17 Things to Consider Before Renting Out Your Property
Becoming a landlord is a big step. There are many pros and cons of renting out your property in Scotland which we’ll look at in detail in this article.
Whether you’ve recently inherited a property, have moved in with your partner, plan to go travelling or live abroad, these 17 things to consider will help you weigh up your options when it comes to deciding to sell or putting your place up for rent.
#1 - Are you aware of the all the regulations?
There are a number of important laws and regulations that apply to landlords. If you’re considering renting out a property you own, you need to be aware of all your responsibilities from the outset. These cover things such as gas and electrical safety, carbon monoxide detectors, fire & smoke alarms and much more.
You’ll also need to lodge your tenant’s deposit with an approved Tenancy Deposit Scheme provider.
#2 - Have you researched the level of rental income you can expect?
Another vital consideration before renting out your property is to look at how much rental income you can realistically expect from it. Have you done your homework to determine the going rate for similar properties in the area?
If the achievable level of rental income isn’t going to be as much as you expected, it’s better to find this out at the start of the process.
#3 - Have you taken ongoing costs into account?
If you’ve never let out a property before, you may be unaware of many of the costs associated with being a landlord. As well as the various safety certificates and licences, you’ll need to factor in repairs and general wear and tear too.
#4 - Do all the numbers stack up?
You need to treat renting out a property like running a small business. You can’t just expect that property prices will rise and everything will be OK in the end.
You should go through all your potential outgoings in meticulous detail and decide if it’s worthwhile for you financially. If you’re planning on using a letting agent, then you need to be clear about what their costs are too.
#5 - Applying for the mortgage lender’s permission
Before you take the plunge onto the world of property letting, you need to make sure your mortgage is in order. If for example you’ve been living in the property and want to rent it out, you’ll need to let your mortgage provider know the situation.
If you’ve inherited a property from someone else that you want to let out, you’ll need to enquire about a buy-to-let mortgage (unless of course if you own the property outright).
#6 - Tax implications
Any profit you make from renting out a property is liable to tax, which is certainly worth thinking about. You can find out more about how this works and what expenses are deductible by reading: Income tax when you rent out a property.
You should also be aware of the 3% levy being imposed on second homes and buy-to-let landlords come April 2016.
#7 - Registering as a landlord
When you’re planning on becoming a landlord, you need to make sure you’re registered with your local authority first.
#8 - Knowing what you can and can’t do by law
There are many regulations and laws pertaining to the relationship between tenants and landlords in Scotland. You’ll need to know things such as how much notice you should give before an inspection (at least 24 hours) or the correct procedure for giving tenants notice to leave your property.
#9 - HMO Licensing
If you’re planning to rent your property out to multiple people at the same time, you may need to look into HMO (Houses in Multiple Occupation) Licences. It’s a criminal offence to operate without a HMO License when one is required.
#10 - Type of tenancy agreement
In Scotland there are three different types of tenancy agreement; regulated tenancies, assured tenancies and short assured tenancies.
#11 - Where to find the right tenant(s)
There is certainly no shortage of tenants for good rental properties. However, letting out your house or flat to the right people is important.
You’ll need to think about where you’ll advertise for tenants (if you’re doing it yourself) or which letting agent to choose to carry out tenant vetting on your behalf.
#12 - What’s your long term strategy?
Becoming a landlord now may seem like a good idea but it always pays to look a bit longer term and consider what your plans may be.
For example, if you have tenants and then decide you need a quick sale of your property in the future for financial reasons, you can’t just evict your tenants because it suits your own interests.
There are a number of things you may want to consider when looking at the future value of your property, including plans to build new houses/schools nearby, previous price trends, and the demographic of the local community.
#13 - Should you do everything yourself or hire an agent?
Becoming a private landlord can be a time consuming task. It’s certainly not a good for for many people, but you may want to use an agent to manage things professionally on your behalf.
Make sure you do your research first when hiring a letting agent. Choosing a well-established reputable company rather than simply going for the cheapest option is recommended.
#14 - Changing your insurance cover
If you’ve been living in the property you plan to rent out, you’ll need to think about your insurance cover too. If you’re going to have tenants, you can’t have the same policy as you had as a homeowner.
You’ll also have to make sure your tenants have their own contents insurance policy for the time spent at your property.
#15 - Preparing your property for rent
The Repairing Standard covers a number of areas you must satisfy when renting out a property to tenants. In some cases this means a lot of investment in bringing things up to the required standard before any rental income can start to be collected - something else worth noting.
#16 - Voids in rental income
Landlords sometimes experience voids in rental income through no fault of their own. For example, tenants may up and move on without any notice or a large local employer may close down and reduce demand in the area.
You should consider how you would cope financially if you did have a void in income for even a couple of months. Would you still be able to cover the repayments on your buy-to-let mortgage?
#17 - Are you doing it for the right reasons?
If you’re mulling over whether to sell your property or rent it out, you need to think about whether your final decision has been made for the right reasons.
Being a private landlord doesn’t suit everyone’s financial circumstances or lifestyle. The idea of having a rental property may be appealing but the reality may not live up to your expectations.
There’s no ‘one size fits all’ solution. We’d urge you to consider all the points made above and your own circumstances before deciding whether becoming a landlord is the best option for you.
Summary
Becoming a landlord is essentially going into business for yourself, and as such, should be given the same careful consideration.
You may be pleasantly surprised by the current value of your property or just simply not have the time or appetite to get involved with all the legislation and regulations required for landlords.
Whatever you decide to do, our experienced property experts can guide you through the selling or rental process. Contact us now for a no obligation chat.