Buy to let factors

The most popular type of tenancy agreement is the Assured Shorthold Tenancy (AST). This is usually a renewable six month (sometimes twelve month) agreement covering every aspect of the relationship between tenant and landlord. Amongst other things it allows access for you to your property (by prior booking with the tenant) and workable periods of notice for termination. This type of agreement is also that favoured by mortgage lenders. Enforcement of this agreement and particularly the planning in advance of changes of tenants is a vital way of maximising your return. You would normally expect the competent letting agent to look after all such dealings but your involvement periodically is not a bad thing. 

An alternative type of agreement is occasionally offered by Local Authorities, Housing Associations or Central Government, which runs for three to five years. This should be confirmed as being acceptable to the mortgage lender prior to signature. Such an agreement can, of course, be very attractive as it gives a degree of guaranteed income. Additionally it can sometimes include full repair, reinstatement and maintenance clauses, which is another very lucrative element given the potential type of tenant. However, it is not unusual for these bodies to offer slightly lower rents in recognition of these benefits to the landlord. The lengths and guarantees offered by these contracts can, of course, also obviate the need for a letting agent, presenting a further saving. 

Building Maintenance

Again, if you do not want to do this yourself, or if you do not want to have constant calls from tenants for dripping taps or broken boilers, then appoint a good property maintenance company. Your steady stream of income can be quickly eroded by costs and inconvenience if this point is not addressed adequately. A speedy resolution of a tenant’s problem is important in maintaining good relations and adds value to your desirability as a landlord and hopefully a consequent occupancy advantage. Of course, being slow to repair any fault can increase the overall cost of that repair. 

Providing a good, prompt, 24 hour maintenance service is a matter of logistics and therefore many of the smaller companies that offer this service may not have the resources available to cope with peaks in demand.  A good, local letting agent should be able to provide such a service.

Costs will vary hugely by area and type of property, but can be arranged on an annual fixed-fee basis. This is likely to be labour only and you would usually be expected to pay for parts and materials. Do not confuse that which constitutes a call-out or maintenance issue with that of an insurance claim. You may well have agreed that the letting agent handles all building maintenance callouts and also insurance claims, dealing directly with the tenant, repairer and insurer. If not, then you must be on top of this issue as again the potential for eroding returns very quickly certainly exists.

Property Insurance

Your tenants may burn down your property, but that is a minor problem compared with your tenant breaking their neck on rickety stairs or a badly worn carpet. They may have good cause to pursue you for damages if the property is not in a good state of repair.  It is therefore important to have Property Owners Liability cover for such events.  It is not an expensive addition to insurance and should be automatically included within conventional insurances for let property.

You must make sure that if you let to people receiving Housing Benefit that the insurance company is informed immediately.  Some insurers do not cover DSS or Housing Benefit occupancy.  As previously mentioned, cover is available for buildings and also for basic landlords furnishings that you may choose to provide. The costs of cover should be between one and a half times to twice the cost of normal residential cover, and there are many insurers in this field. Be careful about your liabilities in respect of any fittings, contents or furnishings. They should be safe and meet all Consumer Protection Act 1987 and Furniture and Furnishings (Fire) (Safety) Regulations 1988 and all subsequent amendments.

Consideration should also be given to loss of rent cover. This will usually reimburse you for extended periods of no occupancy arising for any reason. For example, in the event of a property catching fire, your buildings insurance policy should cover much of the repair cost.  However, you will not be receiving rent for the period of time taken to restore the property; a particular problem if you have to maintain mortgage payments. But be careful about the cost and wording of such cover. Letting agents can usually arrange such cover.

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