Buying a house to rent out can be a profitable venture, if you approach it with a considered strategy. This comprehensive guide will walk you through every step of the process, from planning your strategy to ensuring your property is tenant-ready and compliant with legal requirements.

Plan your strategy

When you pose the question, is it worth buying a house to rent out, the answer lies in how much you are willing to put in at the outset. Buying a house to rent out should never simply be a case of setting your sights on a property, buying it, then finding tenants and signing them up to a rental agreement.

Here’s what you are going to need to cover if you are to make a success of your buy-to-let investment:

1. How will you market your property?

Marketing your rental property effectively is crucial to attracting the right tenants quickly. Consider these methods:

• Online Listings: Use popular property portals such as Rightmove and Zoopla.
• Social Media: Promote your property on platforms like Facebook and Instagram. Try joining Local Facebook groups for your property’s area, as this can be a valuable way of finding good tenants.
• Local Advertising: Make use of local newspapers and community boards.
• Word of Mouth: Inform friends, family, and colleagues about your rental.

 

2. How will you manage your property?

When buying a house to rent out, decide whether you will self-manage or engage the services of a managing agent to take care of the everyday running of your rental property.

Each option has its pros and cons:

Self-management:

Pros:   Cost savings, direct tenant interaction, full control over your property.

Cons:  Time-consuming, requires knowledge of landlord responsibilities, property marketing and tenant referencing.

Using a managing agent:

Pros:   Professional management, less hassle, expertise in legal and maintenance issues.

Cons:  Management fees will come off your rental yield, less direct control over your property.

If you decide to use a managing agent, making the right choice is crucial for a successful and stress-free rental experience. Here are some key factors to consider when selecting a managing agent to help you when buying a house to rent out:

Reputation and experience

Track record: Look for agents with a proven history of managing properties effectively.

Reviews and testimonials: Check online reviews and seek testimonials from other landlords.

Services offered

Comprehensive management: Ensure the agent offers full management services, including tenant sourcing, rent collection, tenant liaison, maintenance, and property inspections.

Tailored services: Opt for agents who can tailor their services to meet your specific needs.

Transparency and communication

Clear fees: Ensure there is a transparent fee structure with no hidden charges.

Regular updates: Choose an agent who provides regular updates, and who is easily reachable for queries and concerns.

Tenant vetting process

Thorough screening: Confirm that the agent conducts comprehensive tenant referencing, including credit checks, employment verification, and Right to Rent checks.

Legal and compliance knowledge

Regulatory compliance: The agent should be well-versed in current landlord and tenant laws, and ensure your property complies with all regulations.

Accreditations: Look for agents who are members of professional bodies, such as ARLA Propertymark or RICS.

Maintenance and repairs

Efficient handling: Ensure the agent has a reliable system for handling maintenance requests and repairs promptly in order to keep your tenants happy, and your property compliant.

Qualified contractors: The agent should work with qualified and insured contractors to perform quality repairs and maintenance.

Rental income protection

Rent collection: The agent should have a robust process for rent collection and dealing with arrears.

Guaranteed rent options: Consider agents who offer guaranteed rent schemes for added security. Many will include a full property management service in addition to the guaranteed rent, removing all the headaches from the rental process.

By taking all of these factors into consideration, you can select a managing agent who will effectively manage your property, optimise your rental income, and reduce the stress and effort involved in being a landlord.

3. How will you deal with void periods?

Minimising void periods is crucial for maintaining a regular rental income. Strategies for maximising your occupancy rates include:

Guaranteed rent schemes:

A guaranteed rent scheme ensures continuous income, even during void periods. So you’ll never have to worry about being without your rent, for the duration of the agreement.

Marketing:

Start advertising the property well before the current lease ends to give yourself the best chance of a seamless transition from one tenant to the next.

Competitive pricing and features:

Set a competitive rental price to attract tenants quickly, and offer appealing features, such as allowing pets, high-speed broadband, smart home controls, parking, outdoor space and energy efficient appliances.

4. How will you deal with unpaid rent?

In order to safeguard against unpaid rent, you may consider:

Guaranteed rent schemes:

Even if your tenant defaults on the rent, the guaranteed rent scheme will continue to pay.

Landlord insurance:

This can cover lost rental income, but it’s different from guaranteed rent. It often involves paying an excess, as well as a claim process and minimum arrears period, and may not cover all situations.

Learn the differences between guaranteed rent schemes and landlord insurance.

5. How will you achieve a profitable rental yield?

To ensure a good return on your investment when buying a house to rent out, you’ll need to make sure you understand the local rental market and set a competitive rental amount.

When working out your rental yield, you need to factor in all expenses, including mortgage repayments, maintenance, legal costs, management and insurance.

These guides should help you with this task:

What is a good return on rental property?

How to calculate ROI on rental property

Choosing a rental property – what to consider when buying a house to rent out?

When selecting a rental property, there is a lot to consider:

Tenant type

It is very important to identify your target tenant group so that you can tailor your property and marketing efforts.

Your core choices will be:

• Students
• First-time buyers
• Young professionals / couples
• Families
• Retired

Location

Proximity to amenities, schools, transport links, and places of work is a major consideration. Your chosen tenant type will dictate your decisions here.

For example, if you are looking to house families, then schools, nurseries, parks and playgrounds will need to feature high on your priority list. If you are targeting students, you’ll be seeking out property in university towns or close to colleges and training schools.

For young professionals, look for properties with nearby transport links or in city centres. And for couples, you’ll want a property close to quality amenities.

Demand

Rental demand will be higher in certain areas than others.

For example, in high population locations, there will be more call for rental properties, as will be the case around educational establishments, hospitals and large commercial developments.

Property type

Again, your chosen tenant type will dictate which kind of property you will invest in.

Flats are more suited to younger couples and first time buyers, whereas houses with good-sized living space and outdoor space appeal more to families and higher-earning couples.

Houses in multiple occupation (HMOs) will be more for students and house-sharing young professionals, whilst retired renters will generally prefer bungalows.

Buying a house to rent out – getting prepared

There are various things you’ll need to arrange when preparing to become a landlord. These include:

1. Tenancy agreement

You will need to draw up a legally binding tenancy agreement to clearly set out what you expect from your tenants, and what each of your respective responsibilities will be.

Because the agreement will cover things such as rent increases and break clauses, it is vital to consult a specialist landlord and tenant lawyer to draft it professionally for you, so as to avoid issues down the line.

2. Deposit protection via approved schemes

You will need to ensure your tenant deposits are protected in a government-backed scheme. You have three choices:

• Deposit Protection Service (DPS)
• Tenancy Deposit Scheme (TDS)
• MyDeposits

This is a legal requirement. Landlords are not permitted to retain their tenants’ deposits in their own bank accounts or elsewhere.

3. Check-in and inventory

There is only one way to record the contents and condition of your property at the start of a tenancy, and that is by organising a detailed inventory and check-in report.

An inventory and check-in report will protect you against disputes, as well as providing evidence for situations where you wish to retain some of the tenant’s protected deposit to cover repairs or replacements.

It is the landlord’s responsibility to prove to the tenancy deposit scheme adjudicator that the tenant has caused damage or removed items, and without a detailed, time-stamped photographic report, there is little chance that they will find in the landlord’s favour.

It is also worth noting that few deposit scheme adjudicators will rely on ‘DIY’ inventories undertaken by the landlord themselves. So it is well worth investing in a professional independent inventory service.

4. Mid-term inspections

Regular inspections help maintain the property’s condition and address issues early, ensuring your own legal compliance, as well as tenant satisfaction.

Be sure to arrange your first mid-term inspection within six months of the tenancy start date.

5. Landlord insurance

Landlord insurance protects against the risks associated with renting out property. There are different types of landlord insurance. You will find that most will offer buildings and contents insurance, and then you can add a variety of additional cover options that suit your specific needs.

These may include liability cover, theft and vandalism cover, legal protection and cover for loss of rental income.

6. Licence

In some locations, local authorities may require landlords to obtain a licence for certain types of properties so that they can keep a check on whether the properties are being maintained in a safe and well-managed condition. HMOs will always require a special type of licence.

Be sure to research the licensing requirements within your local area, as they will vary from one location to the next.

7. Legal documentation and compliance

Renting a property is covered by a variety of legislation. Landlord regulations are subject to regular change, so it is important to stay up to date.

Before you rent your property, you must have various documents in place. These include:

• Electrical Installation Condition Report (EICR)
• Gas appliance annual safety check (CP12)
• Energy Performance Certificate (EPC)

You must also carry out Right to Rent checks to ensure your tenants have the right to lawfully live in the UK in accordance with the Immigration Act. Omitting to do this can lead to fines, or even a custodial sentence.

The Homes (Fitness for Human Habitation) Act 2018 requires landlords to ensure their properties are ‘fit for human habitation’. This means the property must be safe, healthy and free from any risks that could cause illness or harm. If a tenant has an accident or becomes ill due to non-compliance with this Act, then landlords can face legal action.

Finally, in England landlords are required to provide their tenants with a copy of the How to Rent Guide to ensure they are informed about their rights and responsibilities.

You can find more detailed information on landlord responsibilities in our guides, How to Rent Out Your House, and What You Need to Rent a Property.

Buying a house to rent out? Consider securing your buy-to-let investment with a guaranteed rent scheme from City Borough Housing.

Wondering is it worth buying a house to rent out? The answer is yes, it could be, if you follow all the guidelines, plan your strategy and take steps to protect your investment. One such step is a guaranteed rent scheme.

The City Borough Housing guaranteed rent scheme includes full property management, as well as tenant sourcing and referencing, day to day tenant liaison and everyday repairs and maintenance.

We also offer quarterly property inspections, and a promise that your property will be returned to you at the end of the agreement in its pre-let condition, allowing for fair wear and tear.

To learn more about how a guaranteed rent scheme could benefit you as a landlord, and to request your free rental valuation to discover how much you could achieve for your property each month, please get in touch with our helpful team.