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How to become a landlord: your step-by-step guide

Want to make some extra cash by renting out property? Here's how you do it.

A house with a to let sign

Although the pandemic skewed the market over the short-term, rental income has been on the rise over the past few years, and the average UK monthly rent at the start of 2020 was £886. 

With that kind of potential income, it's no wonder that some want to take the plunge and become a landlord.

But where do you start? Here's a step-by-step rundown on how to become a landlord.


Make sure you're allowed to be a landlord

If you already own a property outright, you can skip this step.

But if your property has a mortgage, check with your lender whether you're able to rent it out.

You may need to get a specific buy-to-let mortgage for this.

You should check whether the property is freehold or leasehold. If it's leasehold, you'll need permission from the freeholder to sub-let the property.


Understand the costs of being a landlord

You'll need to balance your rental income with a host of potential outgoings. These include:

  • Mortgage repayments
  • Tax
  • Stamp duty
  • Agency fees
  • Set-up costs to bring the property up to standard
  • Landlord association costs
  • Ongoing maintenance and upkeep costs


Void periods

Void periods are when you don’t have a tenant – either because you’re between lets or you’re doing the property up.

Your rental income will dry up but your expenses will continue, so you’ll have to keep paying the mortgage and bills such as council tax.

It’s important that you have a slush fund to cover these periods, which can crop up unexpectedly.


Understand your responsibilities as a landlord

You have certain responsibilities as a landlord, so you must:

  • Maintain the property and be responsible for all repairs.
  • Ensure the property is secure, with properly functioning door and window locks.
  • Follow all energy, fire and building safety regulations.
  • Protect your tenant's deposit.


Choose your buy-to-let property

When you're on the lookout for that perfect property, think about the kind of tenants you want to attract. Consider:

  • Location - closeness to certain services may change who might want to live in your property.
    • Good transport links – commuters and professionals
    • Schools, GPs and hospitals – families
    • University campus and town centre – students
  • The age of the property.
  • The state of repair – any renovations and repairs are going to cost you.
  • Accessibility – you have to make reasonable adjustments for tenants with a disability.

If you're considering becoming a commercial landlord then you need to learn about commercial property insurance.


Apply for a buy-to-let mortgage

Once you've found a suitable property, it's time to apply for a buy-to-let mortgage. To be eligible, you usually need to:

  • Be a homeowner already
  • Have a good credit record
  • Earn £25,000 or more a year
  • Be under 70 years old

The amount you can borrow will likely depend on how much rental income you expect to get.

Roughly, your rental income should be around 30% higher than your mortgage repayments.

Many landlords tend to go for an interest-only mortgage.

Their rental income covers the interest payments, and they sell the property at the end of the term. The money they receive from the sale covers the rest of the mortgage debt.


Make sure your property meets building and fire safety regulations

The specifics on safety regulations for landlords will vary depending on where your property is.

But whatever they are, it’s crucial that you follow all landlord regulations.

In general, you'll need to:

  • Have a valid gas safety check record and an annual check on all gas appliances, carried out by a Gas Safe-registered engineer.
  • Make sure the electrics and all electrical appliances are safe to use, and comply with the recently updated government legislation.
  • Fit a smoke alarm on each floor and make sure there's an accessible escape route.
  • Install fire alarms and extinguishers if you're renting out a house in multiple occupation (HMO).
  • Make sure any furnishings meet government standards.


Register as a landlord

If your property is in Wales or Scotland, you'll need to register as a landlord.

In Wales, you do this at Rent Smart Wales. In Scotland, you do this at the Scottish Landlord Register.

If you're a full-time landlord, you'll also need to register as a business. This could change how you pay tax.

If you have full-time employment elsewhere, you don't need to register as a business. You still have to pay tax, though.

The rules on paying tax for landlords depend on where you are in the UK.


Compare landlord insurance

When it comes to home insurance, you aren’t legally required to take out landlord insurance.

But most buy-to-let mortgage lenders will need you to have it as part of the agreement.

Landlord insurance aims to protect your investment. It covers the physical building in the case of fire, flood and subsidence.

When you get a quote you can choose to add on extras such as home emergency cover, which can protect you against things such as broken boilers or burst pipes. 

If you're furnishing the property, you might want to consider landlord contents insurance.

This could help protect things such as furniture and appliances from fire and flood.

You might also want to think about public liability insurance.

This helps protect you if a visitor injures themselves at your property.

Compare home insurance quotes


Decide how you want to manage your property

You've two options here.

The first is to manage everything yourself.

You'll be able to develop a rapport with your tenants, and you'll save money on agency fees. But you'll have to do all the work.

The second is to use a letting agency. This means you can be pretty hands-off.

Agencies can handle tenants, collect rent and inspect the property.

But letting agents can cost upwards of 20% of your monthly rental income, so it's worth weighing up your options before you make a decision.


Get some tenants

Advertise your property as you would if you were selling it. Invest in good photography and make your property look as neutral as possible.

If you're letting a property in England, you'll need to check that your tenants have a right to rent.

Check that they are who they say are, and that they can pay the rent on time.

The National Landlords Association can run a basic tenant check for you from £12.95.

You'll also need to secure their deposit into a Deposit Protection Scheme.


What is the rental yield?

The rental yield refers to how much you earn from your rental property as a proportion of its value.

So if you earn £750 a month, meaning a total of £9,000 a year, and the house is worth £180,000, the rental yield is £9,000 divided by £180,000, multiplied by 100.

In this example, the rental yield is 5%.