The opportunity to generate extra income from a second home has never been greater. This is down to the simple fact that more people are looking to rent rather than buy due to the unstable economic environment. If you’re in a position where you can buy to let there is some serious money to be made, but it’s not a complete walk in the park as there are still some things you’ll have to sort out before you can begin profiting from a second property.
Find your property, do your research
If you haven’t already secured your second home make sure you do plenty of research before you buy any property. There are a whole raft of things to consider, such as how much similar properties in the area are charging for rent. You can draw an area on a map with rightmove.co.uk to find out what other similar properties are charging for monthly rents. Depending on the quality of your property you can expect to charge the same amount (but not necessarily receive the same amount as income… we’ll get to that later).
Get a good deal on landlord’s insurance
As a landlord you have plenty of duties to your tenants. You need to make sure all electrical, plumbing, sanitary and heating appliances to name just a few are in good and safe working order. If you can’t provide a habitable home you’ll find your source of income drying up, or you’ll be faced with huge repair charges.
Normal household insurance won’t cover the requirements of landlords so you’ll need specialist landlord’s insurance. A good place to start is Simple Landlord Insurance as they offer a cheap basic insurance policy allowing you to only add the extras, such as home emergency cover, that you need.
Find a tenant
If you’re able to find a tenant yourself make sure you get references from employers or previous landlords or do a credit check. If you’re renting to students make sure you have a guarantor. The last thing you want to have to deal with is defaulted payments.
Also, it’s important to remember that in the UK if you’re letting your property on an assured shorthold tenancy you need to put your tenants’ deposit into one of three tenancy deposit schemes. Not doing so could cost you up to four times the amount of the original deposit. Similar stipulations may cover deposits in the USA.
Ensure you have a strong tenancy agreement
You can easily find general tenancy agreements online that may be fit for purpose, though it might be worth getting personalized legal advice. Whatever you do make sure you actually read through the contract, even if it is rather lengthy, so you’re clear about both your and your tenants’ responsibilities.
Consider using a management company or lettings agency
Having one extra property that you rent out isn’t going to generate the income you need to survive on. However, many landlords find that trying to arrange everything and maintain properties can become something of a full time job. This is why lettings agencies are so popular.
Of course, you’ll have to pay them a fee – this is why the price that other properties rent for won’t be what you can expect as a monthly income. Nevertheless, the peace of mind afforded by a property management company is usually worth it.
Lettings agencies will take care of things like references and inventory checks – the only hard work you have to do is finding a property manager that you can trust to keep your property occupied and well maintained. From that point you can just wait and watch the money roll in.
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