Want to be a landlord but need to know more about it?

The popularity of buying property to let has never been higher and people become landlords for all sorts of reasons but it's not always a route to easy income. Some let their homes while they're travelling or living elsewhere, others buy a second property as an investment and rent it out while they wait for it to increase in value. If you're new to buying property to let, there are some key points to consider.

The essentials for becoming a landlord

Being a landlord has been proven by many people to be a great way to earn an income and grow assets, although anyone attempting to buy and run a let property must have the basic requirements to do so.

Time

Sourcing a property, arranging finance and preparing a property to let can be a major project, but the hard work does not stop there. Once the property is tenanted there is also the ongoing collection of rent and monitoring of the property for upkeep by the tenant.

Money

You will need enough capital for a deposit on the property and any essential repairs, ongoing costs would still need to be met during any periods without a tenant. It is advisable to keep an emergency fund for such eventualities.

Ability to deal with hassle

Your tenant will rightly expect that any major issues such as water leaks or storm damage be dealt with promptly with as little disruption to them as possible. You may also have to deal with problem tenants and damage to or misuse of your property. Finding the right tenant in the first place can pay dividends in the long run and references should always be taken up. To obtain references for potential tenants visit http://www.tenantverify.co.uk/. In the event of wishing to remove a tenant from you property take independent legal advice or visit Citizens Advice Bureau at

Location

Do your research and make sure there's a demand for rented properties in the area you intend to buy. Find out about typical rents from local estate agents and property managers. If the amount you need to charge to cover your mortgage payments is going to price you out of the market, you're bound to have problems. Remember also that if you intend to take a mortgage on your rental property the lender will need to be satisfied that the rental income you receive is more than sufficient to keep up your mortgage repayments.

Finding the right rental property that is attractive to tenants can be difficult. You'll have to think what will appeal to them and put aside your personal preferences. Bear in mind, as with any other property purchase, factors which could affect the resale of the property, as a Buy to Let property should retain the flexibility to realise your investment when you decide, not when other factors dictate to you.

Any new purchase should be researched thoroughly. These factors could include planned local developments, social trends in the area and proximity to flood plains. For advice on flood risk visit http://www.environment-agency.gov.uk/subjects/flood/?lang=_e. To find out more about the profile of the area you intend to purchase a property visit http://www.upmystreet.com/

Management

Finding tenants, collecting rent and dealing with routine problems can be time-consuming. Many new landlords have found the effort spent on managing the property can outweigh the financial benefits so many landlords employ a letting agency to manage their property. However, an agency will typically charge 10-15% of the gross rental income, which will eat into your profits. They will also have lots of other clients to deal with meaning your property is not always a priority and they may not have the same level of care as you would on your own rental property.

Budgeting

Sometimes the rental market will be buoyant in the area you intend to buy others times it may not.In an ideal world, well-behaved tenants who paid promptly every month would occupy your property all year round. Unfortunately, the chances are that you may have problems with tenants, your property and finding people who want to rent it. You could be left with a 'void', an empty rental property earning no income, for several months if you're unlucky. Make allowances for this when drawing up your budget.

As well as mortgage payments, insurance premiums, ongoing maintenance of the property and any contributions to council tax, water rates or utilities, other costs to consider are: -

When purchasing a property to let:

• Stamp Duty

• Solicitor's Fee

• Estate Agent's Fees

• Surveyor's Fees

• Land Registration Fees and Searches

When preparing your property to rent out:

• Complying with Fire, Gas and other safety regulations

• Decoration

• Purchase of furniture and equipment

• Potential cleaning costs

• Any utility bills before the property is let

Taxation

There are several kinds of tax you may be liable to pay when you own property that's let. To find out more about your tax liabilities, talk to a professional advisor or HM Revenue & Customs.

• Income Tax: You may have to pay it on rental income, depending on your personal circumstances. However, you can offset some of the costs of letting against this rental income.

• Capital Gains Tax: When you sell the property, you may have to pay Capital Gains Tax on the profit.

• Inheritance Tax: If you leave your property to someone when you die, they may have to pay Inheritance Tax at a rate of 40% - depending on the value of your estate and your personal circumstances.

To find out more about the tax considerations of buying property to let visit http://www.letlink.co.uk/GeneralInfo/taxlord.html and consult an independent tax consultant.