It can feel pretty daunting when you first start out as a landlord on your first rental property. It certainly was for me! In this blog post, I share tips I’ve picked up to help you thrive as a first time landlord.
Although over half of first time landlords bought their first rental property with the intention of letting it out, 43% became landlords “accidentally”.* Known as accidental landlords, they didn’t set out to become a landlord.
I fell into this category with my first rental property, which was a flat I already owned. Many accidental lawyers are like me, and may have originally bought their first rental property to live in themselves. Alternatively, they may have inherited or been given the property.
In any event, whatever the route to becoming a landlord, there’s a steep learning curve for us all when we first become landlords.
Here are 7 tips to help you get started on a sound footing, so you can thrive as a first time landlord.
Updated: 29 April 2023
7 Tips to Thrive as a First-Time Landlord
- Tip 1: Treat your rental property like a business
- Tip 2: Make sure your mortgage allows you to let
- Tip 3: Educate yourself about your landlord responsibilities
- Tip 4: Arrange specialist landlord insurance
- Tip 5: Decide how you’ll find tenants
- Tip 6: Decide whether you’ll manage the property yourself
- Tip 7: Prepare your property for renters
- Final thoughts
Tip 1: Treat your rental property like a business
In deciding either to buy a rental property, or to not sell it if you’re an accidental landlord, you’re making an investment decision. It’s also a business decision. And like all businesses, it’s important to know what your objectives are. That way you can measure how your investment is performing
What does success look like?
In terms of objectives, are you investing for income in a good rental market, capital growth, or a mixture of both? Think about what success would look like for each property. For instance, gross income (what you take), net monthly revenue (what you make) and yield (annual rent divided by property value). For capital growth, what is your timescale?
Be aware that average rents, yields and capital growth vary considerably over the the country. For instance capital growth and rents tend to be highest in London and the South East, but yields are low. The latest Rightmove rental tracker (Q1 2023) says the average rent in London is £2,501 pcm, but the yield is 5.1%. By contrast, in the North East, whilst the average yield is a whopping 7.9%, average rents are only £803 pcm. Click here for yields and average rents in other regions and countries across the UK.
Equally, like all businesses, it’s important to keep your eye on the bottom line. How much you make after you have paid everything? And then you can decide whether it is worth keeping your investment, or whether you need to make other changes.
Ultimately if a property isn’t making you any money after you have paid the expenses, and this is unlikely to change, it doesn’t make sense to hold onto it.
I decided to sell my flat after 3 years of trying to make a go of it on Airbnb and then as a single let as an accidental landlord. eventually concluded that the net income would always be depressed by the high service charge (£2,500 pa compared to rent of £1,500 pcm). This was on top of what was already a low yield (4.5%). I’d not bought it to let, and I eventually concluded it would be better to sell it. Having caught the landlord bug, I used the money to buy a house with a considerably better yield in a stronger rental market elsewhere.
Keep business records
You will need to report your rental income and allowable expenses as a sole trader to calculate how much income tax you will need to pay for your tax return. You also need to keep records of capital expenses so you can calculate your capital gain or loss for capital gains tax (CGT) purposes if you sell the property in the future (see this explanation of CGT). It’s important to keep your invoices and receipts. If you own your rental properties through a limited company, you will also also need to keep records.
Do also keep records of business mileage, as you can claim an allowance at a rate of 45 pence per mile for the first 10,000 miles. It soon adds up.
Part of treating your rental property like a business is acting professionally.
- Be reliable. Do what you say you are going to do when you said you were going to do it.
- Do the paperwork. Don’t let the renters move in without signing the tenancy agreement. Also, if affordability is an issue, put a guarantee in place.
- Pay bills promptly. It is a professional courtesy and is likely to help you build positive relationships with the trades.
- Treat your renters with courtesy and respect their privacy, whilst still fulfilling your landlord responsibilities. Equally, don’t be over familiar as they are customers and not friends.
- Be clear about the frequency of inspections. I let my renters know at the start of the tenancy how often the property inspections will be, and keep to it. I also list in the house manual when the safety inspections are next due. It’s polite and practical to give tenants lots of notice before inspections or arranging checks and repairs. Technically you must give more than 24 hours written notice, but I usually contact them a week beforehand with a choice of time slots.
- Behave in professional manner at all times. This includes the tone of messages and emails, as well as your speed of replying. If there are any issues, it is usually best to try to resolve them amicably. If renters fall into arrears, process is your friend. Send professional reminders by email before starting a formal debt recovery process. The NRLA has excellent templates for managing rental arrears.
Tip 2: Make sure your mortgage allows you to let
This is really important for accidental landlords who already have a residential mortgage in place before deciding to let the property. It is likely that your existing residential mortgage won’t authorise you to let the property, and you’ll need a buy to let mortgage. Therefore it’s important to contact your mortgage lender to make them aware of your new situation. Failure to advise them could result in mortgage fraud and may incur a fine.
As a short term solution, your lender may grant you a Consent to Let . This allows you to let your property for a maximum of 12 months while maintaining your current mortgage. This might be a good solution if you are wanting to try out being a landlord. However, the lender does not have to grant you the Consent to Let.
A longer term solution may be to switch your residential mortgage to a buy to let mortgage. Be aware that the mortgage company will use different test to see if you’re eligible for a buy to let mortgage. Often they use a stress test to make sure your rent covers 125% of your interest payments. Sometimes they use a higher interest rate to allow for future increases
Tip 3: Educate yourself about your landlord responsibilities
Landlords are subjected to a myriad of legal responsibilities, even more so if the rental property is an HMO.
It’s important to educate yourself about your responsibilities as a landlord, and to stay updated. An easy way of doing this is to join the NRLA, the National Residential Landlords Association. They have numerous resources available to members and run excellent good value courses. I particularly recommend the NRLA’s Landlord Fundamentals, which leads to landlord accreditation for members, and covers all of the key areas. If you are thinking of joining the NRLA, use my referral code UYN-702 for a £15 discount.
Here are examples of what landlords need to do:
- an annual gas safety certificate. It is good practice to service the boiler too.
- a carbon monoxide alarm provided in any room used as living accommodation which contains a fixed combustion appliance (excluding gas cookers). This includes boilers and operational fire places/wood burning stoves. The government guidance recommends alarms with ‘sealed for life’ batteries instead of replaceable batteries
- a smoke alarm on every storey of the property
- annual checks of smoke detectors and carbon monoxide alarms and immediately before the tenants move in
- fire risk assessment and chimney sweep if property has a working fireplace
- an electric installation condition report (EICR) every 5 years
- an assessment of the property’s energy performance (EPC) every 10 years with an energy performance certificate of at least EPC Band E
- data privacy registration with the Information Officer (ICO)
- registration of the renters’ deposit in a deposit protection scheme and service of prescribed information within 30 days
- checks that all of those 18+ have the right to rent in the UK before they move into the property.
Click here for details of where to buy good value gas safety certificates, EICRs, smoke alarms and other landlord essentials.
The law also imposes lots of repairing obligations on landlords. It’s not rocket science though. In a nutshell, landlords should ensure their rental properties are well maintained, fit for human habitation, and don’t contain serious hazards that may harm the people living there. And when a tenant reports an issue, it’s important to respond promptly. Take a look at my practical guide for landlords on what landlords repairing obligations mean in practice.
Tip 4: Arrange specialist landlord insurance
It is important to take out specialist residential landlord property insurance as standard home insurance policies may either not be valid or adequate. There are lots of different options available, including rent protection insurance.
Click here for a detailed guide on how to shop around for competitive quotes on landlord insurance.
Tip 5: Decide how you’ll find tenants
For first time landlords, it is probably easier to use a letting agent to find tenants, until you get a better feel for the process. I initially started with letting agents on a ‘tenant find’ basis, which is an up front fee without management. I chose this as I wanted to manage the property myself.
It is relatively expensive to use a letting agent on a ‘tenant find’ basis. The last time I used a letting agent, I paid around £2,000 for rent of £1,300 pcm. This is a considerable amount of money.
I eventually gained the confidence to start letting myself using OpenRent, an online letting agency which gives access to the property portals for £49. Click here for of the OpenRent £49 Full Tenancy Creation details (affiliate link). It worked very well for me, and I even managed to carry out my own Right to Rent checks for someone emigrating to the UK under a skilled worker visa.
If you are interested in finding tenants yourself, take a look at my comprehensive guide to finding renters without letting agents.
Tip 6: Decide whether you’ll manage the property yourself
This is a big decision. First time landlords often feel overwhelmed at the thought of being responsible for managing the property. Especially as letting agents often imply that you are some how incapable of looking after it yourself. It’s actually not that difficult, once you get organised. Take a look at my detailed guide on how to manage your property yourself.
The law does impose lots of repairing obligations on landlords. However, it’s not rocket science though. In a nutshell, landlords should ensure their rental properties are well maintained, fit for human habitation, and don’t contain serious hazards that may harm the people living there. And when a tenant reports an issue, it’s important to respond promptly. For a practical guide on what the repairing obligations mean in practice, take a look this blog post.
If you manage your properties yourself, you’ll see yourself what needs to be repaired or maintained, and make decisions to do the right thing. This will be without the filter of the managing agent.
You’ll also save a lot of money if you manage your property yourself. Fees for property management vary, but on average it’s around 12% +VAT (14.4%) of the gross rental income . There’s also likely to be a mark up on the cost of the repairs that the managing agents arrange for you, eg plumbing and electrical work. It’s a hefty amount to come out of a landlord’s small profit margin.
Once you agree to enter into a management agreement with an agent, it can be difficult to get out of it, without paying a fee or giving six months’ notice. They justify this by saying that they need to be paid for the tenant find. Whatever the enforceability of these penalty clauses, the contract won’t be easy to get out of without paying for a penalty or serving the full notice. Alternatively, you can always wait until the tenants leave, and then not use the agents to find new tenants.
Do therefore think long and hard before getting someone else to manage the property, especially if it has been recently refurbished and is near your home. It often amounts to an expensive call centre and it can be hard to extricate yourself. Even as a first time landlord, this is not something you need to outsource. It’s a choice you make.
Tip 7: Prepare your property for renters
Whether or not it’s a buy to let, or your own property, it is bound to need some work before it is of a good standard for renters to move in. Even if it is just a case of a thorough deep clean.
Ensuring your property is ship shape before letting it, will help you get a higher rent and generate more interest from prospective tenants. It will also mean your new tenants can settle into their home without being disrupted by trades people.
Now is the time to repair all of the things that don’t work properly. It will save you aggravation in the future, and it’s easier doing work when it’s empty. Check the gutters and downpipes, treat any mould in the bathroom, bleed the radiators, clean the extractor fan filters etc. It may also be worth giving the property a lick of paint, or new flooring.
It’s easy to get carried away when preparing a property for renters, especially when you’re a first time landlord. Therefore, it’s important to get the balance right between making it nice for renters to live in, and not spending so much you won’t make a reasonable profit.
You’ll also need to decide whether you wish to rent the property furnished or unfurnished. It is easier from a practical point of view to let it unfurnished, as there is less to break. However, it depends on your target market e.g. student or professional sharers in an HMO may expect furniture. All of my properties are unfurnished.
The more furniture and appliances you provide, the higher the start up costs, and the higher the maintenance costs for when they inevitably break or wear out.
That said, there are certain things that all properties need to provide, like a cooker and oven, even if they are unfurnished. To find out more on what unfurnished properties usually include, read my practical guide.
I always put up curtain poles/rails or blinds in the key rooms, and a door stopper to stop the front door banging into the wall. These little touches show the landlord has an attention to detail and cares both about the property and the renters, and are inexpensive.
Don’t forget that you’ll need to comply with all your landlord responsibilities mentioned above.
Everyone who starts out as a landlord is on a steep learning curve, and we all make mistakes.
The key thing is to comply with all of your legal responsibilities. So long as you have chosen your property wisely, being a good landlord and looking after your property, is likely you’ll thrive as a landlord. Being a good landlord is good business.
Before you know it, you’ll be looking for your next one!
Let me know if you have any comments or questions below!
*Source: English Private Landlord Survey for 2021
You may also find helpful
Landlord Essentials: Tips on what to get for your buy to let
What all new landlords need to know
How to choose the best location for your next buy to let
How can landlords make good profits?
Managing rental properties – is it really that hard?
Which repairs must landlords carry out?
What should landlords provide in unfurnished properties?