The rental market in the UK is a particularly profitable one for new entrepreneurs, and boasts a lucrative opportunity for those able to invest in property directly. Housing is a provision with evergreen demand, and demand for rental housing in particular has peaked as the cost of buying property continues to rise.
Still, starting a new business in property rental is not a sure-fire path to passive income. Maintaining a portfolio of rental properties requires close attention to a number of variables – but if done correctly, can make for an uncomplicated income stream. Here are some practical considerations to start you on the right foot.
Revise Your Legal Responsibilities
Legal compliance should be your leading concern as a landlord. There are numerous items of legislation to which you must remain compliant, as well as tenant protection laws you must fully understand in order to avoid issues with your practice. One long-standing law relates to the protection of tenancy deposits, with landlords required to keep deposits in independent tenancy deposit schemes for safety and security.
One newer legal responsibility, though, which may stand to catch some landlords out in the coming months, comes in the form of the Minimum Energy Efficiency Requirement Standards (MEES). This standard requires rental properties to acquire an EPC rating of E or higher – otherwise, the landlord is required to spend up to £3500 on measures to improve energy efficiency.
Pre-Invest in Renovation
This brings us neatly to the topic of renovations as a whole. As a landlord, you are naturally responsible for the overall state of repair of your rental properties. Many rental businesses and property management companies make the mistake of being reactive with home renovations – that is, to leave renovations until tenancy complaints begin to mount.
Doing this can harm your business’ reputation and even lead to costlier damage to your properties. Instead, you should take a pro-active approach to home renovation. Any new properties you buy should be fully renovated and decorated before you begin the rental process. Many renovations can be kept on the cheap through DIY; internal walls can be repaired or erected with plasterboard and filler, while utility storage can be repaired or re-instated with sheet woods.
Maintain an Emergency Budget
No amount of pre-investment in renovation can eliminate the likelihood of mid-tenancy emergencies, though. A burst water pipe can wreak havoc with wooden flooring and stud walls, while adverse weather can cause external property damage with potentially devastating consequences.
In these scenarios, costly repairs can result – not just in the direct cost of repair, but also in the potential costs associated with re-housing your tenants. As such, an emergency budget should be kept at all times, to act as a breakwater between your revenue and your emergency maintenance costs.
Treat Tenant Concerns as a Priority
Lastly, your business is ultimately one of customer service. You are providing tenants with accommodation, and beholden to specific contractual and legal requirements to assure their comfort – just as they are contractually and legally obliged to respect your property. This relationship can be a harmonious one if you keep service at the heart of your business model. Tenant concerns should be a priority, from little requests to replacing broken appliances.