Becoming an unplanned landlord

Have you inherited a property recently or moved home and held onto the previous one because it didn’t sell? Maybe you’ve moved in with your partner, and suddenly you find yourself an accidental landlord.

While having a property that offers extra income and appreciates in value over time can seem like a huge bonus, it’s not always smooth sailing. Those who unexpectedly become landlords must navigate a complex web of rental laws, tax liabilities and potential fines for not legally or safely renting out a property.

UNDERSTANDING YOUR OBLIGATIONS AS A LANDLORD

With numerous laws governing the rental industry, it’s easy to breach them unintentionally. Ignorance, however, is not an excuse. You must understand your obligations as a landlord, and be ready to invest money to ensure the property meets legal letting standards. Apart from potentially breaking the law, you could endanger your tenants if you lack the right health and safety procedures.

Moreover, if you’re new to managing financial investments, understanding the most tax-efficient way to own an investment property and generate additional income might be overwhelming. This could lead to incorrect tax returns and hefty future bills. Plus, if you’re unaware of the costs associated with running a buy-to-let and haven’t budgeted ahead, you may find yourself financially strained on an ongoing basis.

HOW TO ENSURE YOUR RENTAL PROPERTY ENHANCES YOUR FINANCES

Here are some crucial steps to ensure that this unexpected rental property doesn’t get you into trouble with local authorities and, instead, bolsters your finances.

CONSULTING A FINANCIAL ADVISER AND PROPERTY TAX SPECIALIST

As soon as you know you’ll be renting out a property, if appropriate, you should seek professional financial advice from property experts to guide you on the best way to own the property and maximise profits regarding rental income and equity. Also, consider legal advice on ownership, especially if you’ve inherited a property you’d like to pass on to children or other family members.

CONNECTING WITH A BUY-TO-LET MORTGAGE ADVISER

It’s critical that the property is correctly mortgaged. If you previously lived in and mortgaged the property, your lender must be informed about the change so they can transition you to a buy-to-let mortgage. You cannot have a standard residential mortgage on a property that isn’t your primary residence.

A mortgage adviser can review your current mortgage and find the right deal for your new circumstances. This might even involve switching lenders. Depending on your circumstances, even if the property is mortgage-free, you should consider financial advice to determine if taking out a mortgage and releasing some equity is beneficial.

ENGAGING A GOOD LOCAL AGENT TO LET AND MANAGE THE PROPERTY

A good agent can provide immense value, and their services are tax-deductible. A reputable letting and managing agent will be a member of a professional industry body, such as ARLA or RICS. This means they are well-trained, abide by a code of conduct and protect your money through Client Money Protection insurance. Importantly, they keep up-to-date with the latest legislation and ensure your properties are legally let to the highest industry standards.

While it’s possible to let and manage a property yourself, with new rules and regulations constantly emerging, it becomes increasingly risky for owners of more than one property to handle everything independently. Considering the time and money spent learning and keeping up with legal obligations, it’s worth hiring professionals who can shoulder most legal and administrative responsibilities.

FINDING THE RIGHT TENANT

A good letting agent can also help you find the right tenant. If you try to let the property yourself, you may not get the best market rent or know how to reference the tenant properly. This could mean missing out on a more suitable tenant, higher rental income and a more successful let.

A reliable agent should also be transparent about all costs associated with owning a buy-to-let. They can help you create an accurate budget to avoid unexpected bills and plan ahead for periodic work that will be required.

Don’t forget, our professional friendly advisors are on hand to support you and can help you explore all of your options.