Renting Out Your Property For Dummies

Introduction 1 About This Book 1 Conventions Used in This Book 1 What You’re Not to Read 2 Foolish Assumptions 2 How This Book is Organised 3 Part I: So You Want to Be a Landlord? 3 Part II: Renting Your Property 3 Part III: The Brass Tacks of Managing Rentals 4 Part IV: Techniques and Tools for Managing 4 Part V: Money, Money, Money! 4 Part VI: Only for the Daring 4 Part VII: The Part of Tens 5 Part VIII: Appendices 5 Icons Used in This Book 5 Where to Go from Here 6 Part I: So You Want to Be a Landlord? 7 Chapter 1: Do You Have What it Takes to Manage a Buy-to-Let Property? 9 Recognising the Advantages of Owning Rental Property 10 Being Honest with Yourself about Your Skills and Experience 11 People who need people: Putting your interpersonal skills to the test 11 Making sure you have good management skills 13 Chapter 2: Deciding Whether to Manage Your Property Yourself or to Hire an Agent 15 Managing Your Rental Yourself 16 Recognising the advantages of self-management 16 Paying attention to the drawbacks 17 Managing your property from a distance 17 Exploring Professional Management 18 Knowing what to look for in a letting agent 19 Telling the good from the bad and the ugly 20 Paying your letting agent 23 Making sense of management agreements 25 Knowing the tax consequences of using a management company 26 Chapter 3: Becoming an Accidental Landlord 27 Deciding to Rent Out Your Own Home 27 Needing to move but unable to sell 28 Recognising your home’s limitations 28 Setting the price 29 Finding a tenant 30 Knowing the law 30 Seeking Consent-to-Let 31 Staying on your existing mortgage 32 Paying a premium 32 Switching to a buy-to-let mortgage 32 Remembering your insurer 33 Part II: Renting Your Property 35 Chapter 4: Finding the Perfect Rental Property 37 Knowing What to Look For 37 Deciding on size 38 Setting your budget 39 Finding the ideal location 39 Considering dilapidated properties 41 Letting out a basement in your home 41 Sourcing Your Rental Property 42 Using an estate agent 42 Buying at auction 43 Using the Internet 44 Checking Out the Tenant Pool 44 Chapter 5: Preparing Your Rental Property for Prospective Tenants 45 Coming Up with a Plan to Handle Vacancies 46 Considering renovations and upgrades 46 Paying attention to the exterior or common areas 48 Making sure the interior of the property is up-to-scratch 49 Deciding whether to furnish 51 Preparing Your Rental Property the Right Way 52 Keeping up appearances 53 Making sure everything’s ticking over 53 Getting out the paintbrush 54 Applying some elbow grease 55 Sorting out flooring 56 Introducing Energy Performance Certificates 57 Inspecting Safety Items 57 Facing up to fire 57 Checking the electrics 58 Taking sensible precautions 58 Using Outside Contractors 59 Chapter 6: Rent, Deposits and Tenancy Agreements: The Big Three of Property Management 61 Setting the Rent 62 Examining the return on your investment 62 Conducting a market analysis of the rent in your area 64 Coming Up with a Fair Deposit 65 Protecting your tenant’s deposit 66 Setting a reasonable deposit 67 Avoiding non-refundable deposits 67 Increasing deposits 68 Using a Tenancy Agreement 68 The Rent Assessment Committee 70 A standard tenancy agreement 70 Chapter 7: Generating Interest in Your Rental Property 73 Developing a Marketing Plan 73 Determining your target market 74 Knowing what your tenants stand to gain from your property 75 Understanding the Importance of Good Advertising 76 Rifle versus shotgun: Picking an advertising approach 77 Kerb appeal: Getting your property to rent itself 78 Looking at Your Advertising Options 79 Word-of-mouth 80 Property signs 81 Newspapers 83 Internet 89 Flyers 90 Rental publications 92 Local noticeboards 92 Local employers 92 Letting agencies 93 Advertising without Discriminating 93 Chapter 8: Handling Prospective Tenants and Showing the Property 95 Making the Most of Technology 95 Using your phone’s special features to your advantage 96 Preparing for Phone Calls 99 Having the basic tools ready 99 Answering the phone 103 Providing and obtaining the basic information 104 Convincing the prospective tenant to rent your property 106 Checking the prospective tenant’s suitability over the phone 107 Handling phone objections 109 Converting phone calls to rental showings 109 Planning Ahead for Open Houses and Individual Viewings 111 Holding an open house 112 Scheduling individual appointments 113 Providing directions to the property 113 Showing Your Rental Property 114 Showing a vacant property 114 Showing an occupied property 115 Checking if the prospective tenant is suitable during the property viewing 116 Resolving objections 117 Convincing the prospective tenant 118 Inviting the prospective tenant to rent your property 118 Persuading the prospective tenant to complete a rental application 119 Holding a deposit 120 Using waiting lists 121 Handling Hazardous Materials and Environmental Issues 122 Lead-based paint 122 Asbestos 123 Radon 125 Chapter 9: Eenie, Meenie, Miney, Mo: Selecting Your Tenants 127 Understanding the Importance of Screening 128 Establishing Tenant Selection Criteria 129 Verifying Rental Applications 131 Verifying the identity of all adults 132 Reviewing occupancy guidelines 132 Checking rental history 133 Verifying employment and income 134 Reviewing the applicant’s credit history 136 Talking with all character references 138 Dealing with guarantors 138 Notifying the Applicant of Your Decision 139 Avoiding Complaints of Discrimination 140 What it is and what it isn’t 140 Steering 141 Children 142 Disabled tenants 142 Reasonable accommodations 143 Guide dogs 144 Sexual harassment 145 Part III: The Brass Tacks of Managing Rentals 147 Chapter 10: Moving in the Tenant 149 Establishing the Move-In Date 150 Meeting with Your Tenant Prior to Move-In 151 Going over the rules with your new tenant 151 Reviewing and signing documents 153 Collecting the money 157 Inspecting the property with your tenant before the move-in 158 Giving your tenant an informational letter 161 Distributing the keys 162 Setting up the Tenant File 164 Preparing a Welcome Pack for Your New Tenant 165 Chapter 11: Collecting and Increasing Rent 167 Creating a Written Rent Collection Policy 168 When rent is due 168 How rent is paid 170 Dealing with Rent Collection Problems 173 Collecting late rent 173 Charging late fees 174 Handling bounced cheques 175 Dealing with partial rental payments 176 Serving legal notices 177 Increasing the Rent 177 Deciding when and how much 178 Informing the tenant 178 Sweetening the pill 179 Chapter 12: Keeping Good Tenants – and Your Sanity 181 What Tenants Want 182 Timely and effective communication 182 Quick responses to maintenance requests 183 Respect for your tenants’ privacy 184 Enforcement of house rules 184 Fair rent and increases 185 Renewing Tenancy Agreements 185 Tempting your tenant to stay 185 Better the devil you know 186 Chapter 13: Dealing with Problem Tenants 187 Recognising and Responding to Common Tenant Problems 187 Late payment of rent 188 Additional occupants 188 Inappropriate noise levels 189 Unsupervised children 190 Exploring Alternatives to Eviction 190 Negotiating a voluntary move-out 191 Using mediation or arbitration services 191 Taking your tenant to court 192 Evicting a Tenant 192 Serving legal notices 192 Enforcing County Court Judgements 194 Knowing What to Do in Unusual Tenant Situations 195 Bankruptcy 195 Sitting tenants 195 Broken tenancy agreements 196 Subletting 196 Departing housemates 197 Domestic problems 197 Death of a tenant 198 Chapter 14: Moving Out Tenants 199 Requiring Written Notice 200 Giving Your Tenants a Move-Out Information Letter 201 Inspecting the Property’s Condition at Move-Out 202 Noting damages 202 Using a Deposit Itemisation form 205 Handling Special Move-Out Situations 206 When damage and unpaid rent exceed the deposit 206 When disputes arise over the deposit 207 When the rental property is abandoned 207 Part IV: Techniques and Tools for Managing 209 Chapter 15: Maintenance 211 Recognising the Importance of a Maintenance Plan 212 Being Prepared for the Different Types of Maintenance Issues 213 Emergency repairs 213 Preventive maintenance 214 Corrective maintenance 214 Custodial maintenance 215 Cosmetic maintenance 216 And what if I don’t? 216 Handling Rental Property Maintenance 217 Responding to a tenant’s request for repairs 217 Keeping tenants from fixing things themselves 218 Purchasing maintenance parts and supplies 219 Chapter 16: Safety, Security and Insurance 221 Tackling Crime in and around Your Rental Property 221 Participating in your local Neighbourhood Watch scheme 222 Paying attention to tenants’ questions and complaints about safety-related issues 223 Responding to crimes when they occur 224 Taking Security Precautions 225 Keys 225 Lighting 226 Addressing Environmental Issues 227 Fire safety 227 Carbon monoxide 229 Natural disasters 229 Cover Me, I’m Going In! Making Sure You Have the Insurance You Need 230 Choosing a company and getting the coverage you need 230 Understanding the types of insurance cover available 232 Determining the right excess 234 Encouraging your tenants to get home contents insurance 234 Handling potential claims 235 Part V: Money, Money, Money! 237 Chapter 17: Raising the Cash to Buy Your Rental Property 239 Making Sure You Can Afford to Buy a Rental Property 240 Buy-to-Let Mortgages 240 Generating enough rental income 241 Raising a deposit 242 Finding the right buy-to-let mortgage 243 Remortgaging to a better deal 247 Releasing equity 248 The more the merrier 248 Renting Out in Order to Buy Again 249 Using a Mortgage Broker 249 Chapter 18: Avoiding Property Taxes 251 Knowing Which Taxes You’re Responsible for Paying 251 Avoiding Income Tax 252 Allowances on Furnished Property 253 Avoiding Capital Gains Tax 254 Steering Clear of Council Tax 255 Minimising Stamp Duty Land Tax 256 Advanced Tax Avoidance Tips 256 Share and share alike: owning property with someone else 257 Thinking about Inheritance Tax 258 Chapter 19: Using a Company to Hold Your Property 261 Understanding the Pros of Using a Company 261 Beneficial tax regime 262 Limited liability 262 Flexible ownership 263 Status 263 Spotting the Cons of Using a Company 263 Setting Up a Property Company 264 Deciding on private or public 265 Choosing a name 265 Registering to pay tax 266 Placing Existing Property into a New Company 266 Chapter 20: Financial Management and Recordkeeping 267 Organising Your Files 267 The property ownership file 268 Separate files for each rental property 268 Tenant files 268 Insurance file 269 Maintaining Property Records 269 Taking Care of Business: Rental Property Accounting 270 Creating a budget and managing your cash flow 271 Using technology for financial management 272 Hiring a professional number-cruncher 273 Part VI: Only for the Daring 275 Chapter 21: Government Programmes 277 Housing Benefit 278 Housing Associations 279 How they work 279 Which properties are eligible 280 Pursuing this option 280 Chapter 22: Working in Niche Markets: Students, Pets, HMOs and Smokers 283 Taking another Look at Your Pet Policy 283 Renting to Students: Is It Really Like the Young Ones? 285 Getting a rental property in a university town 285 Preparing for the challenges involved 286 Houses in Multiple Occupation (HMOs) 287 Establishing whether you need a licence 287 Taking health and safety onboard 288 Changing an HMO: when to notify the local authority 288 Smoking or No Smoking? Tapping into Potential Markets 289 Catering to smokers 289 Designating your rental properties no smoking 290 Part VII: The Part of Tens 291 Chapter 23: Ten Reasons to Become a Rental Property Owner 293 You Can Diversify Your Investments 293 You Don’t Need Much Money to Start 293 It Can Be a Second Income 294 You Gain Tax Advantages 294 Property Holds Its Value 294 You Get Leverage 295 It Beats Inflation 295 You Get a Positive Cash Flow 295 It’s an Alternative to a Pension 296 It Can Make You Wealthy in the Long Run 296 Chapter 24: Ten Ways to Get and Keep Full Occupancy in Your Property 297 Maintain Kerb Appeal 297 Keep the Property in Rent-Ready Condition 298 Establish a Competitive Rent 298 Offer Prospective Tenants a Rent Guarantee 298 Stay Ahead of the Technology Curve 299 Offer Referral Fees 299 Accept Pets 299 Offer Move-In Gifts or Upgrades 300 Contact Big Companies or Corporations 300 Accept Housing Benefit 301 Chapter 25: Ten Ways to Increase Cash Flow 303 Increase the Rent 303 Decrease Your Operating Expenses 304 Reduce Your Turnover 304 Remortgage Your Rental Property – Perhaps 304 Upgrade Your Rental Property 305 Pre-Let to Minimise Void Periods 305 Buy Freehold Rather than Leasehold 306 Avoid Gas Appliances 306 Do Your Own Repairs 307 Manage Your Rental Properties Yourself 307 Part VIII: Appendices 309 Appendix A: Resources 311 Professional and Trade Organisations 311 Government Organisations 312 Further Information 313 Mortgage Brokers 313 Credit Reference Agencies 314 Appendix B: Forms, Templates and Standard Letters 315 Index 361