Everything you need to know before you buy to let
You’ve bought your new rental property, now what? Here's a list of the essential to-dos for new landlords.
Last updated on
Apr 12, 2024 15:15
Just keep in mind that this is generic information for a buy-to-let; if you'd like advice that's tailored to your situation, it's a good idea to chat to an expert.
First off, check your lease and your mortgage terms to see if there are any restrictions.
If the property is a leasehold, you’ll need to check you have permission to let it. Your lease may have certain restrictions on letting the property that you’ll have to follow, and you might need to get written consent from the freeholder. You’ll want to double check your mortgage terms too, in case there are any restrictions.
You’ll need to follow national and local landlord regulations. If your property is a home in multiple occupancy (HMO), you’ll need to get an HMO license from your council. Local authorities also sometimes have something called “additional and selective licensing,” which your property could fall under (even if it’s not an HMO), so check your local council’s website to see if they ask for extra licensing.
You’ll need an energy performance certificate (EPC), which rates how energy efficient your property is on a scale of A to G (A being the most efficient, and G being the least). You’ll have to renew yours every 10 years, and make sure your property is rated E or above before you can let it.
If your property has a gas supply or appliances (like a gas boiler), you’ll also need a gas safety certificate from an engineer who’s registered as Gas Safe.
You’ll need an electrical installation condition report (EICR) to show that everything is safe. If your property is an HMO, you’ll also need a Portable Appliances Test for the oven, fridge, and any other appliances you’re supplying.
In England, you’ll have to make sure you install a working smoke alarm on every inhabited floor. You’ll also need a carbon monoxide alarm in any inhabited room with an appliance that burns solid fuel (like coal or wood). Make sure all your alarms are working properly before anyone moves in!
If you’re letting your property furnished, the furniture will need to meet fire safety regulations (check the furniture labels to make sure). If your property is an HMO, you’ll have to meet a few more fire safety requirements.
Last but not least, you’ll need to get a legionella assessment.
Don’t forget about insurance! You’ll need building insurance, as well as contents insurance for any furnishings you provide. Once you find tenants, you should also set up a Rent Guarantee Insurance policy so you’re protected in case they stop paying rent.
Finding the right tenants can sometimes be the hardest part of letting. You have two options for finding tenants: do it yourself directly, or use a letting agent.
For a one-time fixed fee, your letting agent will advertise your property, book viewings, arrange the let, and take care of tasks such as checking references, running credit checks, drawing up the inventory, drafting the letting agreement, and collecting the security deposit.
Or, you could use an online listing site to advertise your property yourself. Just remember you'll have to do the rest of it (viewings, references, checks, and collecting and registering their security deposit) yourself, too!
You’ve found tenants, hooray! Now you’ll have to carry out a Right to Rent check on them – basically, checking they have the right to rent in the UK. That means inspecting a valid combination of ID documents (in their presence) and making photocopies.
To create a standard tenancy, you’ll need to create an agreement called an “Assured Shorthold Tenancy,” which both you and your tenants will sign.
If you take a deposit, you’ll need to register it with a government-backed deposit protection scheme. You’ll have to tell your tenant about the scheme and explain how you’re protecting their money within 30 days of receiving it. You’ll also need to give your tenant the “How to Rent” leaflet – the UK’s checklist for renters.
Before your new tenants move in, you’ll want to carry out an inventory of your property: a list that describes the condition of each room and part of the property, and any furnishings. Give this to your tenants, and ask them if they want to suggest any changes, and then sign and date it once you’ve both agreed on everything it says.
If you're using a letting agent, they'll do all this for you!
Like all income, rental income is taxable. Make sure you’re set up to pay the right amount. You’ll need to pay tax if you earn more than £2,500 from rent in a year (after subtracting expenses). If you only have one or two properties, it might be easiest to simply declare what you’ve made in the property section of your Self Assessment tax return. Either way, you should always get professional advice when it comes to working out taxes. It’s worth noting that new tax rules are being phased in that mean landlords can only deduct 20% of the cost of their mortgage interest from their taxable rental income. Before, you could deduct the full amount of mortgage interest costs before you paid tax on rent earned. (You can read more about taxes for buy-to-let income here.)
It’s popular for landlords in the UK to buy properties through limited companies. But is it the better choice?
Buying to let can cost way more than you expect. Get clued up on landlord costs: from letting agent fees, to property maintenance, to tax.
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