Landlord and letting agent checklist to start your business

Thinking about setting up as a landlord or letting agent? To help you, we have created this landlord and letting agent checklist so you can think about what you should consider before starting your business, what the roles involve, what your financial responsibilities are and more.

The changing landscape of the property market in the UK means young people are more likely to rent that buy their homes, while figures have doubled for those who are middle aged and renting.

This means there could be a real benefit for you to become a landlord or set up a letting agency.

Why rent out your property?

There are lots of reasons why it is has such appeal:

• It’s an investment, to top up your pension and savings in your later years
• You’re moving house and want to rent out your current property to pay your new mortgage
• You’ve inherited a property and want to keep it in the family
• You already rent out one or more properties and you are taking advantage of house price rises slowing down to add more properties to your portfolio.

What should you consider before you start out as a landlord or letting agency?

There are some important things you need to do before you start:

• Research the local area. Are you likely to be able to attract a good stream of quality tenants to your property? You don’t want it sitting empty.
• Check out the competition. Property has always been a competitive industry – will you be able to compete?
• How are you going to market the property and what will it cost to use a popular service such as Rightmove or Zoopla?
• Are you actually allowed to rent the property under the terms of your mortgage agreement? Check with the bank first.
• Talk to your insurance company about your building and contents cover.
• Research the legalities of renting out your property. Which has great tips on tenancy agreements, deposits, and safety checks on gas and electrical appliances.
• Find out what tenants expect from you. Look at the Department for Communities and Local Government’s guide, How to rent: A renting checklist for England.

What does being a private landlord involve?

Depending on how involved you want to be with the running of the property, you might choose to rent it out yourself or use a letting agent.

Renting it privately

This means you get to keep all the rental income. But there will be a cost to your time – you will need market the property, find new tenants, potentially chase them for rent and deal with any repairs and maintenance yourself.

Using a letting agent

Typically they will take upwards of 10% for managing and marketing the property but this can be a good peace of mind option, particularly if you don’t live locally.

However, if you have a bit of experience in property management and have a good plumber and handyman on speed dial, you might prefer to let the property yourself.

And if you have several properties on your books and this is bringing in more and more income, you may consider becoming a letting agent yourself…

What does becoming a letting agent involve?

Letting agents are responsible for managing rental properties on behalf of clients. As well as marketing the properties and looking after the paperwork, you will be on call when your tenant has a broken toilet, lost their key or their fence has blown down in the middle of the night. Expect to be kept busy.

Becoming a letting agent is a good option if you have:

• experience in the property market, an understanding of the complexities involved and a good reputation in the local area
• a large property portfolio – you have enough properties to make enough from rental income to run it as a full-time business, rather than alongside your main job
• great sales and customer service skills, plus a knack for multitasking and being organised

Becoming a letting agent means keeping on top of:

• marketing the properties, arranging viewings and negotiating the rents
• checking tenants in and out of the property and creating inventories of contents
• dealing with financials such as deposits, chasing rent and arranging transfers to landlords
• dealing with queries from landlords and tenants
• repairs and maintenance, end of tenancy cleaning and related jobs
• inspecting the property to ensure it meets health and safety requirements

What are your responsibilities as a landlord or letting agent?

There are naturally lots of regulations to keep on top of when you let property. You must:

• keep it safe and free from health hazards
• ensure all gas and electrical equipment is safely installed and maintained
• follow fire safety regulations
• provide an Energy Performance Certificate for the property
• protect your tenant’s deposit in a government-approved scheme
• place your tenants’ deposits in a government-backed tenancy deposit protection scheme
• ask a solicitor to draw up a tenancy contract if you are a private landlord, or join a body such as the Association of Residential Letting Agents

How should you market your property?

Like any business, it’s essential to make sure you have a steady flow of customers. In property terms this means tenants – in particular, tenants who pay their rent on time, keep the property in good condition and stay on good terms with the neighbours.

You will need to budget for marketing. Online property search platforms offer membership deals to agents and developers.

If you’re a private landlord, you could do an internet search on a term such as ‘list private property for rent’, or promote your property in newsagents and local papers.

Always give as much information as possible, with plenty of high-quality images to tempt the tenants in. Ideally you want lots of viewings so you can pick and choose between the best tenants.

What are your financial responsibilities as a landlord or letting agent?

The rules relating to letting property are subject to change. So it pays to find a good local accountant or bookkeeper to help you stay on top of the latest regulatory changes and to use trusted online accounting software so you know that all your records are in order.

When you start renting out property, you must tell HMRC about the situation and register to fill out an annual Self Assessment tax return. Don’t forget to put aside money each month so you can pay your tax bill at the end of the year.

As a landlord, you will have to pay:

• Income tax on the profits you make from your rental income
• Class 2 National Insurance if the work you do renting property counts as running a business

You can deduct a lot of costs, however, on:

• repairs and maintenance
• letting agent fees
• landlord insurance
• travel to and from your property
• utility bills and service charges
• mortgage interest

If you sell the property you will be liable for capital gains tax.

If you are a letting agent, there are different tax rules for:

• residential properties
• furnished holiday lettings
• commercial properties

Look at the Gov.uk article on Renting out your property (England and Wales) for detailed information.

Landlord and letting agent checklist

1. Have you researched the market? Look at tenants, as well as the competition in the local area
2. Get your marketing plan ready
3. Check with the bank if you can let out your property or properties, find out what insurance cover you need and what legal guidelines you must follow
4. Find out what tenants can legally expect from you as a landlord or letting agent
5. Get good online accounting software for landlords or letting in place
6. Register with HMRC and find out about your tax liabilities
7. Build good relationships with people who can help with repairs and maintenance on your properties

Make sure you have plenty of budget to pay for any emergencies, as well as your tax bill and deposits on new properties you want to add to your portfolio.