How To Be A Landlord

David Salusbury, chairman of the National Landlords Association (NLA), answers questions about the basics of buying-to-let and being a landlord.

Can I make money from buy-to-let?

It is not a get-rich-quick scheme, but it is a means of giving individuals financial independence - it can act as a form of pension provision. Whatever happens about housing bubbles, rocketing values and property slumps, in the long run property does increase in value - there is capital appreciation. As a long term investment I believe investing in property is always going to be an attractive option.

It's also a good thing in my view because it diversifies the ownership of property in the UK, because the hundreds of thousands of people who own a flat or property are ensuring between them that the ownership of the country's real estate wealth is not concentrated in the hands of too few. This is a point which is not often made.

What property should I buy?

Potential landlords should research to establish whether there is the demand for rented property, because some areas of the country are low demand. Unsurprisingly London and the South East are generally high demand areas. You can get an idea of whether there's demand for rented accommodation by looking in the local press and local newsagents' windows and so on.

If there is a demand then you can look at property values and search on the web for rental values and yield. Rental yield is the percentage of the capital value of the investment returned in rent, the receivable rent.

It's better to invest in property within convenient range of where you live if you can.

How much should I spend?

Do not overborrow. 75 to 80 per cent of the value of the property is probably the limit. You need to be careful if you are relying completely on the rental income to cover the cost of a mortgage. Be prepared and think what you would do if you found yourself in difficulty - have an emergency plan.

How can I prepare the property?

For a rental property it's a good idea to make decoration and furniture neutral, and keep the property uncluttered and simple, to look fresh and inviting for potential tenants.

Make sure everything works, and that furniture is in reasonable condition according to how you wish to present the property.

Should I do it myself or go through a letting agent?

If the property is within driving range of where you live I recommend that you manage it yourself. You'll learn the ropes quite quickly. There are pitfalls lying in wait to ensnare the unwary, but if you approach it sensibly and with a view of determination to get it right and take the trouble to find out what you need to know, then doing it yourself is best.

However if the property's remote, for example you live in London and the property's in Manchester, then it is probably better to retain the services of a reputable letting agency.

Do I need insurance?

If you have a flat in a block then the freeholder will have third party liability insurance but it's wise to insure the contents of the flat, if they are reasonable - some landlords don't bother to insure because they replace as they go, but it's usually best to have some form of insurance.

If it's a house, let to a family for example, then you need landlord type insurance, which a number of companies provide.

What laws do I need to worry about?

Letting of private residential property is very heavily regulated. If you are letting relatively modestly, for example a single flat, then you do not need to be too concerned about the plethora of legislation. This is really designed to correct abuses at the lower end of the private rental market - generally multiple occupancy houses.

Draw up a proper tenancy agreement, in a way that ensures tenants understand their obligations to you as a landlord as well as the landlord's obligations to them. It's a contract where both parties accept responsibility for meeting a set of obligations.

You need to take a deposit. The normal deposit is about equivalent to a month's rent. It's held against damage to the property and as a surety for the tenants to meet their responsibility to the actual property. You must protect that deposit in accordance with the legislation which came into force in April 2007.

Take photographs at the beginning of the tenancy. A digital camera is ideal. Get the tenant to sign a statement on the back of the picture to the effect that the photo is a fair and accurate reflection of the state of accommodation.

Ensure that utilities such as water are transferred to the right account.

How do I deal with tenants?

In the majority of cases dealing with tenants should not be a problem. You need to be careful who you let to. Never assume the credentials of somebody you're proposing to let to are genuine - always check with their employer or a previous landlord. Establish that the individual who you're proposing to do business with and let your accommodation to is who they say they are and they do what they say they do.

If you're confident enough to do it by telephone then you will find that the majority of employers are keen to help their employees get settled and therefore will confirm that the individual does indeed work for them, and they'll give some indication of the firm in which they work, whether they are on probation or where they are in the company.

A previous landlord will invariably be prepared to tell the new landlord that the individual is trustworthy, if the tenant has been a reasonable tenant - as the majority of people are.

What do I do if things go wrong?

If you have a problem during the tenancy then you need to try to resolve issues early rather than allow them to fester. You should maintain contact with the tenant so that you are aware if things are going wrong. It's no good buying a property, putting tenants in and then having nothing to do with them. Visit to see and talk about how things are going, by prior arrangement, and establish some sort of client relationship. If you do that, often any problems that they might have will be nipped in the bud.

If you find you've made a mistake and the tenant who presented himself or herself at the beginning of the tenancy nicely dressed, well spoken and very plausible turns out not to be that person at all, then you need to act early to resolve that. In that situation the only recourse you have really is to seek possession.

In the majority of cases the reason for seeking possession is either non-payment of rent - rent arrears - or failure to meet the obligations of the tenancy in terms of treatment of the accommodation - in other words they're wrecking the property, or behaving disruptively and inhibiting the peaceable enjoyment by other people, perhaps other tenants in adjacent flats, with anti-social behaviour such as late night parties, shouting or domestic rows.

If you are unfortunate enough to get that then all you can do is serve notice, and then if they do not go, apply to the courts for a possession order under section 21 or 8 of the 1988 housing act. In those cases you can do it yourself by serving the notices if you are confident about drawing up the documentation, many landlords do it themselves, or you would have to get a solicitor, or you can get help from the NLA.

Web Links

www.landlords.org.uk - The National Landlords Association provides advice and information for landlords. This includes a telephone helpline, legal documents and events, plus discounts on insurance and other specialist services.

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