I’ve just inherited a property which I plan to rent out. Is there anything I should do to prepare myself for being a landlord?
There are several key issues to consider before renting out your property, including finances, tax, ownership structures and lettings legislation.
First, investigate the most tax-efficient methods of owning the property – in your own name or in a limited company or limited liability partnership. This will depend on your personal circumstances – a property tax specialist can advise you. Next, finance. You may not currently have a mortgage on the property but it could be more tax-efficient to take one out and release some equity. Ask a financial advisor to explain the options.
If the property is already mortgaged, you may need ‘consent to let’ – formal permission from your lender to rent it out. They will probably switch you from a residential to a buy-to-let mortgage. You must also arrange specialist landlord’s insurance.
You will now also need to complete annual, self-assessment tax returns. You can claim certain tax allowances against your rental income – for example, offsetting interest on mortgage repayments against rental income and claiming deductions for the capital costs of replacing fixtures, furnishings and appliances. An accountant can explain what you need to do.
Moving on to legislation – there are over 150 pieces of legislation to comply with. These range from ensuring the property is ‘habitable’, with adequate heating, ventilation, sanitation and insulation to organising Energy Performance Certificates (EPCs), Gas Safety certificates, Portable Appliance Testing (PAT) checks and ensuring furnishings meet Furniture and Furnishing Fire Safety Regulations (FFL).
Last, decide whether to manage the property yourself or use a property management agent. Most professional landlords use an agent (preferably a member of ARLA PropertyMark) – this ensures you comply with legislation and won’t incur large fines for inadvertently breaking the law. An agent will collect the rent, chase unpaid rent, organise inspections and certificates, property repairs and maintenance. Also, a professionally managed property is easier to let as most companies will only allow employees to sign a tenancy agreement with professional property management in place.
Marc Von Grundherr
Benham & Reeves Residential Lettings