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Practical Tips for Accidental Landlords

What is accidental landlord? PropertyLoop

What Is an Accidental Landlord

Put simply, an accidental landlord is someone that has found themselves in possession of a property that they need to rent. This is a situation commonly found by those that have struggled to sell their home and have decided to take on tenants until the right buyer can be found, allowing them to use the rent for the mortgage on their next property.  

 Do I Need a Buy to Let Mortgage?

It is not always the case that the owner of a property will need to obtain a buy to let mortgage. In some instances, owners may be able to gain consent from the provider of their residential mortgage, allowing them to let out the property to tenants for a limited period, typically 12 months. 

If the owner of the property is unable to gain consent to let from their provider, they will need to change from their current residential mortgage to a buy to let product. It is essential to note that unlike a residential mortgage, owners will only be paying the interest off the mortgage with the capital of the property being paid once the term comes to an end.  

It is essential that landlords notify their mortgage provider that the property is being occupied by tenants and do not let out the property on a residential mortgage. Owners that are found to do also will be considered in serious violation of their mortgage’s terms, often requiring them to immediately settle any outstanding amount on their property.  

Do I Need to Reference My Tenants?

It is understandable that as a new or accidental landlord there will be a temptation to rush into a tenancy in an effort to occupy the property and start generating a rental income as quickly as possible. However, this can occasionally lead to landlords letting their property to a problem tenant that soon falls behind on their rental payments and becomes the cause of excessive repairs.  

For this reason, landlords choose to put the applicants for their tenancy through a screening process known as referencing, evaluating if the aspiring renter is a good fit for the opportunity. Referencing will see the tenant produce testimonials from previous landlords, alongside declaring their current income, credit history and employment status for a series of affordability assessments.

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Landlords are legally required to assess each of their tenants for their right to rent. This will see the landlord scrutinise official identification documents such as a visa, passport or other residence documents to determine if the tenant can reside within the UK for the duration of the tenancy.  

Do I Need to Protect My Tenants Deposit?

Before a tenant moves into a rental property, they will be required to provide the landlord with a security deposit. This will typically be the equivalent cost of five weeks rent and be retained by the owner of the property until the rental period has come to an end.  

Whilst landlords are under no legal obligation to take a security deposit from the occupants of their rental property, if they choose to do so then they must enter the provided sums into a government-approved deposit protection scheme. Once the tenant has paid the security deposit to the landlord, the owner will have 30 days in which to enter the amounts into a protection scheme and provide the tenant with details of how their deposit has been safeguarded, alongside the process of having the sums returned and when deductions can be made by the landlord.  

It is also important for rental property owners to note that the 2019 tenant fees act introduced a limit on the amount that a landlord is able to take from the occupants of their rental property towards the security deposit. This monetary threshold was largely dictated by the amount the tenants pay to rent the property over the course of a year. If the annual rental charge for the property is up to £50,000 then the occupants of the property is able to request up to five weeks rent for the deposit; however, if the rent is over this amount tenants can pay as much as six weeks rent.  

 How Much Should I Charge for Rent

It goes without saying that maximising the potential rental yield that can be gained from a property will be one of the most significant ambitions of a landlord. However, this is of course a balancing act as if the monthly charge is too high potential occupants will be deterred from proceeding into a tenancy. 

New landlords will commonly evaluate the rental opportunities that are available close to their property and perhaps more importantly, how long these rentals are on the market. This process can provide an invaluable insight into tenant behaviour in the area, the demand for rental opportunities and how much your target demographic is willing to pay for a home.  

However, this does not dismiss the pillars of pricing as a well-situated opportunity is a desirable location, close to commuter routes will always be able to demand a slightly higher rent because of its appeal.  

It is also worth considering that in order for a buy to let mortgage to be approved in most cases owners will be required to maintain a rental income that is approximately 145% of the monthly mortgage payments. The rental yield will not only have to provide landlords with a dependable income but as mentioned cover any mortgage payments, management fees, agent charges, repairs and other running costs.  

Accidental Landlords and Capital Gains Tax 

If a landlord decides that they wish to sell their rental property they will need to pay tax on the increase in value the property has seen over the course of its ownership, referred to as capital gains tax or CGT. Those that are taxed at a higher rate will pay 28% CGT whereas those on the basic rate will only need to pay 18%.  

With this being said private residence relief will be granted for any periods that the owner resided within the property, alongside relief for the final 9 months of ownership; significantly reducing the chargeable tax for accidental landlords that only let for a short period.  


Capital Gains Tax


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