Rental property is increasingly popular in London and the guide only intends to help new or existing landlords understand what makes for successful lettings.

1. Buying as an investment is quite different from buying a home

An investment made in rental property should be ruled by the head rather than the heart and be treated as an unemotional business decision.The criteria for buying properties to let are notably different from those you might apply if buying a place in which you plan to live in . Properties with neutral decorations and small gardens which usually won’t take much maintenance are usually among the ones tenants go for .

2. Find best locations in great demand for the lettings market

If you are considering buying an investment property, assess locations that are most popular with renters. Tenants are usually attracted by locations with plenty of employment opportunities or good communications for commuting to nearby towns and cities. University students are a group which you might want to consider, which means accommodation near universities should always let well. Students are known to often share properties , the well known “houses in multiple occupation” (or HMOs). HMOs are often subject to special legal requirements, which include licensing, registration and inspection by the local authority. It’s also a good idea to make some thorough enquiries of them before proceeding.

3. Process of choosing the property which meats the demands

Doing your research with the local estates agents and getting to understand which type of properties would let quickly helps you in not wasting your time searching for stable income from rents. The Guaranteed Rent Scheme could prove as a great way to get your hassled free monthly income off your properties without having to deal with all the hassale of managing your properties .

4. Rental calculation- generating income

Landlords need to consider the three per cent stamp duty surcharge which came into effect on April 1, 2016. Visit the government’s stamp duty calculator to work out tax liabilities. You are buying a property for the purpose of generating an income from the rent to be paid by a tenant. This rate of return is called the “yield” and is calculated by dividing the annual rent by the capital value of the property (the amount you paid for it). Yield is the vital measure of the success of your investment. If a property costs £200,000 and the annual rental income is £20,000, the gross yield is 10%. However, you will have some costs during the year – including repairs to the property. This will reduce the rental income and result in a “net yield”. In our example, if these costs amounted to £8,000 you would be left with an income of £12,000 .

5. Property values change over time

Along with the rental income, possible changes in the sale value of the property need to be considered too. Check sold prices as part of your search for a property to rent.

6. Anticipate periods without income

Finding a a tenant might take longer than expected, the rental figure may be lower than anticipated and there may be “void” periods between tenancies. All these can reduce the return on your investment and put pressure on your cash flow, however the Guaranteed Rent Scheme saves you from all the above head aches and gives you the freedom of managing your income without any “VOIDS”.

7. Complying with the law is of extreme importance

When a property is rented out, the tenant needs to receive a copy of the EPC( Energy Performance Certificate), a GSC(Gas safety certificate) and an electrical safety certificate for HMOs . There is an obligation to have fixed electrical installations in every HMO inspected and tested at intervals not exceeding 5 years by a qualified electrician for any electrical equipment at the property. If any furniture is supplied, it must comply with fire safety legislation. Although it is not a legal requirement, it is good practice to fit smoke detectors.

8. Choosing the managing/lettings agent

The relationship between landlord and letting/managing is likely to be long-term, so it pays to choose wisely. An effective and professional letting agent can be an invaluable asset and will be especially helpful to new landlords finding their way in the market. They will deal with everything from finding the tenant, referencing,dealing with inventories, deposits, complying with legislation, handling maintenance issues and making sure the property is looked after.

9. Service you need from your agent

Estate agents offer three-four levels of service. Let only- they find the tenants ,deal with referencing and the landlord will be undertaking the day-to-day management of the property. Rent collection – means the agent will find the tenant and collect the rent but all other matters will be dealt with by the landlord. Full Management- means the agent takes care of everything to do with the letting from start to finish and will only involve the landlord if something out of the ordinary needs their decision. Guaranteed Rent- it is very similar to Full Management and you also get the piece of mind of getting paid rent even during void periods, basically , the agent “becomes your tenant ” and they deal with all maintenance issues, you rarely need to get involved.

10. The Assured Shorthold Tenancy

This is the most common form of tenancy agreement for properties. It specifies all the details of landlord and tenant obligations, the rent to be paid and the period of the rental. There are strict legal rules governing assured shortholds and your agent will advise you on any matters that affect you as the landlord. Most importantly, a professional letting agent will draw up the Assured Shorthold tenancy agreement and ensure it complies with the law.

11. Security Deposits

All tenants need to pay security deposits, which are being held for the duration of the tenancy and must be registered with one of the government approved Tenancy Deposit Schemes. At the end of the tenancy the deposit will be used to pay for any dilapidations/damages done to the property by the tenant outside of “fair wear and tear”.

Tenancy Deposit Scheme (TDS) has launched a Code of Recommended Practice. This Code of Practice sets out the recommended requirements which letting agents and landlords should meet as members of the Tenancy Deposit Scheme.

12. Inventories

A extensive property inventory should be made by the agent before the tenancy commences. It will provide a record of the condition of the property and items in it and can be used at the end of the tenancy to determine whether dilapidations are payable. It is of high importance that the tenant confirms agreement with the inventory.

13. Checking insurance

Standard buildings and contents insurances do not usually cover rental property.It is a good idea to check for specific policies.

14. Buy-to-let mortgages

The lender will take into account the likely rental income when deciding how much they may allow you to borrow. Taking professional advice from a Financial Adviser to find the mortgage that works best for your circumstances is a way of avoiding unwanted outcomes . In case of owner-occupiers of properties subject to a normal mortgages, the lender needs to know about the intention of letting the property out and this may affect the level of repayments.

15. Declaring income and taxes

When a property is being let out HMRC needs to get informed and the landlord has to report the rental income on a self-assessment tax return . ome costs, including interest on buy-to-let mortgages, and expenses are allowable against rental income. Visit www.gov.uk /renting-out-a-property for more information.