Landlords

It may come as a surprise to learn that up until the outbreak of World War I, in 1914, almost all – in fact, roughly 90% – of the residential property in the United Kingdom was privately let. However, throughout the course of the 20th century, the popularity of letting, or renting, property dwindled.

Legislation, public sector housing and the poor image of landlords, in general – think Rupert Rigsby, from “Rising Damp” – all contributed to the downward spiral, such that, by 1991, the privately rented sector contributed just 7% to the residential property market as a whole.

More recent legislation – namely the Housing Acts, of 1988, and 1996, redressed the perceived imbalance between the rights of landlords and tenants, and, coupled with the then low interest rates, and a buoyant housing market, led to a rise in the popularity of private letting once again.

At the time of writing, the aftermath of the so-called “credit crunch”, which began in mid-2007, is adversely affecting consumers and lenders alike. Nevertheless, that fact that many potential home-owners – first-time buyers, or otherwise – are finding it difficult to secure an affordable mortgage deal, and choosing to rent property, instead, means that demand for rental property is high, and likely to remain so for the foreseeable future.

Becoming a Private Landlord

The simplest way of becoming a private landlord – of the “live in” variety – of course, is let a room in your existing residential property. A lodger effectively shares your home as if you and he, or she, were renting a property together; a lodger can therefore expect his, or her, own furnished room, and access to your kitchen, bathroom and living room(s). In return, he, or she, is typical expected to carry out his, or her, own cooking, laundry, etc. and a proportion of the cleaning within your home, although the precise division of labour is largely down to what you agree between you. A lodger has no inherent right to expect you to clean, or cook for him or her, for example.

You may, of course, want to take the next – potentially daunting, but also potentially lucrative – step of acquiring a property expressly for the purpose of renting to tenants. If this is the case, you will probably require a buy to let mortgage loan (unless, of course, you are in the enviable position of being able to buy a property outright), and you should be aware of the difference between this and a standard residential mortgage.

You will, for example, be expected to supply a deposit of, at least, 10% – in difficult economic climates this is more likely to be 20%, or 25% – of the total purchase price, and you can expect to pay a slightly higher interest rate than for a standard mortgage.

A private landlord is also responsible for the safety of the gas and electrical appliances within a property, including room and water heating equipment, structural repairs and the general maintenance of a property in a state fit for human habitation. He, or she, also needs to be aware of the legal implications of current legislation relating to sex, race and disability, when it comes to vetting and selecting tenants.

Becoming a private landlord can therefore be a time-consuming – not to mention risky – business, and should only be undertaken by those with a professional, business-like mindset; it should not be viewed, in any way, as a means of making a “fast buck”. You must, as a private landlord, be prepared for a downturn in the housing market, but this is only likely to affect you if you actually want to sell your property; demand for rental property tends to remain high under such circumstances, as, indeed, do rents themselves.

Your selection of a suitable property for investment should be subject to certain criteria, not least that it is able to realise 125%, or 135%, of your monthly mortgage repayments, in order to compensate for any “void” periods (when the property lies empty) throughout the year. This depends largely on the type, and location, of the property you choose in relation to the local market, and the type of tenants you are looking to attract.

A member of ARLA (”Association of Residential Letting Agents”) should be able to give you a good idea of local market conditions, potential rental income, etc. Typically, a small property, such as a flat, in a good state of repair, and close to transport links, etc. is the type that you should be looking at for an initial buy to let investment.