When selling up seems like an impossible task, renting out your house can be a good alternative. This handy guide will help you with the steps you’ll need to take before you welcome tenants to your home.
There are lots of reasons why you might be thinking of renting out your house.
For example, perhaps you’re struggling to sell your house at this time. In that situation, you might be asking yourself ‘should I rent my house?’. Renting it out can be a handy alternative to selling.
Renting out your house could also give you the chance to live elsewhere for a while. Perhaps you’d like to move in with your partner, go travelling or even work abroad, but you’d like to keep your home. If you rent it out while you’re living elsewhere, it’s a great opportunity to earn rental income.
But, before you decide whether renting out your house is right for you, you might like to read our guide on how to rent out your house.
If you’re thinking of renting out your house, start by having a look at the sorts of properties being let in your area. Try to find rental homes that are similar to yours, and check how much rent they’re asking for. That way you’ll get a rough idea of how much you could price yours at.
Sometimes, renting out your house can involve using a letting agent. If you’d like to do this, check out the options in your area. Look at the service they offer and how much they charge. If any of your friends or family are landlords, you could ask for recommendations, too.
It's worth doing the maths to make sure it's worth it financially before you commit to renting out your house.
Remember that any rental income you receive could be taxed at your usual rate. This is 20% if you’re a basic rate taxpayer, or 40% if you’re a higher-rate taxpayer. So when you ask yourself, ‘should I rent my property?’, don’t forget to take tax deductions into account. Then factor in letting agent fees, and see how much you’re left with. This net figure would need to cover the mortgage payments on your property, at the very least.
Ideally, it should also leave you with some surplus for a back-up fund in case you need to do any maintenance and repairs on the property. This could also cover paying the mortgage between tenants. You’ll have to continue making your mortgage repayments, even when you’re not receiving any rental income.
This should be a key consideration when you’re asking yourself ‘should I rent my house?’.
Yes. When you decide to rent out your house, it’s important to talk to your mortgage lender and let them know what you’d like to do.
Failing to tell your mortgage lender could mean you’re breaking the terms of your mortgage contract by renting out your house. You need to ask their permission before you go ahead.
You’ll usually have to get something called a consent for lease from your lender. Once you’ve got this, you can get started with renting out your house.
It's very important that your current buildings and contents insurer knows if you’re planning on renting out your house. That’s because your insurance policies might need to be amended.
You’ll also have to arrange a special landlord insurance policy. This can protect your property itself, your tenants and your investment as a whole.
Some landlord insurance policies can even pay out if your tenants miss their rental payments. If you’re a landlord renting out your house, and you rely on your rental income to pay the mortgage, non-payment could be problematic. Having the right landlord insurance in place could protect you in a financially challenging situation.
There are certain things that you’re expected to do as a landlord, so it’s important to learn about how to rent out your house before you go ahead.
A landlord’s responsibilities include:
Keeping your properties safe and making sure there aren’t any health hazards that your tenants could be exposed to. As part of this, you’ll need to make sure any gas and electrical equipment is safely installed and maintained
Taking responsibility for all repairs, maintenance and refurbishments. If it’s something that needs urgent attention (like a gas leak), you may need to spring into action unless you have an agent doing this for you
Making sure you have an Energy Performance Certificate for your home
Keeping your tenant’s deposit safe in a government-approved Tenancy Deposit Scheme
Making sure your tenant has the right to rent your property (England)
Carry out fire safety checks and make sure fire alarms are installed and working
Sharing a ‘how to rent’ checklist with your tenants.
If you’re renting out your house furnished, you’ll also need to make sure any upholstered furniture is fireproof.
If you’re renting out your house through a letting agent, they may take responsibility for some of this for you.
If you’re wondering how to rent out your house in the most effective way, it’s important to think about how you’re going to prepare your home.
You’ll need to decide whether to rent it furnished or unfurnished.
Other things to think about before renting out your house include:
Removing anything from the property that’s precious or fragile
Making sure any repairs on fixtures and fittings have been carried out
Checking all appliances are in good working order
Giving the property a mini-makeover to ensure everything’s well-presented and up-to-date.
It’s also worth noting that may tenants prefer a ‘blank canvas’. So, if you’re painting it, stick to neutral colours.
This will help make the process of renting out your house smoother. If everything’s in good nick, you should find tenants more quickly, and they’ll be more likely to be happy once they move in.
It might have crossed your mind that ‘I’d like to rent my house but I don’t have time to deal with it all’. If that’s your situation, you could use a letting agent. You don't have to use one, but having an agent means less work for you when it comes to renting out your house. On your behalf, a letting agent will:
Advertise your property
Show prospective tenants around
Draw up a tenancy agreement
Deal directly with the tenant on your behalf if you don’t want to.
Agents typically charge around 10-15% of the rental income you receive from renting out your house. You may or may not feel this is worth it for the work they do for you.
Ask your letting agent how much they feel you should charge for rent, but remember this decision is down to you. You could gather the opinions of two or three agents before you decide.
You may want to meet potential tenants before deciding whether you’re happy renting out your house to them. Some people prefer to leave it to a letting agent to carry out due diligence checks.
If you use an agent, they can perform reference and credit checks on potential tenants to ensure everything’s above board. Otherwise, you’ll need to do this yourself.
If you don't want to move out, you could think about renting out a room in your home rather than renting out your house as a whole. This is a way to bring in a little extra money.
Under the Government's Rent a Room scheme you can earn up to £7,500 each tax year, tax-free, by renting a furnished room in your family home.
Vet potential lodgers: Ask for references, preferably from a previous landlord. Then you can verify their identity and check they’ll make a reliable tenant
Protect your home: Draw up an agreement including rent amount, due date, let period, notice period and house rules
Tell your home insurance provider: This may increase your premiums, but will also ensure your policy’s valid. It’ll also pay out for any claims you make.
There’s a lot to think about before renting out your house, but this article covers a lot of what you need to know.
A few extras that you might not have thought about when renting out your house include:
You might like to think about having your house and appliances professionally cleaned before renting it out for the first time. You’ll also need to do this between tenants
It’s a good idea to make copies of keys that your tenants might need – this could include windows, doors and utility meters
If you have instruction manuals for things like the boiler or white goods, try to gather these so you can give them to your tenants. You could photocopy them if you’re worried about losing them
You might find it helpful to get to know the laws around being a landlord. There are currently almost 150 of them and it’s in your interest to understand as many as possible. There’s plenty of legal information on Gov.uk
Renting your property out can be stressful, especially if you encounter unexpected expenses. Compare landlord insurance to get the protection you need for less.