How do I become a landlord in the UK? | What to consider

Home / Andy's Blog / How do I become a landlord in the UK?

How do I become a landlord in the UK?

UK landlords
Table of Contents
    Add a header to begin generating the table of contents

    Becoming a landlord might sound like a good way to make an investment and a monthly income, but where are the pitfalls, and what should you be aware of before jumping into the buy-to-let property market?

    Check out our guide below for all the pros and cons.

    What do I need to do to become a landlord?

    Owning a rental property can be demanding and costly. It’s not just a case of buying a property and letting it out to tenants. There are many aspects to consider when considering becoming a landlord.

    Can I get an HMO as a first-time landlord?

    Yes, it is possible, although it is unusual for first-time landlords to invest in HMO property.

    Rental property types

    There are four main property rental types, each of which has its advantages and downsides.

    Let’s look at each in turn:

    Residential

    Many landlords begin their property investment journey in a residential rental property. Often, people accidentally become landlords because they are unable or unwilling to sell a property where they no longer wish to leave.

    This can occur when people meet a partner and move in together, or they move for work, leaving an empty property they then decide to rent out. Residential rentals can be on a furnished or unfurnished basis.

    HMO

    A House of multiple occupation HMO means that a leasehold property is split into several flats. These types of property are commonly used for housing students or are often let to young professional people. There is one main front door and a communal hallway, and then each flat has a secure entrance.

    Commercial

    Commercial landlords own properties that are used for business purposes, including shops, business rental units, warehouses and offices. These types of properties come with additional regulations to be followed, and getting mortgages for commercial properties is somewhat different to residential mortgages.

    Holiday rental property

    If you have a property in a beautiful location or a popular tourist area, you could decide to make rental income from letting your property on very short holiday lets.

    To learn more about choosing the right buy-to-let investment for you, check out our blog.

    Mortgage options for rental properties

    Mortgage options for rented properties are different from residential mortgages. You’ll need a buy-to-let mortgage, which is usually more expensive to set up and often has higher interest rates, too.

    Switching from a residential to a buy-to-let

    If you are moving out of your property and you are planning to let it out, you may be able to switch from a residential mortgage to a buy-to-let mortgage with the same mortgage lender. This is likely to be the most straightforward way to finance your let property.

    Buying property using a buy-to-let mortgage

    Buy-to-let (BTL) mortgage payments are often higher than standard residential mortgage repayments due to the risks lenders perceive with rental property.

    Buy-to-let affordability criteria will take into account the expected rental yield when determining how much money a lender will loan. Don’t forget that you will also need to pay stamp duty land tax which can add a significant amount to the overall cost of property investment.

    Deciding between furnished and unfurnished properties

    If you have a lot of furniture already in the property you wish to rent out, you may find it easier to offer it as a furnished property.

    This can reduce the pool of prospective tenants, though, so you may need to be flexible and put your furniture in storage to find the right tenants if they don’t want to rent a property furnished. You may wish to take advice from a letting agent or local estate agents who have seen similar rental properties when making this decision.

    How will you manage the property?

    It can be challenging to find tenants who will respect your property, but this is the key to having a good experience with your privately rented property.

    A letting agent may be able to screen prospective tenants, do rent checks, show them around the property, and manage the tenant’s deposit and the tenancy deposit scheme. Letting agent fees should also be factored into the cost of managing your rental property, and an online letting agent could be a more cost-effective option than a high-street agency.

    Property management companies

    A property management company can handle the day-to-day admin of renting out your property including dealing with tenant disputes, tenants who don’t pay rent on time, managing maintenance providers and doing the annual electrical safety checks and other health and safety inspections.

    What legal responsibilities do landlords have in the UK?

    If you are an HMO landlord, you must have a landlord registration. For Scotland, Wales and Northern Ireland, private landlords renting single residential properties must also register. In some parts of England, the local council requires registration, but this is not yet a national requirement.

    Landlord insurance

    When you become a landlord, you’ll need to take out landlord insurance. This will protect you if you have problems such as fire, vandalism or loss of rent. Common cover includes building insurance and rent guarantee insurance, but you can also include accidental damage.

    Tenancy agreement

    A tenancy agreement, also known as a lease agreement, is a legally binding contract between you, the landlord and your tenant.

    It will include the terms of the tenancy, such as:

    • The tenant’s name, your landlord’s name, and the address of the property which is being let
    • The date the tenancy began and its expected duration, whether it’s an assured tenancy or assured shorthold tenancy. A fixed-term tenancy means the landlord has an automatic right to regain possession of the property at the end of the initial term
    • The amount of monthly rent payable, when and how it is paid and when it can be reviewed
    • What the rent includes – for example, council tax or energy bills
    • Whether your landlord will provide any services – e.g.maintenance of common parts and the cost of these
    • The notice period you and your landlord need to give to end the tenancy

    Taxes

    If you rent out a property, you are required to pay tax. As an individual landlord, you will pay income tax on profits, whereas if you set up a company to hold the property, you will be subject to Corporation Tax.

    How much profit you can make will depend on the annual rental income and how much you spend on maintaining your property. Allowable expenses include maintenance costs, finance arrangement fees, letting agency fees, advertising costs and so on.

    Although corporation tax is charged at a lower rate (19-25%) than income tax (20-45%), there are other costs associated with being a limited company, such as producing annual accounts.

    Safety requirements and checks

    Private landlord responsibilities are significant. You are responsible for ensuring that the property is fit for human habitation at all times and should pay all the costs associated with ensuring the building is safe.

    Each year, you must arrange and pay for a gas safety certificate which is an annual gas safety check undertaken by a registered gas safe engineer on the gas appliances in the property. Landlords must all have an energy performance certificate epc for the property to prove to the prospective tenant that the property is energy efficient. Properties should also have at least one carbon monoxide alarm.

    Is it worth becoming a landlord in the UK?

    Becoming a landlord may not be as lucrative as it once was. Tax rules have changed, which means that landlords can no longer deduct mortgage payments from their rental income when calculating profits for tax. Landlords receive mortgage interest tax relief, but this is at a rate of 20% rather than 100% of mortgage interest.

    As a result of these tax changes, it is harder for landlords to make a profit now. You should also remember that when you come to sell a property, you may have to pay capital gains tax if your property has increased in value although you can claim tax relief by deducting some refurbishment costs.

    Health and safety responsibilities are also a more costly and time-consuming part of being a landlord now.

    How can Simmonds Mortgage Services assist you?

    Simmonds Mortgage Services is a whole market mortgage broker with access to a large pool of buy to let lenders suit your circumstances. Call 01184 693037 to speak to a highly experienced broker able to help you achieve your property investment plans today.

    Frequently asked questions about becoming a landlord in the UK

    How do you calculate rental yield?

    to calculate rental yield take the cost of the property and divide it by the annual rent. Greater than 5% yield is likey to be a profitable investment when taking into account all costs.

    Picture of Andrew Simmonds

    Andrew Simmonds

    Andrew Simmonds is the managing director at Simmonds Mortgage Services. He's been providing mortgage advice to home owners for many years.

    About Us
    See our other news articles
    Can you rent out your house instead of selling it?

    You may be facing a decision about whether to sell or rent...

    Read More
    Can I turn my house into an HMO?

    In short, the answer is yes, you can turn your house into...

    Read More
    Why does the currency of my income impact my mortgage application?

    If you’re looking to return to the UK from working abroad or...

    Read More

    Google Reviews

    Google Rating
    5.0
    Based on 303 reviews
    js_loader

    Request a Call-back

    Please complete our website contact form and a mortgage advisor will call you back, or book a meeting with us:
    Scroll to Top