If you find yourself with a second home – whether temporarily while you’re working away from your usual area, or you’ve permanently become the owner of another property – you’ve got a handy way to make an extra income by letting it out.
But, there are a few things to consider before you put up a ‘For Rent’ board outside the building. let’s dive straight in…
1. What condition does the house need to be in?
There are many Government regulations for renting out a property and you’ll need to tick all the boxes before you can even think about putting your home on the market for rental. Aside from gas and electricity safety checks, the home will need a good Energy Performance Certificate. That may mean installing insulation, changing windows and upgrading the heating system before a tenant can move in – extensive and expensive tasks that you might have the budget for.
2. Who will manage it?
If you’re renting out your property, someone will need to manage it. This is so that the tenant has a point of contact if there are any issues with the building and, even before that, someone to advertise the property, arrange viewings, deal with contracts and deposits etc. Of course, you could do this yourself, but there are lots of rules about letting properties that you’ll need to become familiar with, and you’ll have to arrange for the tenant’s money to be held in a deposit protection scheme.
An alternative to all the admin and ongoing letting tasks is to use professional property managers to coordinate the process for you. They will usually charge a fee or a percentage of the monthly rental in order to look after the property and your tenants. That means you’ll rarely have to deal with out-of-hours phone calls about problems as someone else is the main contact for the property.
Plus, they’re able to assess applicants and find reliable tenants who will take care of your home and stay for a longer duration. They might even be able to negotiate a higher rental rate for you, thereby covering the cost of hiring someone to manage the property in the first place.
3. What ways can you let it?
You can let the property in a number of ways – either as a whole property for a single monthly rent, or as individual rooms, where the rent is often calculated weekly. This might be classed as a House in Multiple Occupation so there will be extra rules you’ll need to follow if you choose to go down this route – which will cost you extra money to start with.
It’s a good idea to offer 6-month or 1-year tenancy agreements, with a rolling contract thereafter. That way, you can be sure you’ve got a tenant for at least the duration of the agreement. Often, if you have an estate agent managing the property, you’ll pay a fee each time they find a new tenant for you. So, it would be better to have a longer duration agreement (1-year minimum) so that you don’t have to pay another agent’s fee every 6 months.
Another idea for renting out your property is as a holiday let. If you live somewhere particularly nice or a popular tourist spot, there will be people who would want to visit and stay in your home. Again, there are many more expenses and regulations to consider before doing this so do your research and calculate the figures to see if a holiday rental would be worthwhile, even if it’s unoccupied for many weeks or months.
4. What costs might you incur?
Even though you’ll be bringing in an income from the rental fee, there will certainly be expenses that you’ll have to cover before you can count your earnings from the property. For a start, you’ll need insurances to keep you and your tenant safely covered for any issues that arise during the letting period. If your property is leasehold, you’ll also need to cover any maintenance fees or ground rent charges. And you’ll need to have a pot of cash available to make any repairs to the property or replace appliances as needed. So, it’s likely that your eventual profit will be much less than the rental figure.
5. Would it be better to sell it?
Sometimes, when a house is newly refurbished and freshly decorated it might be a good idea to sell the property. At this stage, it’s probably in the best condition it will ever be so you can achieve a higher selling price. You can expect wear-and-tear to the interior and fixtures once a tenant moves in, which will mean a lower selling price or the added cost of a revamp if you decide to sell it in the future.
I hope these questions have given you some things to consider before you put your home on the rental market. Let me know if you’ve already rented out your property in the comments below. I’d love to hear how the process has been for you and any tips you would suggest to anyone who is looking to let out their home.
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