Preparation before letting
- Before investing, prepare a business plan that considers the cost of the investment, running costs, cash flow and rent level. Allow at least a 10% return to cover costs and voids.
- Obtain Rent Smart Wales registration. Obtain a Rent Smart Wales landlord licence if you plan to self-manage the property.
- If necessary, obtain permission from a mortgage lender and freeholder to rent the property.
- Consider what part of the private rented sector market the property is designed to serve.
- Is the property to be let furnished or unfurnished?
- Calculate realistically whether the rental income will cover loan or mortgage payments, repairs and all the other rental costs. If not, budget aside money from earnings each month (in the early years) to cover any shortfall.
- Decide on the likely market rent.
- Determine whether gas, electricity and water charges are included in the rent.
- Consider who will manage the property and the cost of this. If using an agent, agree on fees and levels of service.
- Ensure adequate levels of relevant insurance (check the policy is suitable for the rented property).
- Deal with the tax implications of the revenue stream and inform the Revenue and Customs
- Consider joining a landlord association and undertaking professional development.
- Obtain planning or Building Control approval for significant improvement work done to the property.
- Make sure the property is both safe and healthy for any potential occupiers or visitors, including;
- adequate heating and insulation
- free from tripping and falling hazards
- free from significant disrepair
- good lighting and ventilation
- good security
- good sanitation, food preparation and is hygienic
- working mains connected smoke alarm on each storey
- carbon monoxide detector in any room with a relevant appliance
- Obtain a written statement of occupation contract suitable for your letting and avoid unenforceable unfair terms.
- Decide on the length of letting.
- Advertise through the internet, agent, newspaper or other means.
- Obtain an Energy Performance Certificate (EPC).
- Undertake an annual gas safety check by a Gas Safe registered engineer.
- Get an electrical inspection and test report by a qualified engineer every five years (or at a frequency recommended by the engineer).
- Ensure the property meets the relevant fire safety standards by fitting alarms, smoke/heat detectors, and emergency lighting.
If the property is a House in Multiple Occupation (HMO):
- Contact your local authority to check whether a licence is needed, and if it is, apply for a licence and comply with the conditions of the licence and the HMO regulations
- Ensure a fire risk assessment is carried out under the Fire Safety Order
- Ensure that smoking does not take place in public areas by the Smoking and Health Act 2006
Before the contract holder moves in
- Ask prospective contract holders to complete an application for accommodation. Guild subscribers can use the online application form.
- Check the ID of the contract holder. At least one ID, such as a passport, driving licence and birth certificate, should be obtained. The online application form includes a section to upload ID and payslip information.
- Conduct referencing. From the details in the application, conduct referencing. Check for county court judgments (CCJs) or bankruptcy. Also, check earnings are sufficient. Guild subscribers can use the online referencing service (which is integrated with the earlier-mentioned application form).
- Have documents ready. A prospective contract holder can request documentation before moving in. Ensure you have available the EPC, gas safety record and electrical report. The EPC must be available at the earliest opportunity (e.g. at the viewing).
When the contract holder moves in
- Create a written statement of occupation contract. Guild subscribers can use Tenancy Builder. Attach the documents as described earlier.
- Sign the tenancy agreement - typically, remote signing is used, and all parties will receive a completed copy.
- Consider asking the contract holder to sign a bank standing order form for rent payments or use a direct debit service like GoCardless for direct debit.
- Complete and agree on an Inventory and Schedule of Conditions (consider using a professional inventory clerk, if appropriate). Guild subscribers can use our inventory maker (currently in beta testing).
- Give the contract-holder the landlord's (or agent's) contact details for repairs and other problems (legally required on prescribed form RHW2 included automatically in Tenancy Builder).
- Notify the utility suppliers and the local authority (for Council Tax etc.) of the details of the new contract holders.
- Inform the contract holder of utility suppliers etc., and read any relevant meters.
- Provide the contract holder with a copy of the relevant user manuals for appliances in the property.
- If charging a deposit and letting on an occupation contract, ensure that the deposit is protected under one of the schemes available and give the required information to contract holders to confirm this within 30 days (included by default if using Tenancy Builder).
- Consider any local council schemes such as deposit guarantees.
- Keep income and expenditure tax records; if rental income exceeds (allowable) expense, set an amount aside to cover future tax demands. Complete a tax return, ideally soon after the end of your tax year.
- Provide receipts to the contract holder for any cash rent payments
- Keep detailed records of repair requests, inspections, safety checks, repairs, other management issues and a rent statement.
When the contract holder moves out
- If leaving, arrange a joint inspection of the property and agree on any damage or decoration that needs rectifying.
- Provide information about any cleaning required.
- Advise the contract-holder about taking final utility readings for an end-of-contract bill.
- Agree with the contract holder on how to return their security deposit, considering any deductions for damages, cleaning, or outstanding rent.
- Make arrangements for the handover of keys.
