The private rental sector has doubled in the last 20 years. And today, more than 40% of renters expect to rent for the rest of their lives. This booming market provides great opportunities for those looking to put their money into a secure investment and earn a passive income in the meantime.
Becoming a landlord can seem daunting, but with the right knowledge and advice, it can be a great way to earn passive income from your property. Whether you are an experienced investor or a first-time landlord, this short guide will provide you with all the information needed to begin your journey as a successful landlord.
Step 1: Research Your Market
Before getting started, it’s important to have a good understanding of the type of property you have and the type of renter it’s best suited to. From here, you can research local housing markets in order to identify potential demand and pricing for your rental property.
At Smarter Rent, we have conducted extensive research to understand what renters want from a home. Combining this with our data-backed investment model, we are able to identify and source the perfect buy to let investment property that can earn a landlord both yield in the short term and capital appreciation in the long term. For existing landlords, we help them position their property to renters who will pay the most for it by taking into account multiple data points such as location, type of property and proximity to amenities. You can find out how much your property could be earning you using our yield calculator.
Step 2: Secure Financing
You will need to secure financing if you plan on purchasing your rental property or if you need money for renovations or repairs. Securing financing is especially important if you are new to being a landlord since it will ensure that you have enough capital on hand in case unexpected costs arise during the rental process.
If you don’t yet own your property, bear in mind that a buy to let mortgage is quite different to the mortgage you might have for your own home. The amount you can borrow will depend largely on the rental income you expect to get, and with recent economic turbulence, eligibility criteria has become a lot stricter.
When it comes to any renovation or refurbishment work, it’s crucial to weigh up necessary costs versus potential return. At Smarter Rent, we have found that upfront investment to create a fully equipped home that’s ready to move into can generate up to double the rental income with renters happy to pay for the convenience and comfort. Speaking with an expert such as Smarter Rent can help you decide where to spend your money to get above average rental returns.
Step 3: Find Your Renters
Once your rental property is ready for occupancy, it’s time to start looking for your renters. You can do this yourself by advertising online or asking friends and family. But keeping up with communications, conducting viewings and subsequently screening potential renters can be a time drain and incredibly inconvenient.
80% of landlords use an agent. For a fee, they will take care of all of this for you. This can be particularly useful if you want to be hands-off or don’t live close to the property. There are many agents to choose from but sadly it’s often the case that landlords still get stuck between a slow agent and a renter’s demands. So do your research. Look at online reviews and ask to speak to a couple of their current clients. At Smarter Rent, we pride ourselves on taking a proactive approach to property management to make it truly hassle free for our landlords. It’s something that sets us apart from other agents and has won us over 700 5* reviews.
Step 4: Draft Agreements
As a landlord, you have a number of responsibilities to your tenants, many of them legal requirements which can be onerous and complicated to understand, but are incredibly important to avoid legal repercussions.
The most important document of all is the tenancy agreement. This is the legal contract between you and your tenant. This agreement should clearly outline all of the rights and responsibilities associated with renting from you (e.g. payment amounts/dates, rules about pets/smoking etc. notice periods). It’s essential that both parties sign this document before moving forward - this will help protect both parties should any issues arise down the line.
Additionally, familiarise yourself with your legal obligations regarding rent increases and tenant evictions so that you know how best to handle these situations should they come up later on down the road.
It’s important to get legal advice from a qualified professional for any tenancy, so this cost should be accounted for. Alternatively, an agent such as Smarter Rent has expert conveyancing solicitors on hand to handle all of the legal requirements for you.
Step 5: Maintaining Your Property
Lastly, it is important to keep up with regularly scheduled maintenance jobs in order to maintain your property’s value over time. This means staying up-to-date on local building codes and regulations so that your rental property meets all legal requirements necessary for habitation - failure to do so may result in hefty fines from local government agencies.
Additionally, make sure all maintenance tasks are completed promptly so that renters feel safe living at your property - timely completion of maintenance requests will also help protect both parties legally should any disputes occur later on down the road. 25% of renters are dissatisfied with their maintenance because it’s slow or the landlord isn't willing to do the work. Being responsive can put you ahead of other landlords and ensure your renters stick around.
Many agencies will offer a property management service that can take care of this for you for an additional fee. Before signing up, check what they are and aren’t responsible for to avoid any disputes further down the road, and the hours they work too. For example at Smarter Rent, we have a management team on call 24 hours a day, 365 days a year. Even Christmas Day! So can get on with the things you enjoy and earn a truly hassle-free, passive income.
Taking your first steps towards becoming a landlord is exciting, but we know that the hard work is just beginning. That’s why we are here to help.
If you have a property you’d like to rent out, you're considering switching agents or you’re looking for help sourcing the perfect buy to let, you can speak to us today - 01628 633893