How to become a landlord

Guidance and steps involved in becoming a landlord

Congratulations! Now that you have decided to be landlord, let’s discuss the necessary steps and some important considerations.

Here are some steps you can take to gather information and make well-informed decisions:

Find a Property

1. Identify the Location: Location is a critical factor when considering a rental property. You should consider the local job market, housing market, accessibility to public transportation, city centers or business districts and good schools and other amenities such as shopping, restaurants, and entertainment. These factors affect rental demand.
2. Security and anti-social behaviour: Avoid areas with high anti-social behaviour as this will have an impact both on your property and the quality of the tenants you attract. Take a look at local crime statistics to determine if the area is secure.
3. Accessibility: If you are planning to manage the property yourself, it is vital it is easily accessible to you as you may be contacted at odd hours of the day or night. If investing further afield, it is recommended you use the services of an agent to manage the property on your behalf. Check they are registered with ARLA (Association of Residential Lettings Agents)

Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.

Warren Buffett

Do your Research

1. Analyse the Market Trends: Use online resources such as Zoopla to check out the current market trends for the location. Look for the average price per square foot, median home values and rent prices.
2. Check Local Employment Opportunities: Consider the local job market and unemployment rates. Areas with a thriving job market and low unemployment rates tend to have a higher demand for rental properties.
3. Look at Historical Data: Review the historical data for the real estate market in the area. This can help you identify trends and forecast future changes. Websites such as Rightmove can provide you with insights and statistics.
4. Consider the Competition: Look at the competition, including other rental properties for sale in the area. This can help you determine the level of demand for rental properties in the location.
5. Get Advice from Professionals: Consult with local estate agents to get their insights and advice on the local market. They may have information that you wouldn’t find online or in your research.

By taking these steps, you can gather the information you need to make well-informed decisions about buying a rental property in a specific location. Understanding the local real estate market can help you pinpoint investment opportunities, anticipate risks, and make a profitable investment.

Finance

1. Determine Your Budget: Conduct a financial evaluation and ascertain the amount you can allocate towards investing in a rental property. It is vital to take into account all the associated expenses to ensure that you are financially capable of handling them.
2. Affordability: Conduct a financial evaluation and ascertain the amount you can allocate towards investing in a rental property. This will enable you choose an area that is affordable and will give you a good rental return and cash-flow. In addition to the property’s purchase price, take into account the following factors when calculating your returns.:
   • Letting agent fees (if using one)
   • Repair bills
   • Mortgage interest payments
   • Insurance
   • Service charge and ground rent if the property is leasehold
3. Get Financing: Consider your options for financing the purchase of the rental property. This could include getting a mortgage or finding an investor. If you have enough funds to buy a property outright, it may be beneficial to explore the potential of leveraging and buying multiple properties.
4. Purchase The Property: Once you’ve identified a suitable investment property and secured financing, you are now ready to purchase the property.

Financing your property highlights all the costs you need to consider as well as the process of obtaining finance.

The Property

1. Make Necessary Repairs and Renovations: If the property requires any repairs or renovations, this is the point where all those repairs are done to get the property ready for renting. Where repairs are not required, a professional clean could make all the difference between the quality of tenants you attract.
2. To Furnish or Not to Furnish: That is the question! Hopefully your research into the local area should have given you insight into what the area demands.
3. Find and Screen Tenants: Advertise the property and screen potential tenants carefully. This process typically involves checking their credit history, employment status and references. You may want to use an agent for this if you have no experience as accepting a problematic tenant could have significant financial consequences for you.
4. Moving in The Tenants: This will include everything from creating a tenancy agreement, inventory and handing over the keys. Once again, this should be left to professionals if you have no experience.
5. Manage the Property: I am a DIY property manager so always recommend managing properties that are within a reasonable driving distance. Check out my blogs on property management to gain valuable insights on how to be a DIY property manager.

In Summary

Invest in

• Affordable properties, ideally below the UK average of around £290k.
• Strong capital growth potential for when you decide to sell the property.
• High rental income and strong rental yields.
• Good transport links and infrastructure for professionals.
• High levels of regeneration, which is a good sign of a growing housing market.

Becoming a landlord requires careful planning, research and management, but it can also be a lucrative investment opportunity.