Accidental Landlords: Pros & Cons of Letting Your Property
In the modern era of traumatic times and a “boom and bust” era, many homeowners have found themselves in a compromising position, this been “Accidental Landlords”. Accidental landlords following the 2008 recession have become extremely common and continues to be on the rise as more and more people are still struggling to sell their house quick. This subsequently means either facing your property been vacant, or you rent out your property.
Just because you are renting you house, doesn’t mean you are going to make money. Most times when you cant sell your property, renting is the only solution but this doesn’t mean the rent covers your mortgage and it doesn’t mean that renting doesn’t bring its own associated problems.
The aim of this blog is to make you aware of the pitfalls when renting your home, its not as straight forward or stress free as you think!
“Renting is known as an agreement whereby a payment is made for the temporary use of a property owned by another.”
There is no one set rule for why people rent property instead of buying it, there can be a number of reasons why, some examples are shown below:
1) Financial Implications – generally people cant afford the large deposit it requires to purchase a property as their own.
2) Job Relocation – Some peoples jobs mean they have to continually be moving around the country / countries and therefore they may never have a permanent place of residency for long.
3) Burden of Upkeep – Some tenants are happy paying smaller increments in rent per month, knowing that the financial upkeep of the property (lawn, roof, exterior of property etc) is left with the owner and their managing agents.
Letting a property isn’t all about finding a tenant and making a profit, there are many factors which influence your experience of being a landlord, sometimes been a landlord is the very last option you want! See below just a few problems when renting your home:
If you are struggling to sell your home quickly and dont want to move to your next property and leave your current home vacant, there are two options, either rent your property or sell your house fast for cash to a regulated property buyer.
If you were to rent your property, one serious hurdle you need to overcome is finding not only a tenant, but a good reliable tenant with a good track history of paying their rent (and on time). We would suggest finding a reputable local letting agent to find a suitable tenant, depending on the type of property you have to rent, fees from estate agents generally range from £500+ for a “tenant find” only service. If you want the local agent to manage your property when / if it gets rented, they generally charge circa 10% of the gross rental received per month.
Regardless of whether you try to rent your property yourself (not advisable) or through an estate agent, there is no guarantee you will get a good tenant. There are so many horror stories you hear about where a tenant doesn’t pay and refuses to leave. It can take months, sometimes years to vacate these types of tenants through the courts and when they finally arrive they have wrecked the place. Good Move recommends either you as the homeowner or your managing agents that you undertake thorough credit agency checks on any potential tenants. You can do credit checks on websites such as Experian or Credit Karma, and they can be priceless at fishing out problematic tenants.
Some tenants haven’t rented before, if this is the case make sure to ask for an employers reference and potentially even a guarantor who can confirm they know the tenant and they have the financial ability to pay the rent. The benefit of a guarantor is if the tenant doesn’t pay, the liability falls on the guarantor. Unfortunately there’s too many stories of tenants not paying rents and wrecking houses, so if you really do need to rent your property, take the necessary credit checks and precautions.
2) The Legal Implications
If you become an accidental landlord or even if you willingly want to rent your home quickly, you need to understand the legal ramifications and abide to the respective law.
There are a whole host of legalities once must consider and this brings other problems with letting my home. Here at Good Move if renting is your best solution, we recommend that homeowners become a member of a professional landlord organisation / association for help with documents and free legal advice. A couple of associations we would recommend you contact are Residential Landlords Association and the National Landlords Association.
Homeowners should additionally make sure they have and use the right tenancy agreement for proposed new tenants. Its imperative before you let any tenant through your door, that this legal document is signed. The standard is the Assured Tenancy Agreement for residential lettings and its a contractual and legal document between you as the homeowner and the tenant. Its imperative that this document is correct at the time of signing to avoid any costly mishap.
Its important to remember, if you are attempting to rent the property yourself that you need to take a rental deposit and this needs to be kept in one of the governments approved tenancy
Other problems with renting your house is you need to arrange a tenancy deposit scheme , and you’re legally obliged to keep any deposits you receive in an approved governmental scheme, these been Deposit Protection or My Deposits.
Another problem with renting your home is if you don’t live in the near vicinity to the property you could be asking for trouble.
Good Move always recommend if you intend to rent your property and you want to manage the property yourself, you need to realistically live within a 5 mile radius so you can keep an eye on your home. Its not rare to hear of tenants calling landlords at ungodly hours because they have lost their keys or if something has seriously gone wrong with the property. If you are serious about renting your property you need to appreciate its a 24 hour job which means been reactive to tenants requests when they are made. Been a landlord isnt easy, and this is one of the major problems with renting properties.. not everyone is cut out for it.
Other problems with renting houses is that there are constant maintenance and repairing issues so its imperative that as a landlord you compile a book of reliable and trustworthy trades people who are available 24/7 for whatever problem may arise at your rented property. There are some insurance schemes available in the market place to cover maintenance and repairs but these come at a heave price, so if you have the time to gather a list of trades people we would recommend you do this.
The other option you have is to hire a managing agent but they generally charge between 10 – 15% of the gross rents each month for not doing a lot! Additionally they charge a premium price to landlords when maintenance and repair work is needed at your home.
As mentioned earlier in the blog, even if homeowners do the necessary credit checks on tenants and join the relevant landlord associations, this is by no means a guarantee that your tenant will behaves themselves and look after your property.
If you have signed a tenancy agreement with your tenant and you start to receive warnings from police, neighbors, friends etc regarding your tenants its so important you act and act quickly. Problematic tenants are a landlords worst dream when renting properties and you as a landlord need to follow up any complaints that you receive and issue appropriate warnings as soon as trouble starts.
Good Move know that renting properties causes problems and we would recommend you fully insure all contents (if you have left items of furniture in the property) if the property is rented furbished. It is the landlords responsibility to maintain all furnishings and that all furnishings are fire resistant to pass renting regulations.
The other problems renting your home is obviously the dreaded “Rent Arrears”. You can do all the checks in the world on a tenant, you just never know whether they will pay or not, sometimes the people you think wont cause an issue really do! One way to protect yourself against rent arrears is to take out some form of insurance policy. These tend to be very expensive but they can serve their purpose so if your tenant goes AWOL and doesnt pay rent, you can claim partial rent from your insurance company. Given the current state of the economy, Good Move reccomends this could be a sensible strategy if you need to rent your property. If your tenant breaks their tenancy agreement, you have the right to evict them but from a legal logistics perspective, you could be without rent for circa 6 months until you can evict your tenant through the courts.
Good Move recommends when a tenant is due to move in and a tenancy agreement has been signed, its so important to get an inventory signed and documentation with plenty of photographs of your property prior to occupation. If you make sure your property is clean, in good condition and ready for new tenants when a new tenancy agreement has been signed, you can refer back to the inventory at the end of the tenancy if the property has been left in poor condition.
This is a major problem when renting properties as often your property is not looked after the way you have looked after it, subsequently its dirty and is damaged. If the property is damaged or dirty as a landlord you are well within your rights to knock this off the tenancy deposit which is held in one of the governments approved deposit schemes.
Renting properties unfortunately brings associated problems and unless you are a seasoned landlord, letting properties can be a scary task for anyone.
In general, if you are struggling to sell your property and don’t want to leave your house vacant, have you considered selling your property quickly to a cash buyer like Good Move? Good Move is a surveying firm which is regulated by the RICS (Royal Institution of Chartered Surveyors and the NAPB (National Association of Property Buyers) and we can buy properties within 7 days, paying all of your seller fees (we pay your legal fees and you have no estate agency fees to pay).
Renting can be a problematic problem for newbies and Good Move is here to discuss your situation and make you a cash offer which works best for you. If you want a no obligation cash offer on your property, please click below.