If you’re considering renting out your house, one of your first decisions is whether to use a letting agent to take care of some or all of the work yourself.
The choice to rent your property yourself or use an agent will largely depend on how much time you want to devote to the project. A first time landlord should also consider how confident they feel about the process – including advertising for and screening tenants and dealing with tricky issues such as non-payment of rent.
Most agents, whether high street branches or online operations, offer landlords different service levels. So, you may use a letting agent to help you find tenants but manage the tenancy and maintain the property yourself.
To help you decide if you’re ready for the DIY approach, we look at what’s involved in renting out property at every stage.
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Check You Are Allowed To Rent Out Your Property
Before you begin renting out a property, you need to ensure you’re in a position to do so. You’ll likely need to move to a buy-to-let mortgage if you have a residential mortgage. Your buildings insurance may be invalid too, and terms in your lease agreement could prohibit you from renting your home to tenants. Make sure you check all of this out.
Legal Responsibilities For Landlords
Being a responsible landlord and property manager is a challenging feat. You must observe over 140 pieces of legislation when letting out your real estate – housing health and safety is a high priority. These tenant laws are in place to ensure the long-term safety of tenants.
It’s important that the property is fit to live in throughout the tenancy. Problems which might make the property unfit for habitation must be tackled before you start marketing the property for rent. For example, you may need to deal with dampness or rodent infestation.
The gas and electrical systems in the property must be safe, including all gas appliances. Gas installations should be fitted, repaired and checked annually by a GasSafe-registered engineer. Afterwards, you must give your tenant a copy of the safety certificate.
You are legally required to have a landlord electrical safety certificate for each buy-to-let property you own. You are responsible for organising this and ensuring that any remedial works are carried out competently. The electrical safety certificate is valid for five years. You must provide your tenants will a copy of this certificate.
There should be working smoke alarms on each floor and carbon monoxide alarms in any room heated by solid fuel to keep your properties safe.
You must also obtain an energy performance certificate for the property. Your rental property must achieve at least an energy efficiency rating of E – if it doesn’t, you must take the measures suggested in your report.
Landlord Licensing
If you own real estate and wish to rent it out, there are some essential letting requirements you should be aware of.
You should first check Redbridge Council or your local council website to see whether your local authority has introduced selective licensing in your area. Doing this before renting out your rental properties to tenants is critical. Otherwise, you will be breaking the law. These licenses were introduced as part of the Housing Act 2004 to ensure landlords maintain their rental properties to a high standard.
All landlords of a large House in Multiple Occupation (HMO) require a license. Your property will be classed as a large HMO if there are five or more people from more than one household and some or all tenants share the kitchen or bathroom facilities.
Come councils, including Redbridge, operate an additional HMO license scheme. This means that any property rented to three or more people forming more than one household where the tenants share kitchen or bathroom facilities will require a license.
Find out more about landlord licensing schemes in our blog article.
You must inform your buildings and contents insurer before renting out your property because most standard home insurance policies won’t cover the property if you are renting to tenants. You will need a specialist policy specifically for landlords. Get quotes from several insurance providers to find the best deal.
Landlord insurance is not a legal requirement, but if you have a mortgage on the property, your mortgage lender will insist on buildings insurance. Taking out contents insurance to cover items you provide is also sensible. You can also add the following cover if you like:
Rent guarantee insurance: covers you if your tenants default on their rent payments
Loss of rent insurance: covers loss of rent caused by an insured event, such as fire or flood.
Legal insurance: cover the costs if you need to need to take your tenant’ to court
Liability insurance: covers potential compensation claims relating to your rental property. For instance, if someone injures themselves on your property or damage is caused to another property due to yours.
Paying Tax on Rental Income
You will need to pay income tax on the profit you make from your rental properties. The amount of tax you pay depends upon your whole taxable income (not just your rental income). For some people, this might mean paying just 20% in taxes, but it could be as high as 45% for others.
The first £1,000 of income from rental property is tax-free. If you earn more than £2,500 from renting property, you will need to fill in a self-assessment tax return. If your income is between £1,000 and £2,500, contact HMRC.
Landlords only need to pay Class 2 National Insurance if the following all apply:
Your annual profit from renting property exceeds £6,475
Being a landlord is your main job
You rent out two or more properties
You buy properties to rent out
Finding Tenants
Advertising your property for rent is a crucial task. If you’re looking to rent out a property without an agent, you must do this yourself. There are plenty of options – local Facebook groups or forums such as Nextdoor, as well as sites like Gumtree, word of mouth or posters on notice boards.
If you’d like your property advertised on the Rightmove and Zoopla portals, you must use at least a basic estate agency service – as private individuals can’t access these sites.
Viewings
An important part of renting out your property is house viewings. Some landlords are intimidated by the thought of carrying out their own viewings and hire a property management company instead. However, there are a lot of advantages to doing it yourself.
By conducting viewings yourself, you can carry out tenant screening and be satisfied that you are making the right choice, therefore protecting your assets. Rental income is important, so although you should still conduct credit and reference checks, assessing your prospective tenant’s character in person is also good. That way, you can start building a direct landlord-tenant relationship from the outset.
Preparing the property to make it look attractive to any potential renters is a good idea. You should highlight all the positives about the property and the local area when carrying out the viewings.
If you don’t feel comfortable doing it yourself, you could ask a friend or family member or use a professional viewing service. Of course, using friends ensures you won’t need to hire a property management company and add to your expenses.
Also, if you have tenants in situ at the property, you must give them the required prior notice of any viewings, which should also be at a reasonable time.
Once you have found potential tenants, you must do some background checks. Screening tenants is an important task, so always obtain references, including from previous landlords, if possible. Contact all referees to ensure that they are genuine.
Ask for copies of bank statements and proof of income. It is also worth investing in credit score checks to be doubly sure of their past payment history. Credit reference agencies such as Experian can do this for a fee.
However, you must comply with the law on discrimination when choosing the best tenant for your home. It is unlawful to discriminate against anyone based on protected characteristics, including age, race, religion, disability and sexual orientation. Read more on the gov.uk website.
If renting out property in England, you must check that the immigration status of your tenant allows them the right to rent your property. It’s important that you screen tenants properly to ensure you don’t miss vital details like this.
Starting The Tenancy
You will need to draw up a tenancy agreement to be signed by you and the tenant. This is something a letting agent will often do for you. If you rent out the property privately, you can find sample tenancy agreements online. Just make sure you tailor it to your circumstances. For example, if you want your tenants to maintain the garden or not smoke on the premises, you need to include these as clauses. But anything you include must be legal. Most tenancies fall under an Assured Shorthold Tenancy (AST), which allows tenants to rent your property for a fixed period, usually six months to a year.
Ensure the home is clean and tidy and all repairs have been completed before your tenant moves in. Leave instructions for appliances, plus any helpful information – for example, how to reach you if they need to, when the bins are collected etc.
Draw up a complete inventory of your fixtures and fittings – take photos or videos of your property and any items included. Your tenant should sign the inventory to confirm that everything it lists is present and in the stated condition.
Your tenant must be provided with certain documents, including the energy performance certificate, gas safety certificate, Electrical Installation Condition Report (EICR) and a copy of the government’s How to Rent guide. You must also protect your tenant’s security deposit in a government-approved scheme. This security deposit will be released back to the tenant at the end of the tenancy, provided that it’s not needed to cover the cost of damages they have caused to the property.
During The Tenancy
Landlords are responsible for most repairs and maintenance in a rental home. This includes the electrical wiring, plumbing and sanitation, heating and hot water, and the external structure of the building.
If renting out the property without an agent, you must be ready to attend to any tenant issues. It is worth having a list of reliable tradespeople to call on or taking out breakdown insurance to cover you for household emergencies.
You should conduct periodic inspections of the property to ensure that the tenant complies with the terms of the tenancy agreement. However, you must give 24 hours’ written notice before visiting the property – your tenants may refuse entry if they wish.
Collecting Rent
When collecting rent yourself, you should always stipulate how and when the rent should be paid in your tenancy agreement to help avoid future disputes and protect yourself should issues arise.
Some of the common ways to collect monthly rent include:
By standing order – This is one of the most common ways.
By direct debit – This can attract additional costs as it is more difficult to set up without an agency.
Collecting in cash or by cheque – These aren’t reliable or modern ways to collect rent and should be avoided where possible.
A more modern way which is growing in popularity, is to use an app. These can help you manage rent payments from tenants and identify whether the rent has been received.
If you prefer a third party to manage your rent collections, you can outsource it to a letting agent or an independent rent collection service.
Ending The Tenancy
If you want a tenant to leave your property, follow the correct legal process. Currently, you have two means of evicting a tenant – serving a Section 8 or a Section 21 notice. Check the gov.uk website for the latest position on this and current notice periods.
Balance Your Time And Costs
It is possible to rent out your property yourself, and being a DIY landlord allows you to save on letting agency costs. However, being a landlord is challenging and time-consuming, especially if you fit in with a full-time job. Using a trusted letting agent will ensure that you have great tenants, earn the maximum rent and that any emergency and routine maintenance jobs are carried out promptly.
If you’re a new landlord in East London, currently weighing up the pros and cons of using a letting agent vs going it alone, we might be able to help. Contact us to learn more about our services for landlords – to help you make the right decision.
I began as a junior apprentice in a corporate estate agents in 2006 have been working in the property sector since, so over 14 years of experience. I have worked in a range of industries from Property sales and lettings, to construction, development, commercial sales and lets as well as facilities management and maintenance. I have a degree in Economics, enjoy keeping fit and healthy, support Man Utd and have a young family.
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