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Residential Property Lettings |
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Residential Lettings: Pros and ConsIt can sometimes be difficult to make the choice between selling a property and letting it. Many people, who do not have to sell their property, will opt to let it. This is especially true for homeowners with property in central London: not only can letting a home in this part of the country yield a very good source of rent income, more importantly for some homeowners, retaining ownership of the property also means that the homeowner maintains their foot on the property ladder, which is vital if they wish to return to the property market at some stage in the future. There are two ways in which a homeowner can let their property: they can manage the letting themselves, or they can instruct an agent to do it for them. Both of these options have their pros and cons, and when deciding which option is right for you, you have to think about the amount of work you are able and prepared to do. One advantage of instructing an agent to manage your residential letting is that you have nothing to do apart from check that the rent is credited to your account each month. This arrangement is particularly suitable for landlords whose main residence is a considerable distance from the property they are letting. Some homeowners live abroad and therefore have less choice as to how they manage the letting of their property. That’s not to say that a landlord living thousands of miles from the property they are letting has to instruct an agent. Providing both the landlord and tenant agree that there’s no need to involve an agent to manage the let, then such an arrangement can work (when it comes to repairs, the tenant will sometimes take these on themselves and invoice the landlord accordingly). An advantage of instructing an agent to manage your residential let for you is that you are not responsible for carrying out repairs to the property, only the expenses involved. Most agents have a clause written into the contract stipulating that repairs up to a certain can be carried out without prior consent from the landlord; any repairs above that cost will then have to be agreed by the landlord before being carried out. An agent is likely to have a network of reliable trades people they can call on to carry out such repairs, and anyone who has ever had to struggle to find a plumber to come out to fix a leaking water pipe will know just how valuable this service can be! This all comes at a price though: lettings agents usually charge around 15 percent of the monthly rental income for a full management service which includes carrying out repairs, periodic checks on the general condition of the property to ensure it is being maintained, and collecting the monthly rent payments. They will generally charge about 12.5% for rent collection only. The one drawback to instructing an agent to manage the letting of your property for you is that, in a sense, you relinquish all control. While you still own it and continue to make any necessary mortgage repayments, that is about as far as your involvement goes. Some people prefer a little more involvement though, and that is why they choose to manage the letting of their property themselves. If you decide to take on the task of managing your property let, then ideally your main residence should be close to the property, as there is no knowing when you will be called out to carry out repairs. To this end, you should make it easy for your tenant to contact you and be prepared to change your plans at the drop of a hat! The role of a landlord is ideally suited to an expert or an individual who is retired (or semi-retired) and is reasonably proficient in, and enjoys, property maintenance and repairs. The landlord who wishes to let as well as manages his or her residential let will also have to market the property to find a tenant, carry out any credit checks on the prospective tenant, draw up an inventory of the items in the property included in the let, draw up a tenancy agreement (ensuring that it complies with current legislation), ensure that any gas appliances are inspected annually by a CORGI registered plumber and obtain the necessary certificates, and ensure that furniture and contents (if the property is being let furnished) comply with product safety legislation. It certainly pays to have a basic knowledge of the relevant law governing the letting of residential property if you are going to manage the let yourself. While the advantages of letting a property can appear to outweigh any negatives, especially for homeowners wanting to retain ownership of their property, there are some drawbacks associated with the letting of property that affect the owner regardless of whether he or she decides to take on the management of the letting of the property or instructs an agent. There could be times when the property will be unoccupied. This will, of course, mean you’ll receive no rent, and if you’re relying on this income to repay the mortgage, this could leave you in financial straits. And talking of finances, income tax is payable on rental income after deducting allowable expenses, which include repairs, agent’s fees, and wear and tear on furniture. And remember that while your property is being let, you can’t use it (even as a landlord wishing to carry out repairs you may have to give your tenant a notice). Your property is only really yours in so far as your name remains on the Title Deeds. Letting your property?
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