should be provided in any room with a solid fuel appliance such as a coal fire.
Any furnishings provided must be classified as fire-safe, and there must be access to fire escapes at all times. Fire safety requirements for HMOs include additional responsibilities, such as providing fire alarms, extinguishers, and smoke alarms.
Some local authorities require landlords to obtain a licence to adhere to a code of practice, so landlords must check whether their local authority has any licence requirements.
You may need a property licence in Merton, depending on the property type and who lives in it. You will require a mandatory HMO licence if more than 5 people live on the property, forming more than one household. An additional HMO licence may be required in specific areas of Merton if 3 or 4 people live in the property. Check the council website for more information.
Kingston Council also has a mandatory HMO licence for any house in multiple occupation where 5 or more unrelated people live and form more than one household. There is also a minimum room size set out in the HMO licences, so you must check your local authority website to check the full requirements.
For some areas, including Figge’s Marsh, Graveney, Longthornton and Pollard’s Hill, you may require a selective licence under the local authority requirements.
Landlords are legally responsible for carrying out ‘Right to Rent’ checks on prospective tenants, which involves reviewing immigration documents and ID to check their right to live in the UK. Letting agents usually do these checks on the landlord’s behalf, but the landlord must check that this has been done.
You must place the tenant’s deposit into a government-approved tenancy deposit scheme, which protects tenants on an assured shorthold tenancy. The three deposit protection schemes for properties in England and Wales are the Deposit Protection Service, MyDeposits and Tenancy Deposit Scheme.
Landlord responsibilities also include providing the correct documentation to tenants, such as:
As a landlord, you must pay income tax on any income you make from renting out your property. You will need to calculate your rental income plus any other income you have, such as wages, to see which income tax rate you must pay.
When you are calculating rental income, there are allowable expenses that you can deduct.
Landlords receive mortgage interest tax relief based on 20% of the mortgage interest payments.
If you are unsure how to calculate the amount of tax you owe to HMRC or how to file tax returns, it is a good idea to consult an accountant.
Whether you choose to rent your property furnished or not furnished will depend on several variables. For example, the size of the property, its location, the type of tenant you plan on targeting, and your circumstances.
Generally, furnished properties are more popular than unfurnished properties, so if you’ve inherited the property with furniture already in place, it may be easier and quicker to rent out if you leave it that way. Furnished properties are likely to attract more students, graduates, and young professionals, and they can often demand higher rental prices.
If you’re looking to attract long-term tenants, then it’s likely that they will be looking for an unfurnished property so that they can settle in and make it ‘their own’. Renting unfurnished will save you money on the upfront costs of buying furniture and insuring the property’s contents. It may also make your start/end of the tenancy process much smoother, saving you time on inventory and damage checks.
A large proportion of households now have pets, so allowing pets will ensure that you have a larger pool of prospective tenants. Whether to allow pets has historically been down to the personal preference of the landlord but the Renters’ Rights Bill (RRB) introduces changes around allowing tenants to keep pets.
The RRB is expected to be introduced by late 2025 or early 2026, and the rules around tenants keeping pets include stronger rights for tenants to keep pets in private rented properties.
Under the new legislation, landlords will not be allowed to unreasonably refuse a tenant’s request to keep pets. However, the new rules will allow landlords to include a requirement for the tenant to take out pet insurance or to apply a charge in their rent, to add pet insurance cover to their landlord’s insurance.
Again, this is a personal preference. Smoking is becoming less popular, but it may still be a requirement on some tenants’ lists. Whilst you may be able to demand a higher rental price for the privilege, you must weigh this up against the smoke damage caused to the property and furniture and the increased maintenance costs.
It’s also worth noting that if you rent a house in multiple occupation (HMO), smoking in the property could cause rifts among the tenants.
Look at the average rental price for similar properties in your area to know what your competitors charge. Deciding on the rent you will set helps you work out your rental yield. Find out more in our article on how to work out and calculate rental yield.
You need to ensure that the rent you charge covers your costs. It is a good idea to ask local real estate agents for a valuation, as they will know the right amount to charge based on the property and local market. You can book a property rental valuation with Robert Holmes.
There are many types of costs associated with being a landlord, such as:
If you are purchasing a new buy-to-let property, you will have costs such as a deposit, stamp duty, mortgage arrangement fees, solicitor’s fees and survey costs. The amount of stamp duty you pay will depend on the property price and whether the purchase is classed as a second home. Second homes have a 3% stamp duty surcharge over the standard stamp duty rate.
Some ongoing costs will be recurring and predictable, while there may also be unexpected costs that arise. These are the most common ongoing costs for landlords:
If you decide to sell the buy-to-let property at some point, you will have some selling costs to pay. These include:
There are several steps that landlords need to take to get started, including legal and financial processes. These are the key steps to take:
Financial planning – Before purchasing a buy-to-let property, landlords will need to complete financial forecasts to check that they have adequate funds and that renting property out will be financially viable. If the landlord requires a mortgage, they are likely to require a minimum deposit of around 25% of the value of the property. Most landlords also need to pay stamp duty plus a surcharge on second homes.
Financial calculations should also include the projected rental income minus all expenses. The expenses a landlord may need to budget for include regular maintenance, landlords’ insurance (including buildings insurance, contents and public liability), letting agent fees and ground rent. Landlords will also usually need to pay income tax on their rental income and there may be void periods where they will need to pay council tax and utility bills.
Researching landlord responsibilities – There is a long list of responsibilities and legislation to comply with, from health and safety to tax obligations. Getting familiar with all the legislation can take a while, so it is best to do this before putting in an offer for a property.
Area research – For a buy-to-let property to make a good return on investment, the property type and area should be carefully selected. Area research should include:
Paperwork and admin – There will be a lot of work involved in buying the property and managing it going forward. For example, applying for a mortgage, arranging an EPC, Gas Safety certificate and EICR, setting up a tenancy agreement, creating an inventory and filing tax submissions. There will also be tasks such as conducting right to rent checks, putting the tenant’s deposit into a tenancy deposit scheme and you may need to apply for a licence.
The upcoming Renter’s Rights Bill will introduce further responsibilities, including becoming members of a new landlord ombudsman and registering on the new Private Rented Sector Database.
Finding tenants – If you are planning on managing the property yourself without using a letting agent, you will need to market the property and screen tenants. If you choose to use a letting agent, they will be able to find tenants for you and will also take care of most of the paperwork to ensure compliance with the many regulations.
Ongoing responsibilities – Once tenants have moved in, you will need to arrange for regular maintenance, collection of rent payments, Gas Safety certificates and EICRs, handling any issues tenants report, plus much more.
While becoming a landlord does come with a great deal of responsibilities, there can be significant financial benefits that make it very worthwhile. Here are some of the pros and cons to consider before deciding whether it is the right choice for you, and whether you want to manage the letting yourself or use an agent:
Income – Receiving a monthly income from rent is one of the biggest reasons to become a landlord. Generating a passive income could boost your finances and help set up a more comfortable retirement.
Capital growth – There is also a good likelihood that the value of the property will increase over the time period that you own it, providing capital growth when you sell the property.
Tax deductions – Although you will have added tax obligations as a landlord, there are many tax deductions you will be able to take advantage of such as the cost of building repairs.
High demand for rental properties and high ROI – In the UK there is a housing shortage, which means rental properties are in high demand. With savings rates not very high, the return on investment in property is considered a more secure long-term investment compared to many other types of investments.
Tax obligations – You will usually need to pay tax on rental income, although you can deduct allowable expenses. Each tax year you will also need to return a tax submission or hire an accountant to do it on your behalf.
Legal requirements – There are a lot of legal responsibilities to comply with, and the Renters’ Rights Bill includes additional responsibilities such as meeting the Decent Homes Standard and addressing serious health hazards promptly.
Ongoing work and costs – As a landlord, you will need to arrange and pay for ongoing things like repairs and maintenance, gas safety certificates, EICRs and letting agent fees (if you use one). These will be tax deductible but there is still regular work involved if you don’t use an agent.
If you are considering becoming a landlord in Kingston, Merton Park, Wimbledon Village or surrounding areas, and would like further information on the processes and procedures you need to follow, contact us today, and we would be more than happy to help.
Ticking off the items on this list will help you keep track of your legal responsibilities when renting out a property.
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