Last month Simply Business hosted a live discussion offering tips for new landlords.
Our expert panel included Lucy Morton from the Association of Residential Letting Agents, Vanessa Warwick, co-owner of Property Tribes, and Landlord Referencing owner Paul Routledge.
You can watch clips from the discussion here, and read a transcript below.
What insurance do I need?
Vanessa said that underscored the importance of inventory, and also pointed out the potential benefits of agents who perform mid-tenancy checks. She said that insurance is generally undervalued, and that buildings insurance and public liability cover are both important.
How do landlords prevent damage to their property?
Paul said that landlords face many of the same problems that face regular homeowners, but that landlords also have an obligation to their tenants. He said that insurance is important to protect against instances like flood. He advised against buying investment properties in flood areas.
How do letting agents find contractors?
Lucy said that her contractors are audited annually, and that they must meet certain criteria. She highlighted that ARLA agents will use reputable contractors.
How do you select tradesmen to work in your property?
Paul suggested that landlords should go with recommendations wherever possible, and highlighted the importance of online communities like Landlord Referencing and Property Tribes as places in which recommendations might be sought.
How does ARLA vet agents?
Lucy said that ARLA’s vetting rules are very strict. The owner must be a member and must have all of the relevant qualifications, along with professional indemnity insurance. ARLA may also ask member forms for their accounts. Members must also join the Property Ombudsman scheme. She suggested, however, that landlords should be prepared to move on in the event that a relationship with an agent doesn’t work out.
Are there online tools or software that I should use as a landlord?
Paul said that he does not use any software, and that he runs his entire portfolio through an online letting agency. He references through Landlord Referencing, and has designed his own Excel spreadsheet. This automatically produces statements to tenants.
Vanessa, meanwhile, uses a cloud-based digital inventory app, along with property management app Arthur Online.
Should I use an agent for my property?
Vanessa said that she has always worked with letting agents, and that they can be particularly useful if landlords intend to keep up their dayjobs. She also suggested that using an agent may mean that you can free up your time in order to find other properties.
Do I declare taxes for renting out my property, even if my income is below the tax threshold?
Lucy said that landlords should seek advice on tax, and that Self Assessments should be completed even if landlords do not think that they owe any tax.
What are the legalities of letting a property?
Lucy said that there is a difference between tenancies that are covered under the Housing Act and tenancies that are not. Housing Act tenancies are normally Assured Shorthold, and are normally up to £100,000 a year. This constitutes most tenancies. She said that ARLA’s tenancy agreements are updated every month to keep up with the law.
Energy Performance Certificates must also be performed on properties, Lucy said, along with gas safety checks. PAT testing, wiring checks, and furniture compliance checks are also important. Deposits must also be registered with a deposit protection service.
Paul said that he services his own properties, and that he finds this easier as a larger landlord. He said that legislation should be “on an even playing field” and that, in his view, the obligations of the tenant are being forgotten. He again highlighted the importance of asking questions through online forums in order to avoid mistakes.
Vanessa underscored that a letting agent “does not divest you of your responsibility as a landlord,” and that it is important that all landlords understand their obligations.
How do you keep tenants?
Vanessa said that tenants want a “decent, safe place to live.” She said that prompt maintenance and repair is key to ensuring that tenants feel comfortable, and that it is important to instruct letting agents to act in that way too. Lucy agreed that things “fall apart” when properties aren’t properly managed. She also suggested that it is important to vet contractors effectively.
How do you set a rental price?
Paul said that he looks at the market value by comparing similar properties. He said that he has in the past reduced the rent in order to get the right tenant. He highlighted that most landlords want their tenants to stay for a long time, and that the right rent is important for this. Lucy agreed that “comparable evidence” is the key, and that avoiding void periods is the most important factor in overall yields.
Advertising your property - what are the best channels?
Lucy said that agents have valuable expertise, and that they will have specific knowledge of the area. They will also be able to help you set a sensible rent. She said that problems often occur when properly regulated agents are not involved.
Vanessa said that letting agents are “worth their weight in gold”, and agreed that landlords should choose agents that are members of a body like ARLA. She also said that there is a time advantage in outsourcing the letting process to an agent.
How do I find good tenants?
Vanessa said that accredited agents are also important in helping landlords find the right tenants. She said that referencing checks are important, but that landlords should also be prepared to visit prospective tenants in their current property in order to see how they are treated, particularly if they have pets.
Paul said that Landlord Referencing began as what he calls a “lifestyle reference”. He said that landlords should be able to work together to find good tenants, even when tenants refuse to pass on details of their previous landlords.
Lucy said that a tenant should be earning three times the rent each month, and that you should be “concerned” in cases where tenants refuse to give details of previous landlords.
Where should you purchase rental property?
Paul cautioned against investing in London. He said the quality of property outside London for comparative prices is superior. That said, he suggested that it may be more sensible to invest locally – but that the key concern is the quality of the tenant. He also said that it makes sense to spread investment across multiple properties wherever possible. Lucy suggested that it is possible to achieve good yields in major university towns, and that landlords should also consider capital appreciation.
Should you only invest locally?
Lucy said that the key is to research the area. Vanessa suggested that most landlords invest within around a 10 mile radius, and that this is beneficial because you can easily visit the area – but that it is vital to ensure that the tenant demand is there.
Why should you use a letting agent?
Lucy said that a letting agent will not levy fees until a tenant is found. They will be able to advise on the full potential of the property, she said, and will understand the potential demand for that type of property in the area.
What are the dos and don'ts for purchasing a property?
Paul said it is important not to pay over the odds because you have “fallen in love” with a property. He said the process should be treated like running a business, and that landlords must not over-invest. He also said it is vital that landlords consider the relevant legislation before buying.
Lucy said that landlords should always get a second opinion before purchasing, and reminded that the sales agent will always be acting for the vendor. It is important, she said, to build in void periods to the calculations, and to research the area properly.
Vanessa agreed that it is important to “find the demand before you create the supply,” and highlighted due diligence as a necessary part of the process.
Why be a landlord?
Vanessa said that she became a landlord because she was “ready for a change in life,” and that the profession has given her a new lifestyle. Lucy said that she started her working life at a record label, which invested in property, and that she then moved to become an agent. Having advised landlords, she decided to become a landlord herself.