More often than not owners in this position opt to rent out their home – thus joining the ranks of the so-called "accidental landlord".
Numbers of accidental landlords have increased sharply in recent years, reflecting the general lack of activity in the property sector – particularly in the past few months.
Towards the end of 2011 statistics from the Association of Residential Lettings Agents (ARLA) showed that around 47% of its member agents surveyed had seen an increase in "unplanned" lettings in Q3.
Figures vary for different parts of the country but the overall trend is a steady rise in accidental landlord numbers. But the unsuspecting and the inexperienced can find themselves in all sorts of bother if they are not careful: out of pocket or with damaged property. Or both. Or worse.
Many first-time landlords are seduced by the prospect of being able to generate decent returns with little effort. After all, it is simply a case of find a tenant, sign them up and watch the money roll in. And that is their first mistake.
Tenant demand is very strong in the current market – hence the high rental returns. So what could possibly go wrong?
Here Steve Verrall, director of specialist insurance provider Discount Landlord http://www.discountlandlord.co.uk/ considers a number of the major mistakes which can be made by inexperienced first-time landlords – particularly the so-called "accidental landlords".
He explains how best to deal with these problems and, in many cases, how to avoid them in the first instance…
"Becoming a landlord for the first time can – and should – be quite a daunting prospect. If you are not concerned about potential problems then you will not be in the best position to prevent them happening.
"Nobody wants to have a difficult time but you have to face up to the fact that being a landlord is not always easy. That said there are steps you can take to make matters run smoother for yourself."
1 Is there actually demand for rental property in your area?
"Beware generalising the market. With a little research, first-time landlords will quickly become aware that the rental sector is growing both in terms of demand from tenants and also rent paid," Verrall said.
"However, it does not follow that this is the same in all areas of the country – or in all parts of those areas. Somewhere with a major university population may not have much serious demand for families looking for a large home to rent.
"Equally a let aimed at professional tenants may not attract its target market if it is away from public transport or have no parking facilities.
"Successful professional landlords know their target tenants and ensure the property they let fits perfectly the requirements of their prospective tenants.
"Those marketing family homes should be close to schools or other amenities used by families and be located in areas populated by other families. If the location of your property is unlikely to attract your target market then you could struggle with renting. Should that be the case then selling could still be your best option."
2 Use a reputable lettings agent
"The right lettings agent will manage the entire process for you. They will charge but those fees are tax deductable. Speak to other landlords in your area and find out who they recommend and use the internet to investigate further if necessary. Visit the agent and talk to them," Verrall said.
"Always make sure you choose an agent who is a member of a recognised professional body such as the Association of Residential Letting Agents."
3 Suitable tenants
"Perhaps more than any other element of renting, getting the right tenant is most important. A good tenant will always pay the rent on time and respect your property. An awkward tenant can do precisely the opposite and cause no end of heartache and financial woe for landlords," Verrall said.
"References are crucial – not just from the tenant’s current landlord but also, from their previous one if that is possible. Remember, the current landlord may be so desperate to get rid of them they will tell you anything.
"Get bank statements and employment details and find out as much about your prospective tenant as possible. Choosing the right tenant is where having the services of a reputable lettings agent will really help.
"They should sift out the bad/problem applicants for you. When they – or you – think you have found the perfect tenant make sure you meet them face to face. Not only will this help confirm matters one way or another but also it should help get landlord-tenant relations off to the best possible start should you decide to go ahead as neither will be strangers to the other.
"As the tenancy begins this should make dealing with any matters which might arise that much more straightforward.
"Problem tenants can be a landlord’s worst nightmare – refusing to pay rent or to move out or causing serious damage to the property. This can happen, although by using a reputable lettings agency and carefully screening your tenants before they sign on the dotted line you can minimise the chances of this occurring.
"Landlords should also make sure they take out specialist cover such as the rent guarantee insurance http://www.discountlandlord.co.uk/rent-legal-insurance.html offered by Discount Landlord which covers rent payments and legal costs should tenants default."
4 Look after your tenants
"Ensure the property is clean, tidy and all appliances are in full working order when your tenants move in. If necessary make sure the place has been decorated and that any furniture you supply is of decent quality," Verrall said.
"A tenant is more likely to look after a property in good condition than one which has seen better days already. Don’t buy cheap furniture as it will look shoddy quickly and is unlikely to last.
"Many accidental landlords will be letting out property furnished – make sure you remove items of sentimental value before the tenant moves in and consider putting some of your belongings in storage if you are worried about damage as things will occasionally get broken.
"Deal with any problems or complaints raised by the tenant quickly and professionally. Do not expect them to wait in all day for a plumber to fix the heating system. Remember, it is your property, so you must wait, not the tenant.
"On moving in day leave a welcome note and small gift such as champagne, chocolates or flowers for your tenants."
5 Know the law
"Landlords have many responsibilities and legal obligations towards their tenants. Make sure you know and abide by them for the sake of both parties. If you are an accidental landlord make sure your lender knows what you are doing – otherwise you could get into trouble," Verrall said.
"Similarly with home and contents insurance – regular home insurance policies will not usually cover your home if it is let and specialist cover such as that offered by Discount Landlord could be required.
"Safety issues are numerous and must be complied with. Likewise energy performance.
"You will also need to ensure your tenant’s deposit is protected in a regulated scheme."
6 Ensure proper safeguards
"Protect your property and its contents by taking a full inventory before the tenant moves in. Make a record of what is inside the property and its condition and agree this with tenant," Verrall said.
"Take photographs or even video footage to provide evidence that is difficult to dispute. Expect reasonable wear and tear on furnishings and other items.
"Also make sure you take out landlord content insurance in case any damage occurs."
7 Don’t end up out of pocket
"Being a landlord is not a licence to print money – even if you have no mortgage. You will still need to pay agent’s fees if you have taken on their services plus there will be many other running costs," Verrall said.
"Make sure you put some money aside in an emergency fund in case there is a major problem with the house such as boiler replacement or a new roof.
"What is left in terms of earnings from rent is still subject to tax – although many expenses are tax deductable.
"Getting the right Insurance cover is also crucial. Without it, if something serious does go wrong your profit for the year – or several years – could be lost.
"Discount Landlord offers a range of specialist insurance products tailored for landlords. These provide comprehensive protection against a range of potential problems and give peace of mind to landlords, helping those both accidental and professional to sleep soundly at night knowing their investment is safe.
"Being a landlord can be highly rewarding. Many accidental landlords continue to let out property on a professional basis even after the circumstances which saw them turn to letting in the first place change.
"Remember, the landlords who get the best results from letting are the ones who follow the rules and look after their tenants, protect themselves and their property."
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