If you want to move property but don’t necessarily want to sell your existing home, renting out your home may be a viable alternative. This can add additional monthly income too, which is never unwelcome. However, if you’re considering renting out your house, there’s a lot that you’ll need to consider first.
Here, we explain how you can rent out your house, some important pros and cons, as well as a few pitfalls to avoid.
Why rent out your house?
There are a number of reasons why people choose to rent out their house, these include:
Struggling to sell
It can be tough to sell your property. If there are no interested buyers in your area and your home has been on the market for quite some time, renting out your home can be an alternative option. This means that while you’re not living in the property, it’s not sitting there empty. You can take monthly rent payments which can become very handy when you’ve got a mortgage to pay.
Looking to move away temporarily
If you’re looking to move away for a short period of time, whether this is for work, pleasure or due to family needs, renting out your home can give you the flexibility to do this. Renting out your property allows you to keep your house, maintain mortgage payments and rest easy knowing that you’ve got a home to go back to when you’re ready.
It’s an investment
More and more people are looking towards property as a viable investment. One way to do this is to become a landlord. Instead of moving home and selling the old property, people are choosing to save for a new mortgage and maintain their existing one. This allows them to find new tenants to move into the old property and use their rent to pay for the existing mortgage. This can be a great way to build a second form of income.
Know your local area
Do your research! It’s important to understand everything you possibly can about your local area.Take the time to look at similar properties for rent in your area. How much are they on the market for? What condition are they in? This will give you an idea of where you can position your property in the market.
Pros & cons of renting out your house
Renting out your house is a big decision and there’s a lot to consider with this. It certainly has its benefits but isn’t without its occasional difficulties. Here, we’ve brought together a list of common pros and cons to help you make the right decision for you.
Pros of renting out your house
- Can provide you with an additional income stream
- You will still own your property so will benefit from long term capital growth
- The rent should cover your mortgage
- If circumstances change, you still own the property so you can always move back in at a later date
- Can be a great way to temporarily move away while keeping your property
- You can use a letting agent or property management company to take care of some of the hands-on work
- A good tenant will take care of your property as if it were their own
Cons of renting out your property
- You will need to invest money into your property to ensure it is compliant with regulations
- You will be expected to cover ongoing maintenance costs
- You will pay more stamp duty if you own more than one property
- There is a risk that tenants could damage your property (some of which may not be covered in your landlords insurance)
- There is an element of additional debt which can create greater financial burden
- If your tenant stops paying their rent, you will still have to pay your existing outgoings
- When tenants move out, you may encounter void periods which can be costly to landlords
Find out if renting your property out is financially viable
There are a lot of costs involved in being a landlord. This cost can be even higher if you want to take a hands-off approach and use a property management company. Make sure that you know what you’re getting yourself into. Do all of the necessary calculations needed to ensure that you’re actually making a profit each month.
List out of all the costs you’ll likely encounter and work out how much you can expect to charge for rent. Are there any serious discrepancies here which may prevent you from making this idea a reality?
Don’t forget about your tax. Rental income will be taxed at your usual rate (20% basic rate, 40% higher rate). When you’re making a list of your outgoings, don’t forget to deduct tax from your income too.
Here are a few more outgoings that you’ll need to consider when working out if renting your property is financially viable:
- Mortgage payments
- Letting agents / property management fees
- Property insurance
- Class 2 National Insurance (if renting out your property is classed as a business for you)
- Maintenance and repairs
Speak to your mortgage provider
It’s very important that you speak to your mortgage provider before you choose to rent out your house. This is because you may be breaking the terms of your contract. By approaching your mortgage provider about this, they can provide you with a consent for lease which will give you the freedom to rent your property.
Get the right insurance
If you’re looking to rent out your home, it’s important to mention this to your buildings and contents insurer. You may have to change your policy for this. Additionally, there’s a separate landlords insurance policy which you’ll likely need to protect your investment and tenants. This is especially important as some policies will even help cover missed earnings if your tenants miss rental payments.
Understand your responsibilities as a landlord
When you rent out your property, you will be required to take up the responsibilities required of a landlord. If you’re looking for a less hands-on approach, it may be worth considering employing the services of a property management company or lettings agent who can support you on this, though they will charge for this (usually a percentage of the monthly rent you charge).
Here are a few of the responsibilities expected of you as a landlord:
Health & safety
Your property needs to be safe and secure, as well as this, you’ll need to ensure that your tenants aren’t exposed to any health hazards. Your property will need to pass rigorous standards for gas and electricity to ensure it’s safe for habitation. This includes regular maintenance too.
Repairs & maintenance
You must keep your property well-maintained. This isn’t just to entice tenants but also to ensure the property is fit for living. If anything breaks or needs repairing, it’s your responsibility to ensure this is done in a timely manner. Some work will be more urgent than others, which means that you may have to drop everything and deal with this at a moment’s notice.
You will need to ensure you have an energy performance certificate for your property.
Tenancy deposit scheme
When a tenant pays their deposit, this money isn’t yours. It should be kept securely in a government approved tenancy deposit scheme.
Right to rent checks
It’s your responsibility to ensure that your tenants have the right to rent in the UK.
Smoke alarms & carbon monoxide alarms
You need to ensure that you have smoke alarms and carbon monoxide alarms installed throughout your property, regularly checked and in working order.
Furnishing your property correctly
If you choose to furnish your property, you’ll need to ensure that all furnishings are upholstered and fireproof.
Prepare your property for renting
Someone is going to have to live in your property, so make sure it’s prepared for this. If you’re serious about being a landlord, it’s worthwhile putting yourself in the shoes of a tenant. Make sure that your house is well maintained, all appliances are in full working order, the decor is up-to-date and appealing. You want a tenant to walk into your property and imagine themselves living there. It may be worth decorating your property prior to renting it out, this will make it more attractive to prospective tenants. If you do choose to renovate, consider using neutral tones throughout as many tenants like to see their new home as a blank canvas which they can make their own.
Looking for a tradesperson?
When looking to rent out your property, you may need the support of a local tradesperson for renovations, decorations or electrical / gas work. Find a no-obligation quote online from expert, trusted local tradespeople here. Simply enter your postcode and the tool will do the rest for you.
Last Updated: December 20th, 2021