Become a landlord and beat the static property market

19 July 2012

After 11 years in the UK, my husband and I are thinking about returning to our native Australia next year.

We're lucky enough to hold citizenship of both countries, so our move is admittedly relatively hassle-free, compared with most departing Brits, but there's one hitch that dual nationality can't help us avoid: a stagnating property market.

In an ideal world we'd sell our London house before leaving, but as many would-be sellers have discovered in recent times, selling can be difficult.

With properties taking longer to sell and values in some areas falling, many homeowners are reluctantly becoming landlords. After seeking the advice of some local estate agents, we're now preparing for the idea that we may be joining them.

Figures from the Co-operative Bank earlier this year showed that up to a fifth of the applications received by its buy-to-let arm came from 'accidental landlords' and the Association of Rental Letting Agents (ARLA) reported that 47% of its members had seen a rise in 'unplanned lettings' at the end of last year.

Luckily for us, rental demand is high, and rents have been increasing over the past couple of years as would- be first-time buyers increasingly have to rent.

According to LSL Property Services, the average London monthly rent in April was £1,032, a 4.5% jump on the previous April. But this doesn't mean that becoming a landlord is easy and there are a variety of ways of going about it. 

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Do it yourself

If funds are tight, finding tenants and managing your property yourself is the cheapest option. Websites such as have made it easier for property owners to find tenants and tenancy agreements can be purchased easily at shops such as WHSmith.

If you do go it alone, it's important to do your research and to make sure you register any deposit you take with one of the tenancy deposit protection schemes. If you don't, tenants can take you to court and you could be required to repay up to three times the original deposit.

DIY advertising isn't always the fastest way to find tenants, however, as Emma Holcombe, 33, a director of a holiday company from Wiltshire, discovered: "I advertised in the local paper and online but I didn't have much success so I used a letting agent, which found a tenant really quickly.

"It was also an easier option because it did the credit checks and it had the up-to-date version of the tenancy agreement and covered all the legalities."

Emma used the agent on a let-only basis, and once the tenant was in place, took over management of the property herself. Engaging an agent on this basis will typically cost about 7 to 11% of the rental figure, although some agents charge a flat fee for finding a tenant. Once they're in place, it's up to you to collect rent and deal with any repairs or issues with tenants.

This type of arrangement can be ideal if you live fairly close to the property as it allows you to source reasonably-priced repair jobs and helps you keep in touch with tenants. It's not such a great option for someone like me, however, who plans to live abroad. 

Full-management service

For those who want a more hands-off approach, enlisting a lettings agent to find and manage tenants could be a better way to go. The agent will collect rent and deal with any issues that arise during the tenancy.
But whether you use a letting agent on a let-only or a full-management basis, it is important to choose carefully. There is no statutory body regulating lettings agents, so essentially anyone can set one up.

Horror stories abound about unscrupulous agents and in 2011, complaints made about letting agents to the Property Ombudsman rose by 26% on the previous year. Agents do not have to register with the Ombudsman and won't be bound by its code if they haven't. 

Eric Walker, managing director of estate agency Bushells, says many new landlords simply compare the costs charged for full management - usually around 10 to 16% of the rent – and then go for the cheapest one, but he says this can be risky.

"Lettings agents are not bound by the 1979 Estate Agents Act or the new anti-money laundering register, and don't have to be members of the Property Ombudsman.

"There are many bad agents out there and my advice is to use one that is properly regulated by ARLA, NAEA (National Association of Estate Agents) or RICS (Royal Institution of Chartered Surveyors) – not only are you assured that there is independent redress, proper insurances and a code of practice together with a requirement for CPD (continuing professional development), but it shows that an agent voluntarily subjects itself to such stringent criteria."

Sites such as and can be useful in finding suitable agents in your area. 

Rent your property to the council or housing association

Another alternative is to rent your property to your local council or a housing association for a fixed period.

Because housing waiting lists are so long in lots of areas, many local authorities, either directly or via housing associations, will lease properties from homeowners, usually for a period of three to five years. They pay the rent each month, regardless of whether the property is occupied, and manage the tenants.

Karelia Scott-Daniels, 39, from London, has been renting properties she owns with her family for several decades and has had a great experience from leasing to the council.

"We had one property that was rented to the council for 10 years. At the time it took it on, the property was newly refurbished and that's the type of property the council was looking for."

At the end of the tenancy, the council also put the property pretty much back into the same position that it was when it started. "Any damage that was done by the tenants was fixed and it had been repainted," adds Karelia.

However, responsibility for repairs and maintenance varies between councils so it is important to find out exactly what is and isn't covered.

For example, when I contacted my own local council, Lewisham, while I was happy with the guaranteed rent it offered - £1,050 per month, which is somewhat lower than the £1,200 lettings agencies have told us we could achieve privately but which also comes without any management costs or risk of void periods - I was not so enthused about the maximum £500 it was willing to cover for any damage done by tenants and repairs.

And don't assume councils will take on just any property, says Tracy Harrington, development manager at Hyde Housing Association. "We're quite picky and properties have to meet certain standards. London is probably in the most need of properties because we are having a meltdown with the number of people turning up in need of somewhere to live."

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