How landlords can stay on the right side of the law
From the moment you become a landlord, your priority needs to be to ensure that the income you receive from tenants is at least equal to the running costs of your rental home, including mortgage repayments, maintenance, insurance and other overheads.
Whether you have inherited a property or made a buy-to-let investment, the key to achieving this all-important business goal is not only making sure your property is occupied for 12 months of the year and your tenants pay their rent on time but also that you conform to a growing list of landlord regulations.
The vast majority of landlords in the UK have experienced issues with rent collection, and almost as many have had to cope with void periods.
One solution is for landlords to sign up to an agreement that ensures they receive a guaranteed payment for their property every month, regardless of whether it is occupied or not. However, property management specialist Assetgrove says many of the 1.6 million private landlords in the UK do not understand the difference between rent guarantee insurance and rent guarantee schemes.
Most rent guarantee insurance policies will pay out if a landlord needs to a tenant to court, but they won’t usually reimburse property owners if tenants fall into arrears. Such policies often only reimburses lost rent for periods when a property is not possible to inhabit, such as in the event of a fire.
Specialist rent guarantee protection, on the other hand, gives landlords complete peace of mind by ensuring they receive a fixed monthly fee for their property, whether it is occupied or not.
In effect, landlords sign over the running of their property to the provider of the scheme, which means they do not have to deal with the day-to-day hassles of managing a rental property – including dealing with phone calls at midnight from tenants who mislay their keys on a night out.
Assetgrove points out that with many buy-to-let investors now buying property in parts of the country that deliver higher returns than their local area – such as increasingly popular Shoreditch in east London, where the average weekly rent is reported to be £480 – landlords are no longer in a position to deal with issues that require their immediate attention.
Not only that, some rent guarantee schemes also take care of maintenance of the property.
In return for the managing agent paying the landlord a fixed monthly fee, the property business can then keep any profits it makes over what they give to the landlord.
Advantages of rent guarantee schemes
With property becoming increasingly unaffordable for under 40-year-olds and new pension freedoms encouraging over 65-yer-olds to use property investment as a source of retirement income, the number of tenants and landlords is set to increase.
However, increasing regulation in the private rental sector – plus the rising expectations of tenants – means running a buy-to-let property portfolio can become a full-time role.
By signing up to a rent guarantee scheme, buy-to-let investors and accidental landlords can free themselves from the worries of…
- Finding good quality tenants who will take care of your property
- Checking tenant references and their immigration status
- Keeping abreast of regulations governing tenant deposits
- Maintaining an income stream through the receipt of rents
- Keeping the tenants happy by carrying out a regular programme of maintenance
- Ensuring the property meets a growing list of safety regulations
As the number of buy-to-let landlords grows, the pressure to ensure private rental properties maintain minimum standards – including an Energy Performance Certificate rating of at least E from 2018 – will only increase.