How To Rent Out Your Home
So you Want to Be a Landlady?
As much time and effort as we put into making our own home fabulous, there are times when we may need to entrust it to private tenants while we’re away. Perhaps you’re waiting for the building of a brand new home and won’t be able to sell by the time you move into your new place. Maybe you’re going to spend some time travelling and want to make sure that you won’t have to worry about the mortgage while you’re away (travelling internationally can be expensive after all).
There are many reasons why a home owning gal might want to become a landlady but whatever her raison d’etre it’s important that she knows what her duties and responsibilities are as well as the inherent costs. While landladies can often at least cover their mortgage payments with income from renting out their home, many are often unaware of the upfront and ongoing costs involved.
Many landladies and landlords are seasoned property investors who are savvy to the many considerations that go with property letting, many first timers can find the whole ordeal somewhat confusing and if they’re not careful, the costs can run away with them. Here we’ll look at the legal and moral obligations that you’ll have to your tenants, the unexpected costs of letting and the compliance issues that both you and your tenant will have to adhere to.
There’s a lot to juggle which may make it an ordeal that first timers may need support with. While there’s legally nothing stopping you from taking out an ad in the classified saying ‘studio apartment for rent’ and taking it from there, new landladies are advised to get help. Fortunately, there is help out there in the form of…
# Property Letting Agents
Letting through an agent takes a lot of the administrative headache making it ideal for first timers or those with other pressing logistical concerns such as travel or moving house. If, however, you’re planning on using rent payments as your sole form of passive income then you need to be aware that property letting agents’ fees can put a significant dent in your profit margin (typically around 10-15% of your rental income). Choosing the right letting agent for you is a key part of getting the most out of the process.
It’s important to establish trust and arrive at a final rental figure that you are happy with and that the agent believes will make the property attractive to prospective tenants. However, property management services are diverse, so don’t allow an agent upsell you into a loss with extra services that you either won’t need or don’t apply to your property. You should expect your letting agent to:
- Advertise the property for you.
- Show potential tenants around.
- Draw up a tenancy agreement that meets all compliance requirements.
- Deal with tenants and prospective tenants on your behalf.
- Carry out inspections and compliance checks.
# Do your Research
You may have no idea of what an appropriate rental price may be. I’d advise you not to simply settle for your monthly mortgage payment as this may leave you with a shortfall if agency fees come into play or if unexpected costs arise. Get to know the local market by researching rental prices on similar properties in your area. You should also ensure that letting your property is permitted in your mortgage contract. Most mortgage lenders are permissive of property owners letting, although homeowners have a legal obligation to inform their mortgage lenders of your intentions and acquire a governmental ‘consent to lease’.
# Get your Property ready for your Tenant
While making sure that your property is clean, empty and a blank slate for your tenants (it’s their home now) is good form, it’s by no means your only obligation when it comes to getting your property ready for your new tenants.
- Ensure your refrigerator, oven washing machine and dishwasher are clean and in good working order.
- Make sure all electrical fittings and fixtures are safe and in good working order. If a tenant electrocutes themselves, it’s your legal responsibility.
- Remove delicate, fragile items are removed.
# Get Compliant
As a landlady your property has some safety compliance obligations that you need to be aware of:
- Smoke alarms and extractor fans must be fitted.
- If you’ll be supplying furniture, its upholstery needs to be flame retardant.
- Gas appliances must be tested by a registered engineer.
- Your tenant’s deposit needs to be protected. If you spend it, it’s your obligation to pay them out of your own pocket.
# Get to know your Tenants
If you’re not letting through an agent, vetting prospective tenants is obviously important, but you may want to get to know them a little for your peace of mind. After all, few people want to leave their beloved home in the hands of a stranger. Carrying out credit checks on prospective tenants is a relatively quick and easy affair that can save you the nightmare of letting to unreliable tenants. If you’re on your travels or arranging the move to your new home, the last thing you want is to find out that your tenants are unable to pay this month’s rent.
Landlord insurance is essential to protect you from a range of nightmare scenarios from flooding and hurricane damage to tenant vandalism. The right policy can cover your legal expenses if you need to sue your tenants for a violation of the contract and even pay your mortgage payments if your tenant defaults on their payments.
# Keep an Eye out for hidden Costs
Though your rental income will hopefully cover your mortgage and the tenant will pay any tax and utility use you will still be liable for costs as a landlady. Remember that your rental income is taxed at the same rate as income from your job which will typically be 20%-40% depending on your tax bracket. After tax and any agent’s fees, your passive income may be less than you expect.
Also keep in mind also that you will be liable for the costs of any minor repairs and take care of reasonable wear and tear incurred by the tenant. I recommend that you make monthly payments into an emergency kitty for such repairs. After all, it’s better to have it and not need it than need it and not have it.
With the right preparations, being a landlady can provide you with the income to keep your mortgage payments covered and your property safe while you concentrate on your next big adventure.
Could you find some helpful information in this article? Please feel free to tell us about your own obstacles and experiences with renting out your property. I am looking forward to reading your comments. If you are a blogger yourself, make sure to include a link to your blog so that I can find you easily and reciprocate!
Thank you so much for your precious time!