Becoming a landlord can be a minefield and many will have reluctantly found themselves in this position in 2008 when the residential property market collapsed. But fast forward seven years, people are once again choosing to invest in rental property due to the potential yields – anything between four and six per cent net. The profile of our landlords shows the majority are ‘amateur property investors’, either professionals with another job or retirees.
But it’s not a straightforward case of buying a property, putting a few bits of furniture in, finding a tenant and waiting for the funds to accumulate; there is a raft of legislation that must be adhered to before a tenant even sets foot across the threshold.
It’s a complex process which is why it’s beneficial to seek advice and treat a rental property as one would any other asset held as an investment.
As a starter, all landlords need to have a landlord registration number which they must obtain from their local authority. An Energy Performance Certificate is required as is a Gas Safety Certificate. Carbon monoxide detectors have to be fitted as do mains – not battery – smoke alarms in halls and living areas with a mains wired heat detector installed in the kitchen. These devices have to be interlinked.
A legionella risk-assessment must be undertaken and all furniture has to comply with the Fire Safety Regulations 1988. Some landlords are future-proofing their investments and opting for fire retardant curtains.
Also worth having carried out is an Electrical Installation Condition Report which will be compulsory later in the year, and a Portable Appliance Test to ensure all electrical items are up to scratch and not likely to cause a fire risk.
If the property is likely to be rented out to three or more unrelated people, such as students, an HMO licence needs to be obtained.
But that’s not all. Landlords are also obliged to meet the repairing standard before tenancy begins and throughout by ensuring the building and fixtures and fittings remain in good working order.
Once all that is done, a tenant has been secured and a legally robust tenancy agreement signed, their deposit needs to be transferred to a Tenancy Deposit Scheme. Established nearly three years ago, this gives tenants and landlords a degree of security - holding tenants to account for damages and preventing unscrupulous landlords from making excessive claims.
Landlords who rent out a flat will be liable for factoring fees. They can range from a hundred to several hundreds of pounds, so can be a major running cost.
Finally, just when you think you can put your feet up there is the annual tax return that has to be completed. It’s important to keep all receipts for new furnishings and any work done as these can go towards offsetting the amount of tax to be paid.
Owning a rental property is an active investment and an ongoing commitment which needs to be managed year round and doesn’t look after itself. It is, however, a sound investment if the location and condition of the property are good and the management tight.
One of the best pieces of advice is for tenants and landlords to keep an open dialogue. There needs to be a degree of compromise from both sides which is why having honest and open channel of communication, as well as respect, is the key to success.
If you think about your own home, where you are likely to be making improvements or minor repairs all the time, a rental property is rarely different. It is someone’s home and your investment, both need care and attention.
And happy tenants make for happy landlords.
Malcolm Cannon is CEO of Braemore Property Management, Edinburgh.