Everything You Need To Know About Renting Out Your First Home

There’s no sugar-coating this – there is A LOT of admin to consider when renting out your home. But, with a bit of knowledge and guidance, you can easily work your way through it. 

So, let’s break it down…

 

Do I have the right kind of mortgage and insurance? 

Firstly, you need to understand your mortgage and whether or not the mortgage you have allows you to rent out your home, which means your first port of call would be to get in touch with your current mortgage provider. If you plan to rent out your property for less than 12 months, your lender might grant you permission to do so under your existing mortgage terms. However, if you're considering a long-term rental, you may need to switch to a "buy to let" mortgage instead. 

It's a good idea to talk to your insurance provider at this point, too, as more often than not, your regular home insurance won’t cover you for renting out your property.

 

Do I need a landlord license? 

Next up, there’s that lovely little thing called landlord licensing to consider. If you’re considering renting out your home to one family, then it’s important to check with your local council to see if any regional licenses, known as “Selective License” are required. However, not all councils require this, so it’s always best to check. 

If your plan is to rent out your home to multiple people, then you will almost definitely need what’s known as a Mandatory License for HMOs (Houses of Multiple Occupation). You can also check the National Residential Landlords Association website for the most up to date information on licenses.

 

Do I pay more tax as a landlord?

Naturally, if renting out your property means you make profit on it, then yes, there are tax implications to consider, however, just how much tax you pay will be dependent on your other streams of income. The best thing to do is check the UK government website and then contact HMRC and talk to them about your specific circumstances. 

OK, so, you’ve checked with your mortgage and insurance providers, and understood what, if any, landlord licenses you need, as well as what tax you might be liable to pay, so, what’s next?

 

How much rent can I charge? 

Well, if you’re still keen on renting out your property after all that, then the next bit isn’t quite as taxing, as it involves checking to see what your property is actually worth on the rental market. 

For this, you’re best advised to speak to an estate/letting agent and ask them to value your property for rental. If you can, try and get two or three quotes, as annoyingly, they can vary. You might then decide to appoint one of the letting agents as the manager of your property, which helps in terms of tenant screenings and lease agreements, however it does come with a monthly cost. Of course, you’re free to manage the process yourself, which will save you money, however, you are then liable for all of the above, as well as finding your tenants, which we’re about to discuss.

 

How do I find tenants to rent my property?

If you decide to go through a letting agent, then part of their service will be to find tenants for your property. You will have a chance to speak/meet them beforehand, and you have the final say in who gets the keys. Alternatively, you can find tenants yourself through various channels, such as online listing, social media or even local newspapers. 

Of course, this is your home, and you want to ensure that the people who move in are going to treat it with respect. For this reason, you’re best advised to meet your potential tenants beforehand and you can even ask for a reference from their previous landlord, if they have one. 

Now you know the process of how to rent out your home, you might want to consider whether it’s all worth it.

It provides an extra income stream. 

If, after your mortgage, council tax, insurance and maintenance costs you’re making profit, then renting out your home could prove financially beneficial to you. However, don’t forget that you will pay tax on your earnings, if your overall income exceeds the tax-free allowance.

 

There are potential tax savings. 

As a landlord, you could be eligible for tax relief on things like the interest you pay on your mortgage, property taxes, insurance costs, maintenance fees, and depreciation. To make sure you get all the tax benefits you're entitled to, it's a good idea to talk to a tax expert.

 

You can build equity in your home. 

While your tenants pay rent, you can benefit from building equity in your property. Couple this with property appreciation, and mortgage paydown, and you could significantly increase your property’s net worth.

 

You can maintain ownership whilst enjoying flexibility. 

If you need to relocate for work or family, then renting your home gives you the flexibility to do so while still maintaining ownership.

 

You don’t have to manage it yourself. 

There are many professional management options to consider that will handle the day-to-day running of your home, such as finding and communicating with the tenants, maintenance management, and even rent collection. This reduces the amount of time and energy you need to spend on these things, while giving you the peace of mind things are being taken care of you on your behalf.

Naturally, all pros must come with a few cons, and considering these specific cons will only serve to help you make an informed decision that you’re comfortable with.

 

You need to comply with the law

Let’s assume you’re a law-abiding citizen, and you want to follow everything by the book, in which case, this isn’t so much a pitfall, as it is a necessary priority. As a landlord, it’s imperative you stay fresh on UK landlord-tenant laws to avoid any legal problems.

 

You’re responsible for the overall standards of your property

Even if you decide to appoint a letting agent to manage your property, you’re still responsible for keeping it in a good condition, including its overall safety, its décor, its electrical and plumbing standards, as well as the exterior, including the garden.

 

There may be times where your property is vacant

If periods occur where there’s no one living in your property and paying rent, then of course, you’re still responsible for paying the mortgage, council tax and bills etc.

 

Tenants

There’s no getting around this one; not all tenants are created equal. Where the majority of tenants are lovely and will be no trouble at all, there can be cases where some aren’t so lovely, and might not live up to your high standards. Best thing you can do here is ensure you’ve thoroughly screened tenants and agree basic house rules before signing contracts.

 

Whether you should rent your home out or not is a decision you can’t make on a whim, as it requires a lot of thought. However, hopefully this guide serves as a good baseline for you, helping you to understand what’s involved.