The ultimate guide to renting out your house

Why rent out your house or flat?

There are many reasons people choose to rent out a property. Financial gain is a big one. Perhaps you need to move for work but don't want to sell your property. Renting it out can cover your mortgage and provide additional income. You might even be starting a property portfolio and building a rental business.

How to rent out your house or flat?

There are two main ways to manage your rental property:

  • DIY Landlord: You take care of everything yourself, from finding tenants to repairs.
  • Letting Agent: Hire a professional to handle the day-to-day tasks, giving you peace of mind.

You'll also need to decide if you'll rent the property as a whole or convert it into a House in Multiple Occupation (HMO). HMOs can bring in more income but require more work and investment to comply with regulations.

Speak to your mortgage lender

If you have a mortgage on your property, speak to your lender before renting it out. They may need you to switch to a buy-to-let mortgage product with different terms.

Landlord licensing

Some areas in the UK require landlord licensing to ensure proper property management. There are three types:

  • Mandatory Licensing: HMOs in England and Wales must have a license.
  • Additional Licensing: Councils may require additional licensing for HMOs if they feel existing regulations aren't enough.
  • Selective Licensing: Some councils require all landlords in their area to be licensed or to take a ‘fit and proper person’ test.

Check with your local council to see if any licensing schemes apply to you.

How much rent can I charge?

The ideal rent depends on several factors:

  • Property size and amenities
  • Similar properties' rental prices in your area
  • Average income of potential tenants

Overpriced properties may struggle to find tenants, while under priced ones might be more difficult to choose the right tenant. Online rental calculators can help estimate a fair market rate.

Tax and national insurance implications

Rental income is taxable. You can deduct expenses before calculating your profit, including mortgage interest payments which are eligible for a 20% tax credit.

The amount of tax you pay depends on your income bracket, other income sources, and property ownership structure. The first £1,000 of rental income is tax-free. You'll need to declare any income above this. You may also have to pay National Insurance contributions if your profits exceed £6,725 per year and you meet the below criteria:

  • Being a landlord is your main job
  • You have more than one property rented out
  • You are purchasing new properties

Legal responsibilities for landlords

Gas and electrical safety

Regular safety checks are a legal requirement. A Gas Safe registered engineer must perform an annual Gas Safety Certificate check. Every five years, a qualified electrician should inspect the property's electrical installations. You must provide copies of these certificates to your tenants.

Fire safety

Implement fire safety measures like smoke alarms on every floor and carbon monoxide alarms in rooms with solid fuel burning appliances. Ensure tenants have clear escape routes and fire-resistant furniture and furnishings. HMOs legally require fire extinguishers.

Right to rent checks

Landlords (and letting agents) must verify a tenant's legal right to rent in the UK before starting a tenancy. Failure to do so can result in hefty fines.

Find out more about how landlords can check on the immigration status of their prospective tenants on our dedicated Right to Rent page.

Tenancy agreements

After finding a tenant, you'll need to create a lease agreement. A written tenancy agreement outlines the rights and responsibilities of both landlord and tenant. Assured shorthold tenancy agreements are the standard for private rentals in England and Wales. Standard templates are available online.

Protecting your tenant's deposit

Landlords are legally obligated to protect their tenants' deposits and return them minus deductions at the end of the tenancy. You must use a government-backed tenancy deposit protection scheme.

Landlord insurance

While not mandatory, landlord insurance is highly recommended. Standard policies won't cover issues like unpaid rent or tenant-caused damage. Landlord insurance offers extras like public liability cover, loss of rent, and legal expenses. Premiums can vary depending on your tenants (e.g., students may be considered a higher risk).

Repossessing your property

Several options are available if you need to take back your property. The most common method for assured shorthold tenancies involves a Section 8 or Section 21 notice. Court orders can be obtained to remove squatters, or if the tenant abandons the property.

Haybrook can help!

Being a landlord comes with many responsibilities! But Haybrook is here to help. We offer full property management services to help you find tenants, handle rent collection, and oversee repairs.