There is something unusual happening in the housing market in the UK; house prices have been falling in recent times. This is strange given that the housing market has experienced turbo-growth for the last 20 years. In London, for example, house prices have dropped by 4.3%. Furthermore, home sales in other parts of the UK have been drying up.
But recent data shows the number of accidental landlords in the UK has been increasing steadily. This is probably because many people are facing the challenge of selling their homes. Numbers show that at least 12% of landlords who are currently renting out their properties tried to sell them in previous years. Since homes are not selling as fast, demand for rental properties is on the rise. The effect is that accidental landlords are now filling the gaps for rental houses.
Rental properties owned by accidental landlords have grown by over 230,000. On the other hand, properties owned by buy-to-let investors have dropped in the last two years by over 88,000. With the growing demand for rental properties in the UK, accidental landlords stand a chance of reaping big rewards in the housing market.
Accidental Landlords by Region
Although the UK is seeing an increase in the number of accidental landlords, this number varies from region to region. There are many accidental landlords in London than they are in Scotland. Around 12.5% of new rental houses in London are owned by landlords who previously had put their homes for sale. In Scotland, only 5.6% of new rental houses are owned by accidental landlords.
This contrast is attributed to a much solid sales market in the countryside. It is also attributed to the fact that potential sellers all over the UK are unlikely to put up their homes for rent.
Who is an accidental landlord?
An accidental landlord is a person who rents out a house due to unplanned circumstances and not by choice. This is unlike a professional landlord who makes a living from renting out a house. A person can become an accidental landlord in many ways.
- Unfortunate circumstances – Separation, death, or divorce can make a person an accidental landlord.
- Marriage – If a person gets married and moves into their partner’s property and lets out theirs.
- Relocating – If one is relocating to get a new job, they might decide to rent out their old property instead of selling it.
The legalities of the rental market can be complex and can be a bit nerve-wracking for first time landlords. If you are thinking of becoming an accidental landlord, there are certain things you should know about your obligations as a landlord.
Adjust your mortgage plan
Do not rent out your property if it has an unpaid residential mortgage. If this is the case, transfer the mortgage to a buy-to-let lender. The buy-to-let lending market has seen significant changes in recent times. Therefore, it is wise to get advice from a mortgage advisor on the way forward.
Insure your property
If you have decided to become a landlord, the first step is to insure your house by adjusting building insurance policy. Adjust this policy so that it can fit a rental property. It is important to get a buy-to-let mortgage if your house does not have insurance.
There are many regions in the UK that have introduced landlord “licensing” systems. This means that you cannot let your house without the right permissions especially for multiple occupancy. Therefore, you will have to apply for one from a relevant authority. Scotland and Wales, for example, have these landlord licensing systems, and more keep on appearing. Failure to comply with these systems will result in fines.
Gas safety checks
As a landlord, you are legally required to check your property for gas safety every year. Failure to perform gas safety checks will result in huge fines of up to £6,000 or a prison sentence of 6 months. Gas safety checks can only be performed by registered gas safe engineers.
Fixtures and fittings
Fixtures and fittings in your property must comply with current regulations on product safety. If your house has soft furnishings, ensure they have the right labels that declare they are fire or flame retardant. Furthermore, ensure that all electrical goods within your property are PAT checked and tested.
How to Rent out your Property
Choose the right letting agent
You should hire a letting agent to help you market your rental unit. Before hiring the agent, research to ensure you work with the best. You can choose a letting agent to advertise your property and source tenants. You can also choose an agent that will help you go through the entire phase of renting out your property. Make sure you have a tenancy agreement with the agent and determine the most ideal tenancy deposit system to use.
Market your property
Marketing a property is all about showing off the best features of the property. Some on-demand features include: a spacious living room, modern kitchen and bathroom, easy access to local transportation and amenities, etc. When marketing your property, also ensure you set the right rental rate. Above market rates will scare away potential tenants.
Avoid common mistakes
One of the most common mistakes accidental landlords make is letting unpaid rent accumulate. Just because your tenant has signed a contract does not mean they will pay rent on time.
Accidental landlords now have a chance of making money due to a huge demand for rental units in the UK. Mortgage rates in the country are also low meaning that accidental landlords can afford to rent out their homes.