Renting Out Your Property For Dummies, UK Edition

Melanie Bien has written about property for national newspapers and magazines and spent five years as Personal Finance Editor at the Independent on Sunday. She is the author of Renting Out Your Property For Dummies, Buying a Home on a Budget For Dummies and Sorting Out Your Finances For Dummies.Robert Griswold lectures at the Institute for Real Estate Management.

"This book is ideal for someone considering becoming a landlord and who has never let a property." (Landlord Focus, March 2013)

• Introduction 1About This Book 1Conventions Used in This Book 1What You’re Not to Read 2Foolish Assumptions 2How This Book is Organised 3Part I: So You Want to Be a Landlord? 3Part II: Renting Your Property 3Part III: The Brass Tacks of Managing Rentals 4Part IV: Techniques and Tools for Managing 4Part V: Money, Money, Money! 4Part VI: Only for the Daring 4Part VII: The Part of Tens 5Part VIII: Appendices 5Icons Used in This Book 5Where to Go from Here 6Part I: So You Want to Be a Landlord? 7Chapter 1: Do You Have What it Takes to Manage a Buy-to-Let Property? 9Recognising the Advantages of Owning Rental Property 10Being Honest with Yourself about Your Skills and Experience 11People who need people: Putting your interpersonal skills to the test 11Making sure you have good management skills 13Chapter 2: Deciding Whether to Manage Your Property Yourself or to Hire an Agent 15Managing Your Rental Yourself 16Recognising the advantages of self-management 16Paying attention to the drawbacks 17Managing your property from a distance 17Exploring Professional Management 18Knowing what to look for in a letting agent 19Telling the good from the bad and the ugly 20Paying your letting agent 23Making sense of management agreements 25Knowing the tax consequences of using a management company 26Chapter 3: Becoming an Accidental Landlord 27Deciding to Rent Out Your Own Home 27Needing to move but unable to sell 28Recognising your home’s limitations 28Setting the price 29Finding a tenant 30Knowing the law 30Seeking Consent-to-Let 31Staying on your existing mortgage 32Paying a premium 32Switching to a buy-to-let mortgage 32Remembering your insurer 33Part II: Renting Your Property 35Chapter 4: Finding the Perfect Rental Property 37Knowing What to Look For 37Deciding on size 38Setting your budget 39Finding the ideal location 39Considering dilapidated properties 41Letting out a basement in your home 41Sourcing Your Rental Property 42Using an estate agent 42Buying at auction 43Using the Internet 44Checking Out the Tenant Pool 44Chapter 5: Preparing Your Rental Property for Prospective Tenants 45Coming Up with a Plan to Handle Vacancies 46Considering renovations and upgrades 46Paying attention to the exterior or common areas 48Making sure the interior of the property is up-to-scratch 49Deciding whether to furnish 51Preparing Your Rental Property the Right Way 52Keeping up appearances 53Making sure everything’s ticking over 53Getting out the paintbrush 54Applying some elbow grease 55Sorting out flooring 56Introducing Energy Performance Certificates 57Inspecting Safety Items 57Facing up to fire 57Checking the electrics 58Taking sensible precautions 58Using Outside Contractors 59Chapter 6: Rent, Deposits and Tenancy Agreements: The Big Three of Property Management 61Setting the Rent 62Examining the return on your investment 62Conducting a market analysis of the rent in your area 64Coming Up with a Fair Deposit 65Protecting your tenant’s deposit 66Setting a reasonable deposit 67Avoiding non-refundable deposits 67Increasing deposits 68Using a Tenancy Agreement 68The Rent Assessment Committee 70A standard tenancy agreement 70Chapter 7: Generating Interest in Your Rental Property 73Developing a Marketing Plan 73Determining your target market 74Knowing what your tenants stand to gain from your property 75Understanding the Importance of Good Advertising 76Rifle versus shotgun: Picking an advertising approach 77Kerb appeal: Getting your property to rent itself 78Looking at Your Advertising Options 79Word-of-mouth 80Property signs 81Newspapers 83Internet 89Flyers 90Rental publications 92Local noticeboards 92Local employers 92Letting agencies 93Advertising without Discriminating 93Chapter 8: Handling Prospective Tenants and Showing the Property 95Making the Most of Technology 95Using your phone’s special features to your advantage 96Preparing for Phone Calls 99Having the basic tools ready 99Answering the phone 103Providing and obtaining the basic information 104Convincing the prospective tenant to rent your property 106Checking the prospective tenant’s suitability over the phone 107Handling phone objections 109Converting phone calls to rental showings 109Planning Ahead for Open Houses and Individual Viewings 111Holding an open house 112Scheduling individual appointments 113Providing directions to the property 113Showing Your Rental Property 114Showing a vacant property 114Showing an occupied property 115Checking if the prospective tenant is suitable during the property viewing 116Resolving objections 117Convincing the prospective tenant 118Inviting the prospective tenant to rent your property 118Persuading the prospective tenant to complete a rental application 119Holding a deposit 120Using waiting lists 121Handling Hazardous Materials and Environmental Issues 122Lead-based paint 122Asbestos 123Radon 125Chapter 9: Eenie, Meenie, Miney, Mo: Selecting Your Tenants 127Understanding the Importance of Screening 128Establishing Tenant Selection Criteria 129Verifying Rental Applications 131Verifying the identity of all adults 132Reviewing occupancy guidelines 132Checking rental history 133Verifying employment and income 134Reviewing the applicant’s credit history 136Talking with all character references 138Dealing with guarantors 138Notifying the Applicant of Your Decision 139Avoiding Complaints of Discrimination 140What it is and what it isn’t 140Steering 141Children 142Disabled tenants 142Reasonable accommodations 143Guide dogs 144Sexual harassment 145Part III: The Brass Tacks of Managing Rentals 147Chapter 10: Moving in the Tenant 149Establishing the Move-In Date 150Meeting with Your Tenant Prior to Move-In 151Going over the rules with your new tenant 151Reviewing and signing documents 153Collecting the money 157Inspecting the property with your tenant before the move-in 158Giving your tenant an informational letter 161Distributing the keys 162Setting up the Tenant File 164Preparing a Welcome Pack for Your New Tenant 165Chapter 11: Collecting and Increasing Rent 167Creating a Written Rent Collection Policy 168When rent is due 168How rent is paid 170Dealing with Rent Collection Problems 173Collecting late rent 173Charging late fees 174Handling bounced cheques 175Dealing with partial rental payments 176Serving legal notices 177Increasing the Rent 177Deciding when and how much 178Informing the tenant 178Sweetening the pill 179Chapter 12: Keeping Good Tenants – and Your Sanity 181What Tenants Want 182Timely and effective communication 182Quick responses to maintenance requests 183Respect for your tenants’ privacy 184Enforcement of house rules 184Fair rent and increases 185Renewing Tenancy Agreements 185Tempting your tenant to stay 185Better the devil you know 186Chapter 13: Dealing with Problem Tenants 187Recognising and Responding to Common Tenant Problems 187Late payment of rent 188Additional occupants 188Inappropriate noise levels 189Unsupervised children 190Exploring Alternatives to Eviction 190Negotiating a voluntary move-out 191Using mediation or arbitration services 191Taking your tenant to court 192Evicting a Tenant 192Serving legal notices 192Enforcing County Court Judgements 194Knowing What to Do in Unusual Tenant Situations 195Bankruptcy 195Sitting tenants 195Broken tenancy agreements 196Subletting 196Departing housemates 197Domestic problems 197Death of a tenant 198Chapter 14: Moving Out Tenants 199Requiring Written Notice 200Giving Your Tenants a Move-Out Information Letter 201Inspecting the Property’s Condition at Move-Out 202Noting damages 202Using a Deposit Itemisation form 205Handling Special Move-Out Situations 206When damage and unpaid rent exceed the deposit 206When disputes arise over the deposit 207When the rental property is abandoned 207Part IV: Techniques and Tools for Managing 209Chapter 15: Maintenance 211Recognising the Importance of a Maintenance Plan 212Being Prepared for the Different Types of Maintenance Issues 213Emergency repairs 213Preventive maintenance 214Corrective maintenance 214Custodial maintenance 215Cosmetic maintenance 216And what if I don’t? 216Handling Rental Property Maintenance 217Responding to a tenant’s request for repairs 217Keeping tenants from fixing things themselves 218Purchasing maintenance parts and supplies 219Chapter 16: Safety, Security and Insurance 221Tackling Crime in and around Your Rental Property 221Participating in your local Neighbourhood Watch scheme 222Paying attention to tenants’ questions and complaints about safety-related issues 223Responding to crimes when they occur 224Taking Security Precautions 225Keys 225Lighting 226Addressing Environmental Issues 227Fire safety 227Carbon monoxide 229Natural disasters 229Cover Me, I’m Going In! Making Sure You Have the Insurance You Need 230Choosing a company and getting the coverage you need 230Understanding the types of insurance cover available 232Determining the right excess 234Encouraging your tenants to get home contents insurance 234Handling potential claims 235Part V: Money, Money, Money! 237Chapter 17: Raising the Cash to Buy Your Rental Property 239Making Sure You Can Afford to Buy a Rental Property 240Buy-to-Let Mortgages 240Generating enough rental income 241Raising a deposit 242Finding the right buy-to-let mortgage 243Remortgaging to a better deal 247Releasing equity 248The more the merrier 248Renting Out in Order to Buy Again 249Using a Mortgage Broker 249Chapter 18: Avoiding Property Taxes 251Knowing Which Taxes You’re Responsible for Paying 251Avoiding Income Tax 252Allowances on Furnished Property 253Avoiding Capital Gains Tax 254Steering Clear of Council Tax 255Minimising Stamp Duty Land Tax 256Advanced Tax Avoidance Tips 256Share and share alike: owning property with someone else 257Thinking about Inheritance Tax 258Chapter 19: Using a Company to Hold Your Property 261Understanding the Pros of Using a Company 261Beneficial tax regime 262Limited liability 262Flexible ownership 263Status 263Spotting the Cons of Using a Company 263Setting Up a Property Company 264Deciding on private or public 265Choosing a name 265Registering to pay tax 266Placing Existing Property into a New Company 266Chapter 20: Financial Management and Recordkeeping 267Organising Your Files 267The property ownership file 268Separate files for each rental property 268Tenant files 268Insurance file 269Maintaining Property Records 269Taking Care of Business: Rental Property Accounting 270Creating a budget and managing your cash flow 271Using technology for financial management 272Hiring a professional number-cruncher 273Part VI: Only for the Daring 275Chapter 21: Government Programmes 277Housing Benefit 278Housing Associations 279How they work 279Which properties are eligible 280Pursuing this option 280Chapter 22: Working in Niche Markets: Students, Pets, HMOs and Smokers 283Taking another Look at Your Pet Policy 283Renting to Students: Is It Really Like the Young Ones? 285Getting a rental property in a university town 285Preparing for the challenges involved 286Houses in Multiple Occupation (HMOs) 287Establishing whether you need a licence 287Taking health and safety onboard 288Changing an HMO: when to notify the local authority 288Smoking or No Smoking? Tapping into Potential Markets 289Catering to smokers 289Designating your rental properties no smoking 290Part VII: The Part of Tens 291Chapter 23: Ten Reasons to Become a Rental Property Owner 293You Can Diversify Your Investments 293You Don’t Need Much Money to Start 293It Can Be a Second Income 294You Gain Tax Advantages 294Property Holds Its Value 294You Get Leverage 295It Beats Inflation 295You Get a Positive Cash Flow 295It’s an Alternative to a Pension 296It Can Make You Wealthy in the Long Run 296Chapter 24: Ten Ways to Get and Keep Full Occupancy in Your Property 297Maintain Kerb Appeal 297Keep the Property in Rent-Ready Condition 298Establish a Competitive Rent 298Offer Prospective Tenants a Rent Guarantee 298Stay Ahead of the Technology Curve 299Offer Referral Fees 299Accept Pets 299Offer Move-In Gifts or Upgrades 300Contact Big Companies or Corporations 300Accept Housing Benefit 301Chapter 25: Ten Ways to Increase Cash Flow 303Increase the Rent 303Decrease Your Operating Expenses 304Reduce Your Turnover 304Remortgage Your Rental Property – Perhaps 304Upgrade Your Rental Property 305Pre-Let to Minimise Void Periods 305Buy Freehold Rather than Leasehold 306Avoid Gas Appliances 306Do Your Own Repairs 307Manage Your Rental Properties Yourself 307Part VIII: Appendices 309Appendix A: Resources 311Professional and Trade Organisations 311Government Organisations 312Further Information 313Mortgage Brokers 313Credit Reference Agencies 314Appendix B: Forms, Templates and Standard Letters 315Index 361