All Landlords Need To Know About Renting Out a Property for the First Time in Central London

If you are considering renting property out in central London, the good news is that properties in this part of the UK command the highest rent prices. The average rent for properties in Mayfair is over £8,000 per calendar month (pcm), with houses commanding an average of over £13,000 pcm. Areas such as Fitzrovia and Primrose Hill also have some of the highest rental yields in the UK.

While there is no doubt that renting out property can be lucrative, renting property out can be challenging, especially for first time landlords. Before making the decision whether to rent out your property in central London, you can find out everything you need to know in this guide.

Here are some of the important decisions you will need to make and other considerations, to help to decide whether renting out your property is the right choice for you:

1 Deciding Upon Your Involvement

As a first-time landlord, there will be lots of new responsibilities to become familiar with. You can decide whether you want to take on all of the work involved in managing the tenancy yourself or you can employ a letting agent to manage the letting on your behalf. You will need to decide how much extra time you will have around other commitments such as another job.

If you are considering using a letting agent, you can choose the right level of services to suit your needs. For example, you could simply use an agent for tenant finding, or you could choose a full property management service, but you would pay more fees for the latter.

Before you get started, you should decide on your long-term goals and develop a strategy to ensure that the processes you are putting in place will align to your long-term plans. If you are only planning on a single rental, then this will involve less work than building a portfolio, so you may have adequate spare time to manage the letting yourself.

2 Getting Ready To Let Your Property

Landlords have many legal obligations to comply with and there are numerous responsibilities to undertake both before and during your tenancy agreement. For example, landlords are legally required to obtain licenses if necessary. Here are the main tasks involved in getting ready to let your property:

• Obtaining landlord licences – If you are planning on renting out the property as an HMO, you may need to obtain an HMO licence, depending on the requirements of your local authority. Some areas also have a selective landlord licensing scheme which require an application for a licence.
• Buy to let mortgage/consent to let – If you are moving out of the property to rent it out, you are legally required to get permission from your mortgage lender. This might mean that you have to switch to a buy to let mortgage or you might be able to obtain consent to let if you are only looking to rent your property out for a short period.
• Get insurance – While taking out landlord insurance is not a legal requirement, your mortgage lender will usually require you to have adequate insurance to cover the property. There are different levels of landlord insurance, including some that cover missed rent payments and damage caused by tenants, so it is important to review your options to ensure you have the right level of insurance.

Want to know more?  Read about checking a tenant’s right to rent, discover certificates landlords need to keep and explore our guide to improving your EPC rating on London property.

3 Making Your Property Safe To Rent

Before prospective tenants can move into your property you will also need to carry out a list of actions to ensure the property is safe to rent. There are several regulations to comply with, such as the Fitness for Human Habitation Act 2018, Fire Safety Regulations 2022 and several other regulations.

• Fitness for Human Habitation Act 2018 – This includes ensuring that the property is fit to live in, with running water and heating, and is free of health hazards such as mould.
• Fire Safety Regulations 2022 – Landlords must comply with fire safety regulations, which include ensuring smoke and carbon monoxide alarms are fitted as required. CO2 alarms are required in rooms with a solid fuel burning appliance (gas appliances do not require one). Fire safety responsibilities also include ensuring there is always access to escape routes and any furniture provided must be fire safe. Gas safe checks must be completed on an annual basis and a gas safety certificate issued.
• Electrical checks (EICR) – Rental properties must have electrical checks carried out every five years and this includes the inspection of electrical installations and appliances.
• Get a valid EPC (MEES regulations) – It is also a requirement to have a valid energy performance certificate and rental properties must meet the minimum rating requirements under the minimum energy efficiency standards.
• Legionella risk assessment – Landlords have a legal requirement to control the risk of exposure to legionella bacteria.

4 Referencing And Onboarding Tenants

As a landlord, you are legally required to complete right to rent checks and carrying out referencing checks will help to avoid tenant issues in the future. These are some of the checks you will need to complete:

• Right to rent checks – You have a legal duty to complete right to rent checks, which involves checking ID documents to ensure that tenants have the right to rent property in England.
• Providing the ‘How to Rent’ guide within 30 days – You must supply your tenants with a copy of the How to Rent guide within 30 days of them moving into your rental property.
• Contacting guarantors – If you are accepting a tenant with a guarantor, you should contact the guarantor to ensure that they are fully aware of their financial responsibility to cover any missed rent payments.
• Credit checks/references – Completing credit checks and employer and landlord references will help to identify potential problems, such as renting out to tenants who are financially unreliable. Comprehensive checks can help you to avoid being in a situation where there are missed rent payments and having to go through the eviction process.

5 Sign Up To A Deposit Protection Scheme

Landlords are required to sign up to a government approved tenancy deposit scheme to transfer the tenant’s deposit into. Failure to do so can result in financial penalties and you must pay the deposit into the scheme within 30 days of receiving the payment.

Here are the 3 schemes approved by the government:

• Deposit Protection Service
• MyDeposits
• Tenancy Deposit Scheme

6 Taking An Inventory

Taking an inventory will help to prevent disagreements about the property condition when the tenancy ends. As well as providing a comprehensive list of items in the property, the inventory should include photos and videos that evidence the property condition at the start of the tenancy.

7 Arranging Ongoing Checks

Throughout the tenancy, ongoing checks of the property condition and safety checks should be completed. This includes arranging a convenient time with tenants for inspections, which are recommended to be done on a quarterly basis.

You will also need to organise the statutory checks for gas, fire and electrics on the periodic basis that these are required.

8 Maintaining Your Property

Landlords are responsible for ensuring the property is kept in a reasonable state of repair. This includes the structure and exterior of the property, for example:

• pipework
• guttering
• electrics
• sinks
• baths
• toilets
• basins
• windows
• drains

The repair to pipes that supply gas, water, electricity and heating also come under the responsibility of the landlord.

Want to know more?  You can also read about how to increase rental income, discover tips on how to become a landlord in Central London and explore buy to let guide for Central London.

9 Paying Taxes And Managing Cash Flow

One of the most challenging aspects of renting out property for the first time is to understand and comply with tax obligations such as paying income tax on rental income. There are also financial requirements such as paying a deposit in a buy to let mortgage, paying stamp duty when purchasing a property and capital gains tax when selling.

The best way to deal with the financial impact of void periods and missed rent payments is to budget for these situations, by having a pot of money set aside to cover these. Taking out a rent guarantee scheme can also help keep a steady cash flow if you experience missed rent payments.

In Conclusion

There are many responsibilities to get up to speed with as a first-time landlord in central London and as an experience letting agent covering areas such as Soho and Marylebone, we can provide hassle-free property management services. On the other hand if you’re a tenant, take a look at these questions to ask when viewing a rental property. Contact us and we can create a strategy to help you get started in taking advantage of this lucrative property market.