Are you planning to rent your property in 2022? Becoming a landlord is a complex process. When you take this step, it’s important to understand the costs you’ll be liable for, and the key obligations involved with owning a buy-to-let property.
Here’s an indication of some of the things you need to know about becoming a first-time landlord, including setting up residential leases and how A M Davies can help.
One in eight prospective landlords underestimate the costs that come with buying to let – don’t be one of them!
If you need a buy-to-let mortgage, your monthly repayments are likely to be your biggest fixed outgoing. The current economic climate means that there are fewer mortgages on the market. It will help to ensure you get the loan you need if you can raise your deposit above 20%.
When it comes to property maintenance costs, landlords are responsible for ensuring that their property is health and safety compliant and in good condition. By law, you must carry out gas, fire and electrical safety checks every year. These checks alongside general repair work, cost the average UK landlord £765 a year – so make sure you’re prepared for the expense!
With the cost of letting agent fees, the likelihood of “void” periods between tenancies and landlord insurance, first-time landlords may be surprised at the extra charges involved in buying to let.
From securing your tenants’ deposit to paying tax to HMRC, there are a number of regulations that you must familiarise yourself with when becoming a landlord. Failure to comply with them may prejudice your ability to recover possession from a tenant who causes damage or fails to pay the rent. Many landlords have suffered from gratuitous damage caused by disgruntled tenants, or have found themselves unable to recover rent arrears when tenants disappear without leaving a forwarding address.
Like all income, rental income is taxable. New tax rules are being phased in that mean landlords can only deduct 20% of the cost of their mortgage interest from their taxable rental income – with these changes, we’d advise first-time landlords to consult a professional when it comes to calculating taxes.
Whether you have a tenancy agreement in place or not, you must check your tenants’ right to rent in the UK and protect your tenants’ deposit in a government-approved scheme.
You will also need to get an energy performance certificate (EPC) when you let the property to new tenants. The certificate indicates to the tenant how energy efficient the property is and recommends ways they can reduce energy use.
We recognise that each responsibility involved in renting a property can seem complicated and confusing – why not contact a professional to iron out the paperwork?
If you’re looking for advice about leaseholds, we’re here to help. Leasehold is a specialist area of property law, and it is important to seek legal advice before entering any potentially onerous obligations, whether as landlord or leaseholder.
Landlords and leaseholders have important statutory rights and obligations on which we can advise. From granting leases, buying leasehold properties or applying for lease extensions, our experts can guide you through the process – contact the team at A M Davies today.