If you wish to make an additional income, rental of your property can be an excellent source of revenue. However, the benefit of an easy income must be weighed against the potential stress that rental can create when things go wrong. As a landlord, you need to ensure that you avoid some of the potential problems that can arise by thinking ahead. Here are some simple steps you can take in order to make sure the relationship with your tenant remains a good one.
The most simple step you can take as a landlord in order to protect you and your property is to ensure that your relationship with the tenant is embodied in a comprehensive rental agreement which sets out all of the pertinent details concerning the rental. Not only should it record the tenant’s full contact details and all of the salient points regarding the property, term of the rental, rent payments etc, but it should also cover all of the responsibilities of the parties. You need to consider who will be responsible for payment of utilities, telephone, council taxes, insurance and other payments concerning the property and ensure this is clearly set out in the agreement. It is also wise to include provision to the effect that the tenant will arrange and pay for all such bills to be transferred into his name. If you, as landlord, are responsible for insuring the property, the onus should be placed on the tenant not to do anything that might render the insurance void.
If you are renting a property that is fully furnished then you should prepare an inventory that lists all of the items left in the property and their current state of wear and tear. The best way to ensure an accurate record is made is through photographic evidence, which is co-signed by the tenant and appended to the rental agreement. You need to make sure that the tenant is under an express obligation to return the property at the end of the term with all of the items still there and that any damaged or missing items are adequately replaced or repaired.
It is common practice for the landlord to take a deposit for the property, which is his guarantee against non-payment of rent and/or damage to the property. In order to avoid confusion, it is recommended to clearly stipulate in the written agreement the circumstances under which the deposit will be forfeited and by whom/how the deposit will be held.
If you rent your property out for a longer term, then you should consider the possibility that you may wish to increase the rent. You should ensure that provision is made in the rental agreement that stipulates the circumstances under which the rent may be reviewed and the proportions by which it may be increased.
As a landlord, you should be aware of and take advantage of any tax provisions designed to benefit landlords. For instance, subject to certain conditions, the rental income of preserved buildings is exempt from income tax. Moreover, the expenses attached to the rental of buildings (up to 20% of the rental income) can be deducted from the calculation for the purposes of income tax and so can interest in respect of acquiring a building for the purposes of rental.
As a landlord it is easy to fall into the trap of thinking that the property belongs to you and therefore you have complete control over the relationship with any potential tenants. In fact, the law provides a considerable degree of protection for the tenants and therefore it is very important to work according to a fair agreement that outlines all of the responsibilities and rights of the parties in advance. Attachment of an appropriate inventory and clauses dealing with deposits and rent review will both also guard against some of the common problems faced by landlords. Finally consideration of your tax position will also assist in ensuring that the process of renting your property out is a positive one.