Landlords, purchasing a buy to let property on the private rented market requires a considerable financial investment. If the property is to be either part or fully funded by a mortgage, then it is essential that the landlord takes the necessary steps to ensure that he purchases and presents, a buy to let property that will give him the maximum possible occupancy and financial return.

Valuing the rent potential of a property

Always gather as much information on potential rental values for similar properties in the same locality as possible. Local newspapers, letting agents and private advertisements are very useful sources in determining the market rent for your buy to let property. However there is no substitute for taking the time to view other similar properties that are available for rent.
However, in times of rising house prices, it is always worth remembering that market rents are determined by many factors, not least by a person’s ability to pay! Therefore to maintain a high occupancy level for your property it is advisable to be realistic about the rent that you can charge. The loss of even one month’s rent can substantially reduce your financial return.
Factors to consider when purchasing a property
1. Location, location, location, location……. It can never be emphasised too much.
When researching the requirements for private rented accommodation in a locality, think of the type of person their possible occupation (and thus income) who may be attracted to the sort of accommodation that you are offering. For example, consider local transport and public transport routes, the proximity of local companies who may employ staff on short-term contracts etc. Buying a nice property in the wrong location could cost you dear in terms of lower rent or lack of occupancy.

Also note that buying properties in areas considered not desirable to live in will put a limit on the maximum rent achievable. Personal safety (particularly at night) and security may also be an issue for many prospective tenants.

2. Appearance – Initial impressions are just as important to people viewing with the intention of renting, as they are to those buying. Therefore an attractive property in a pleasant locality will always be a good investment.

3. Property Surveys are essential for prospective landlords as a safeguard to spending a large proportion of your rent on property repairs. Use your eyes (and nose!) when viewing properties for signs of property defects or damp. If in doubt, seek professional advice. If you are obtaining a mortgage on a property, all lenders will insist on a survey but these are often cursory and designed to ensure that the lender will recover their investment if necessary. Therefore for peace of mind, consider arranging for a more comprehensive survey (full structural) to be carried out. If there are structural alterations needed to prepare the property for letting, then take along a builder with you both for advice and, if necessary to prepare a full and detailed quotation for the work to be done.

Presenting the Property

The best presented properties always let first. If the property is to be let furnished, ‘lifestyle’ is the current buzz word, and consideration should be given to the type of furnishings that your prospective tenant may be expecting to see as he enters the property for the first time. A few tips are listed below:

Decoration should be neutral but fresh so that it is acceptable to most people. Carpets should again be neutral, clean and in good condition. They should also be fitted securely (particularly to stairs). Remember that in a small property, the same carpet fitted throughout will give an illusion of space.

Furniture should be contemporary and durable, in good condition and contribute to giving a pleasing overall impression of the property. Do not be tempted to use old second-hand furniture, as this will usually de-value the maximum rent achievable. All furniture and furnishings must comply with all current legislation (see section on safety matters).
Supply only what is needed and do not clutter a room. Always leave room for the tenants’ own personal possessions.

When letting fully furnished a full sized cooker and fridge/freezer and perhaps a microwave oven should be offered in the kitchen. Beds should always be comfortable with a good quality mattress (and a mattress cover to both prolong its life and keep it clean). All furniture must comply with current legislation.

Kitchens and bathrooms ’sell’ rented properties in the same way they do to would-be purchasers. D.I.Y. stores now offer very good deals on ‘value’ kitchen units and bathroom suites, and your investment can be recovered many times over either in terms of improved rents or lack of voids. A shower is an important item for most tenants.
External appearance is essential as properties in poor external condition can often deter potential tenants from viewing the interior. All paintwork should be fresh and on no account flaking. Windows should be clean and curtains hung neatly. Gardens should be tidy and approach paths free from weeds and overhanging bushes.

Cleanliness is one of the most important factors as dirty and ill-kept properties are both difficult to let and tend to attract poor quality tenants.

Security should include basic precautions such as a five-lever mortise lock on the front door and window locks. Many tenants may regard a security alarm as an important feature.

Furnished or Unfurnished?

This depends on the potential market that you have identified for the property. Student accommodation for example will always be offered furnished, as will smaller units of accommodation that are often favoured by young professionals at the outset of their careers. Landlords who are letting their own main home will often offer it furnished, but without items that are valuable or personal to themselves.

There is an increasing trend towards offering unfurnished accommodation (although this usually means that a lower rent will be charged). This can encourage a sense of ownership and permanence, which may lead to longer lets and less damage. However many landlords still offer at least carpets and curtains, a cooker in the kitchen and often other white goods as well. For a furnished property a landlord will also need some if not all of the following: leather sofas or fabric sofas, dining room table and dining chairs, coffee table, TV unit, beds, mattresses, wardrobes, chests and bedsides. Some Buy to let landlords also provide white goods: cookers or ovens, fridges and freezers, washing machines and microwaves.

Essentials for Landlords

There are lots of rules & regulations regarding the letting of property & landlords face a minefield of legal responsibilities ranging from producing gas & electrical safety certification to protecting tenant’s deposits. 

Breaches of certain types of legislation often have criminal sanctions attached, including fines, imprisonment or both. Therefore, it’s essential that all relevant procedures & laws specific to your property & tenancy are followed. 

Because we are specialists in our industry, we can  guide you through each & every piece of legislation. Below is a brief overview of the recent regulations. We must stress that this is just a brief overview, for more detailed information, please contact us & we will be only too pleased to give more comprehensive information. We can arrange for safety checks & certificates to be carried out on your behalf. 

SAFETY REGULATIONS & LEGAL REQUIREMENTS     

The Gas Safety (Installation and Use) Regulations 1998

Government Legislation requires the Landlord to hold a Landlord’s Gas Safety Certificate issued by a Gas Safe Registered Engineer concerning all gas appliances in rented property.  The certificate issued, lasts for 12 months & must be renewed annually whilst the property remains let. A copy must be issued to both the landlord & the in-going tenant. No tenancy can commence until we are in receipt of a valid GSC. We can arrange this on your behalf. If you use your own contractor we will need proof of their Gas Safe Registration. Further information can be found on www.hse.gov.uk/gas

Portable Electrical Appliance Testing (PAT) 

There are several items of secondary legislation under the umbrella of the Consumer Protection act which are directly relevant to the supply of electrical goods, including:

• The Low Voltage Electrical Equipment Regulations 1989

• The Electrical Equipment (Safety) Regulations 1994

• The General Product Safety Regulations 1994

• The Plugs and Sockets (Safety) Regulations 1994

All appliances supplied in a letting must be tested for safety. The landlord has a legal duty to ensure all portable appliances (any item with an accessible plug) such as fridges & kettles are safe – this applies to used & brand new appliances. Although at present there is not a legal obligation to hold an electrical safety certificate, however there is a duty of care regulation &

we would advise that an electrical safety check be carried out, & a PAT Safety Certificate issued by an approved electrician annually.

If we are managing your property, we will require a current PAT Safety Certificate prior to the commencement of the initial tenancy & annually thereafter. 

Energy Performance Certificate (EPC) 

All properties that are on the market to let must have an Energy Performance Certificate (EPC) which must be available for inspection by prospective tenants. An EPC gives prospective tenants information on the energy efficiency & carbon emissions of a building.  They show the current running costs for heating, hot water & lighting for the property & its environmental impact & a list of energy saving improvements. Once an EPC has been obtained it will be valid for 10 years. It is now law that all rental properties have an EPC.  Failure to provide one could result in a fine.

Please be aware that property is NOT allowed to be marketed until an EPC has been obtained. 

The Furniture and Furnishings (Fire) (Safety) Regulations 1988

All upholstery & upholstered furnishings supplied as part of the tenancy must comply with current fire resistance standards. It is a criminal offence, punishable by a fine &/or a prison term, to let premises with furniture or soft furnishings which cannot be proven to comply with the above fire safety regulations. The Regulations apply to the following which must be match resistant, cigarette resistant & carry a permanent label:

• all upholstered furniture, suites & sofa-beds

• beds & divans including the upholstered bases, padded headboards & mattresses of any

size

• furniture with loose or fitted covers, cushions & pillows

• children’s furniture

• cots, high-chairs & other items used by a baby or small child

• garden furniture which may be used indoors

Items such as carpets & curtains are not included.  Any furniture manufactured prior to 1950 will be exempt, provided that they have not been re-upholstered with an illegal filling. All furnishings must carry the appropriate permanent labels to show that they comply. Any furnishings which do not comply with the regulations must be removed prior to the start of the tenancy. We are able to organise the testing and the issue of a Safety Certificate for the furnishings of your property.

Electrical Mains Installation and Fixed Wiring Testing – PIR

The two main Acts of Parliament that impose a statutory duty on Landlords with respect to safety and electrics are: 

• The Consumer Protection Act 1987

• The Landlord & Tenant Act 1985 (Section 11)

The only way a Landlord can check that the electrical installation (the fixed wiring) in the property is safe, is by having a Periodic Inspection & Report (PIR) carried out & signed off by a fully authorised electrician, (such as NICEIC qualified).This inspection identifies any deficiencies against the notional safety standard for electrical installations & issues a report. Any areas that require attention will be detailed in the report, together with a recommendation of remedial works required, if any, in order of priority. It is considered best practice to have a PIR carried out when a property is first prepared for letting, & every 5 years thereafter.

Oil and Solid Fuel

There is no specific legislation applying to oil and solid fuel currently, but we recommend that appliances are serviced regularly, to ensure their safety.

Smoke Detectors

Properties built after June 1992 must have mains interlinked smoke detectors on each floor.

Although older properties do not fall under these regulations, The Property Outlet would recommend that a property for let have at least one fully operational battery operated detector on each floor, as a minimum requirement.

Insurance

It is the landlord’s responsibility to arrange buildings insurance on your property, including cover for your own contents & public liability. Many standard policies do not cover rental properties. If you already have your own policy in place, you must advise the insurer that your property is to be let, otherwise you may invalidate the cover. We recommend that you take out specialist insurance aimed at landlords, as this cover will protect & safeguard your needs & include many additional features associated with letting property, for example damage caused by a tenant. We are able to provide you with competitive quotations for all types of insurance policies available to landlords, including Portfolio policies, Contents insurance and Emergency Assistance.

Leasehold Consent

If your property is leasehold you must ensure that  you have written confirmation from the freeholder (or their agent) that your property can  be let & on what terms. If The Property Outlet is managing your property, we will also require a copy of the Head Lease which can be given to the tenant to ensure that they comply with the leasehold regulations that govern the property.

Management Company

If your property has a Management Company, you must make sure that they are aware that you are going to be letting the property out, & that they have your contact address & details to be able to contact you.

PERMISSION & CONSENTS       

Houses in Multiple Occupation (HMO) Licensing

Houses in Multiple Occupation are properties which are occupied by four or more sharers who do not form a single household. This is governed by stature. In the event of a house being classified in this way, strict criteria must be met before the property has a registration certificate from a local authority to ensure that the property meets additional fire & electrical safety standards. The legislation sets a limit to the number of occupants in a property & the size

of an HMO determines whether you need a licence.  This varies between councils. Information may be found at www.communities.gov.uk.

 Mortgage Lender Permission

If you have a mortgage on the property then you must contact your mortgage provider to make sure that you are allowed to let the property under their terms & conditions. If you require a ‘Buy to Let’ mortgage, or need to remortgage, we have an independent mortgage broker available who is able to offer you advice.

OTHER ESSENTIALS           

Inventories

There is a great importance of having an inventory compiled on any property to let, particularly following the introduction of the Tenancy Deposit Scheme. Without an inventory, landlords can face hefty charges for repairs or breakages that might have otherwise been recovered had the inventory been prepared by a skilled professional who is trained to avoid omissions or errors.

We use a highly professional & experienced independent company to compile a detailed inventory. We recommend that all landlords have an inventory of their property, even if they are going to manage the let themselves. If The Property Outlet is managing your property, we will require a comprehensive & up to date inventory each time we arrange a new tenancy.

Please ask for information and prices.

Rent Guarantee Insurance 

Letting a property does come with some risk.  As a landlord, you rely on tenants to pay the rent on time & vacate the property at the end of the tenancy. However sometimes a tenant may get into difficultly & not be able to pay their rent.  If you want complete peace of mind, you may want to take out rent guarantee insurance. 

Absolute Rent Guarantee covers the property, not the tenant & offers you the following…

• Cover for the total monthly rent, no matter how many tenants live in your property or the rental amount

• 100% of the monthly rent paid for up to a maximum of six months from the date of the first arrears

• Legal expenses up to £25,000 to cover eviction should your tenant fail to vacate the property when obliged to do so in accordance with the tenancy agreement

• 50% of the rent paid for up to two months after vacant possession has been obtained, whilst you look for new tenants

Please ask us for more information should you require more information.

FINANCIAL IMPLICATIONS & THE LEGAL ASPECT   

Deposit Protection

Since April 2007, landlords are legally required to safeguard tenant’s deposits & must be registered with one of 3 schemes within 14 days of  receipt of deposit. This legislation covers virtually all new AST contracts through which private landlords let property in England and Wales. However, the following will not need to be registered with a tenancy deposit protection scheme: 

• Resident landlords (those living in the property)

• Landlords of tenancies with rent of over £25,000 a  year * (This amount will rise to £100,000 from 01/10/2010)

• Company lets

• Student accommodation let directly by universities or colleges

Failure to comply will affect the ability of the landlord to gain possession of their property under the usual Section 21 route of the housing Act 1988.Landlords can also face a fine up to three times the deposit amount.  The aim of this legislation is to ensure that deposits are returned to tenants correctly &the deposit money is not unfairly withheld. 

There are two types of schemes available for landlords to protect the deposit. Custodial schemes The DPS is the only custodial deposit protection scheme. Money is held by the scheme until it is time for it to be repaid at the end of the tenancy. The custodial scheme is free to use. The landlord simply puts the deposit into the scheme at the beginning of the tenancy. 

Insurance-based schemes

Under the insurance schemes the landlord keeps the deposit, & pays the insurance scheme to insure against the landlord failing to repay the tenant any money due to him. There is a choice of two insurance-based schemes, The Dispute Service (TDS) & mydeposits. For more information visit www.thedisputeservice.co.uk or www.mydeposits.co.uk.

If The Property Outlet is managing your property, we will protect the deposit received from your tenant using the DPS.  The DPS will hold the deposit on your behalf & will release to us as your agent at the end of the tenancy providing that we can agree with the tenant how much should be repaid to them.  Any amount that is agreed to be kept by the landlord for the cost of cleaning/repairs will be returned to the landlord (or us as your agent).  If an agreement cannot be reached with the tenants, the DPS will examine the claim from each side & will decide how much of the deposit is to be returned. The decision from the DPS is final & legally binding.

If you are managing your tenancy yourself, we are happy to place the deposit into our DPS account for you, but will not get involved in any negotiations between landlord & tenant.  We will only ask the DPS to release the deposit once we have written permission from the landlord & the tenant.

TAXATION OF RENTAL INCOME       

Income Tax

Rental income is liable to tax. Expenditure which you incur in the running of the property is allowable as a tax-deductible expenditure. This will include mortgage interest, our management fees, & the cost of insuring the property & a wear & tear allowance (in the case of furnished property). You are then taxed on any profit that you make.

UK Resident Landlords 

If you are a UK based landlord, The Property Outlet will pay your rental income to you gross, less fees and expenses. You are then responsible for your own tax affairs. Therefore, if you are not accustomed to dealing with H M Revenue & Customs (HMR&C) or making annual tax returns, we strongly recommend that you employ an accountant on your behalf to deal with this for you.

Non UK Resident Landlords If you are living abroad for more than six months,  you will be considered to be an overseas andlord & required to register your status with the Inland Revenue, by completing a NRL1 orm. You will still have to pay UK income tax on any profits you receive from renting your roperty. If we are managing your property, we are obliged by law to deduct basic rate tax from ny rent we collect & send it to the Inland Revenue on a quarterly basis. 

To receive your rental payments gross you can apply to the Inland Revenue for an Exemption crtificate. If the property is in joint names then you will need to apply for one certificate each, once the Inland Revenue have confirmed that a landlord is registered with them on this basis, they will issue authority for us to pay you your rent without deducting tax.

The NRL1 Form is downloadable from http://www.hmrc.gov.uk/cnr/nr_landlords.htm

From time to time the Inland Revenue will also ask  us for information relating to rental payments paid to landlords. We are legally obliged to provide them with this information.

LANDLORDS OBLIGATIONS         

Property Presentation 

It is very important that a property is handed over to a tenant in a very clean & tidy condition. A professional clean is usually required, including carpets & curtains. If The Property Outlet feels that a property requires attention prior to the first let, we will discuss this with the landlord & agree a schedule of works. The Property Outlet can arrange for the work to be carried out at the landlord’s request but all costs will remain the landlord’s responsibility. 

The garden needs to be well presented with the grass mown & hedges trimmed. Under our tenancy agreement, the tenant is responsible for the maintained of the garden. If possible, you should leave the appropriate garden tools at the property, for example a lawn mower. Large or high-maintenance gardens cannot reasonably be considered a tenant’s responsibility so in such

cases it is usually recommended that the cost of gardening is included in the rent. The Property Outlet can then arrange a contract with a local gardening company to ensure the garden Ongoing Maintenance & Repairs  Landlords are legally required to maintain their properties & undertake repairs.  This includes

the structure & exterior of the building, the fixtures & fittings, as well as the electrics, heating hot water & sanitary conditions. If we are managing your property for you, we will arrange for a local & reliable contractor to carry out the necessary repair work.  If any of your appliances have service contracts, maintenance agreements or under guarantee, please make sure that you supply us with the details and a copy of any documents.

Utilities & Council Tax We recommend that the landlord contacts all service providers to advise that you are no longer responsible for the bills. It remains the landlord’s responsibility to ensure that services & utility companies are made aware that they have moved out & provide their forwarding address for

final invoices. Also, any utility charges between tenancies remain the landlord’s responsibility. If The Property Outlet is managing your property, we endeavour to take meter readings on the day the tenancy begins and will write to the electricity, gas & water suppliers as well as the council tax office to provide them with meter readings and the names of new tenants at the start of a tenancy & the end of the tenancy.

The tenant is responsible for all charges for electricity, gas or oil (where applicable), water & council tax for the duration of their tenancy. They must also pay for any telephone & internet connections, satellite/cable services & a television TV licence where applicable. A landlord is not expected to provide internet, satellite or cable facilities within a property, although provision of a standard telephone line is strongly recommended. It is the tenant’s responsibility to find out if these services are available prior to renting a property.

Landlords, furnishing your first buy to let property can seem like an overwhelming task, but it doesn’t have to be.  Use strategy to help you organize the items you will need to furnish your new living environment.

Before making any purchases, create a list of what furnishings you will need for the below 5 action areas:

    Where you Sleep
    Where you Sit / Socialize (leisure time)
    Where you Snack
    Where you Study (work or hobby area)
    How you will Sanitize

Let’s break these down even further into a general suggested item list of what can fit in these areas. (This list may not included everything for your specific needs, so add or subtract as needed)

 Study
Desk
Chair
Shelving for books
Desk lamp

Sleep – Bedroom
Bed (frame, mattresses)
Pillow & Bedding
Chest of Drawers

Wardrobe

Bedside Tables
Hangers

Table Lamp
 Alarm Clock
Telephone
Chair
Mirror

For more ideas: http://www.buytolet-furnishings.co.uk/loft/category.php?cid=3

Snack / Eating – Dining Room or Kitchen
Dining Room Table (
Dining Chairs Chairs
Utensils (for eating or cooking)
Plates, bowls, glassware.
Cooking Equipment ( pots & pans, spatulas, coffee makers, can openers, blender)

Socializing / Sitting – Living Room
Sofa or Chairs
Side Tables
Table Lamps
Entertainment Centre or TV Stand
Bookcases / Shelving
Coffee Table

For more ideas: http://www.buytolet-furnishings.co.uk/loft/category.php?cid=2
   

Sanitizing (Cleaning & Bathroom Supplies)

Mop
Broom
Vacuum Cleaner
Towels

This list should give you a good start at setting up house and on your way to making that buy to let property a home.

With three quarters already booked out with well-known furniture names like Morris, Buoyant, BM, Kettle, Furnico and Davinci, the Manchester Furniture Show has announced another big furniture brand who will be exhibiting; Corndell.

The Manchester Furniture Show

The Manchester Furniture Show showcases furniturebetween the 18^th and the 21^st of July, and will also be attended by first-time exhibitors Signature Living, Aero Beds and Persian Art Treasure.

Last year’s event attracted nearly six thousand visitors, with many big brands as well as independents exhibiting furniture, and was judged a success by the many who attended. This year’s event takes place at Manchester Central in July.