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How to become a landlord
Residential letting is huge in the UK, with a rapidly expanding private rental market that’s expected to house more than half of all 20-39 year olds by 2025. With rental prices at an all time high, it’s easy to see why becoming a landlord is an attractive choice. Despite buy-to-let mortgage rates being relatively high at the moment, there’s still plenty of potential to make a strong passive income from the private rental market. In this guide, we’ll look at how to take the first steps towards becoming a successful landlord, what your responsibilities will be, and how to make the most of your investment.
Compare buy to let mortgages
Finding the right buy-to-let mortgage can be really tricky. Interest-only? Rental yield? ERCs?
So, let Mojo’s expert advisers compare deals to find your best buy-to-let mortgage rate.
What are Landlord responsibilities?
There are a number of responsibilities you’ll need to fulfil in order to be a landlord, which largely fall into the following categories:
Deposits
Getting started as a landlord
There are five major steps you'll need to take to become a landlord in the UK
Understand your responsibilities - Becoming a landlord is a big commitment, and there are lots of things to be aware of to ensure that you comply with laws and regulations. There is more information in this guide to get your started
Find the right property - If you’re thinking of letting out your current residential property, you’ll need to switch mortgages to a buy-to-let mortgage first - unless you already own it outright. If you’re looking to buy a rental property you’ll need to consider location vs demand, and whether the property is ready to let or needs renovation work
Secure financing - The mortgage you need will depend on the type of landlord you intend to be. If you plan to keep the property in your own personal name, you'll need a regular buy-to-let mortgage. If you’re planning to buy rental properties through a limited company you’ll need to use a specific limited company buy-to-let mortgage. If you already own the property you may also need to look at finance to cover any redevelopment costs and furnishing
Prepare the property - It’s unlikely that any property that you buy, or even already own, will be immediately ready for rental if it’s not been set up for that purpose. You’ll need to think about your rental audience and ensure the property is suited to their needs. It’s also a good idea to decorate neutrally so that people can imagine their own belongings in the home
Advertise - You’ll need to decide whether to use a letting agency to help you manage and let your property or whether you intend to take on this responsibility yourself, and make sure your adverts are attracting the right type of tenants
Deposits in the UK can only be used to secure the property against tenant damage, not to hold the property. There is also a maximum allowable deposit requirement of five weeks worth of rent - or six weeks if the annual rent is over £50,000.
All deposits should be placed into a deposit protection scheme within 30 days of the beginning of the tenancy. The schemes available will vary depending on where in the UK your property is based, but you may face penalties if you fail to use one.
Tenancy deposit scheme providers hold the funds until the tenancy ends and then returns them to the tenant. They are also usually able to help resolve disputes between the landlord and tenants over how much deposit is returned.
Property
Although the tenant is responsible for keeping the property clean and free from damage, as the landlord, you will need to manage the exterior of the property and any structural repairs needed.
You’ll also need to maintain the internal systems of the property, such as gas, electrics and water, to ensure that they work and are safe for use. You’ll need to provide:
An annual gas safety check carried out by a registered Gas-Safe engineer
Making sure electrical any appliances are European CE electrical marked
Install smoke alarms and ensure that any furniture complies with fire safety standards
Install a carbon monoxide alarm
The property must also be fit for the purpose of living in, for example, it must contain a separate kitchen and bathroom. If your tenant(s) have any physical disabilities you will also need to make reasonable additional adjustments for their safety, such as grab rails, but not structural changes.
Once the property is rented to tenants it is their home, you will need to give notice before entering the property - this is usually at least 24 hours notice and you will need their permission to enter.
If the property is empty for more than 45 days in a row, you will need to ensure that unoccupied property insurance is in place.
The local council can carry out an HHSRS inspection on privately rented property at any time if they feel that your property may be hazardous based on other similar properties in the area, or because the tenant has asked them to.
House of Multiple Occupation (HMO) property requirements
If you’re renting the property to three or more people from different households sharing either a bathroom, kitchen or both, you may need an HMO licence - depending on the local council’s rules.
If you rent to more than five people from separate households then you will definitely need an HMO licence. There are also additional rules and regulations to be aware of for house of multiple occupation properties.
Energy performance certificates (EPC) requirements
Since 1st April 2018 it has been illegal to let property with a EPC rating below E, from 1st April 2023 it’s been illegal to continue to let properties with an EPC rating below E, assuming the lease began earlier.
From 2025, this minimum EPC rating will be C for all rented properties, so if you’re buying - or already own property with lower energy efficiency, remember to budget for the relevant improvements ahead of this date.
In Scotland the EPC rating must be displayed in the property.
Tenants
There are a number of tenant specific considerations to be aware of when becoming a landlord:
Right to rent - No matter what type of tenants you decide to focus on, every tenant over the age of 18 must undergo a right to rent check. The fine for renting to non-rent checked tenants is up to £3000
Tenant referencing - To ensure your investment is well maintained and bills are paid, it’s a good idea to use professional tenant referencing services. They will assess tenants’ previous conduct in rental properties and in managing their finances on your behalf - there is usually a cost for this, but it may be included in a package if you use a letting agent
Written tenancy agreement - All tenancies must have a written tenancy agreement signed by both parties. An AST (assured shorthold tenancy) lasts six-12 months and is usually used for private lets. If you would like to let your property to the tenant for a longer period, an assured tenancy or regulated tenancy agreement can be used. It’s also a good idea to include a property inventory with the contract
Tenant responsibilities - Tenants are responsible for the cleanliness and general upkeep of your property - any specific details should be included in their contract, i.e if they should replace light bulbs etc
Taxes
When you become a landlord it’s important to keep a record of all of your expenses and income related to your rental property.
Independent landlords will need to pay - income tax, class 2 NIC (national insurance) contributions, capital gains tax on any profits from sale of the property
Limited company landlords will need to pay - corporation tax on their earnings, capital gains tax on any profits from the sale of the property
How to register as a Landlord
No matter where you are based in the UK, you’ll need to register when you become a landlord. The process to do so varies based on where your rental property is located. If you rent in multiple areas, you will need to register in each.
| Country | How to register |
|---|---|
| England | Check with local council to register, although a national licensing registration is expected to become available in the near future |
| Wales | Register with RentSmart Wales. You will also need to hold a licence, or use a licenced letting agent |
| Scotland | Register with local council through Mygov.scot including for short-term lets |
| Northern Ireland | Register with NI Direct |
Usually landlord registration will need to be renewed (typically between every three and five years). Your relevant licensing body will be able to provide this information.
It’s important to note that landlord registration is required in addition to any licensing that is required if your property is an HMO.
Costs involved in being a landlord
Knowing what costs you’ll need to consider as a landlord will allow you to effectively gauge whether your anticipated rental charge will cover your costs and still turn a profit.
Mortgage repayments - If you’re buying a property using a mortgage, be sure to compare buy to let mortgages regularly to keep your outgoings as low as possible
Repairs and maintenance - Once the property has been fully refurbished to meet safety regulations and decorated for a new let, these costs should be minimal, but be sure to have a budget for occasional repairs and emergency repairs
Letting agency fees - This is usually charged at around 10-15% of the rent. You could minimise or remove this cost by doing some or all of the letting management yourself, but keep in mind the extra time needed for this
Insurance - Landlord insurance is not essential but highly recommended as it can often cover you when your property is vacant, and help towards repair costs. If you have a mortgage you will also need to have buildings insurance in place, although this is also recommended if you own your property outright
Furnishings - If you’re renting your property as furnished, you’ll need to consider this additional cost. However, furnished properties typically attract higher rents, so some of this cost can be balanced. If your property is already furnished you will need to replace damaged or broken items and anything that does not comply with fire safety standards
EPC certificate - these usually cost around £50-£100 but last for 10 years
Tax - tax will be payable on your income, as outlined above in the dedicated tax section
How to make money as a landlord in the UK
Once you’ve considered the above costs, it will be easier to calculate a rental charge that will provide you with a desirable profit. However, you'll need to keep local market prices in mind, as overpricing could leave you with an empty property!
Some other factors to consider when you become a landlord include:
Property location - Looking at similar rental properties in an area can give you an idea of how much you could make in that location. Be sure to keep in mind proximity to amenities and transport
Property features - Depending on the desired tenant type, certain property features will be more attractive and potentially increase the price chargeable. Some examples include gardens for families, luxuries, such as a hot tub for professionals. Also consider the kerb appeal of the property, especially with houses
Type of tenants - With the above in mind, the type of tenant can also affect how much you can earn. For example, students are typically looking for affordable property, whereas professionals and larger families are likely to pay much more for a property that suits their needs
Furnishings - Furnished properties will often bring in a higher rent, but there is still a demand for unfurnished properties in the UK, especially from families. If you do furnish the property, try to tailor it to the type of tenants you wish to attract
Rental increases - If your tenants are on a rolling contract you're usually only able to implement one rental increase per year. For fixed-term tenancies rent can not usually be increased until the fixed-term ends. All increases need to be fair and realistic in line with the open market
Finding tenants
If you plan to advertise your property to let personally, then it’s a good idea to look at major property websites such as Zoopla or RightMove, but you should also consider smaller independent sites, and social media.
Letting agents in the area will have valuable insight into how to secure the right type of tenants for your property, so it’s worth doing some research into how they can help you. As a new landlord, using the experience of a letting agency or full property management company can be a good way to gain the confidence you’ll need to go it alone further down the line.
Compare buy to let mortgages
Finding the right buy-to-let mortgage can be really tricky. Interest-only? Rental yield? ERCs?
So, let Mojo’s expert advisers compare deals to find your best buy-to-let mortgage rate.
Becoming a landlord FAQs
What is the Deregulation Act 2015?
This is a wide-ranging act that contains a few key points relevant to those becoming a landlord. Most notably:
The Tenancy Deposit Scheme – which places the requirement to hold deposits in a government-approved scheme.
Section 21 – Specifies legal duties which landlords must meet in order to be able to serve tenants with a Section 21 notice (eviction notice). It also states that any landlord served with an improvement notice cannot issues a section 21 within six months
How to rent: the checklist for renting in England booklet - this must be provided to all tenants at the start of any AST (assured shorthold tenancy)
Can I rent to tenants receiving benefits?
Yes you can, and shortly changes are expected that won’t allow you to select tenants based on how they receive their income, amongst other previous allowable restrictions.
There are very few differences between a tenant receiving benefits and those who aren’t, for example, the tenancy agreement remains the same and landlord insurance should still be relevant, although it’s worth making sure your insurance provider is aware of the tenant type.
In fact, there is some additional financial security involved in renting to those receiving benefits to cover their living costs. It’s possible to request payment directly from the local authority, should they fall into arrears of more than eight weeks.
What is The Homes (Fitness for Human Habitation) Act?
When you’re considering your health and safety responsibilities as a landlord, this is a great piece of legislation to look at for guidance to ensure you meet minimum legal requirements.
The act gives tenants in England legal power to take action against landlords who provide accommodation that is not considered by the courts to be fit for human habitation.
Should I use a letting agent?
This is really down to personal preference, although many landlords find that letting agents are worth the additional costs, given the amount of time needed to manage your property and tenants effectively. This is even more true of portfolio landlords.
On the other hand, some landlords feel that taking care of the property themselves makes for a better relationship with the tenants and allows them to keep a close eye on maintenance costs.
