There’s never been a better time to be a landlord in London. A recent report revealed that on average, every UK rentable property has around seven tenants interested in it, and demand in the capital is even higher.
In this guide, you’ll find all you need to know about being a landlord in London, and where to start looking for the ideal buy-to-let property.
Landlord Responsibilities
As a landlord, you’ll have certain responsibilities towards your tenants. They’re fairly straightforward, but it’s a good idea to familiarise yourself with them before committing.
Responsibilities include:
- Health and safety. As a landlord, you’re responsible for offering a property that is safe to live in and won’t adversely impact the health of your tenants. All furniture must comply with the Furniture and Furnishings (Fire) (Safety) (Amendment) Regulations 1993 – you can find out more details here. Likewise, you’re required to service all gas appliances once a year and provide your tenants with a copy of the certificate. Any electrical wiring that is over 15 years old needs to be checked annually too.
- Right to rent checks. It’s also your responsibility to check that your tenant can legally rent in the UK. You’ll need to view a range of original documents (you can find out more here), and also obtain copies.
- Tenancy agreements. The tenancy agreement is a legally binding document which protects both you and your tenant. The most common form is the Assured Shorthold Tenancy Agreement, however, there are other forms of agreement.
- Deposits. Normally, landlords take a deposit from tenants, to provide coverage in the unlikely event of there being any damage to the property. In 2007, the Tenancy Deposit Scheme was introduced – which means as a landlord, you have to protect the deposit in a government-initiated scheme.
- Discrimination. It’s an offence in the eyes of the law to discriminate against a tenant – for example, insisting on a higher rental charge to a person with a disability, or refusing tenancy to someone based on their ethnic background.
Renting an HMO in London
Converting your property into a house of multiple occupancy (HMO) is a great way to maximise rental yield; and shared accommodation is becoming increasingly popular in London. In order to convert a property to an HMO, you’ll need to apply for a licence, which needs to be renewed every five years. Bear in mind, licence laws vary according to location, so you’ll need to find out what the requirements are in your area.
When searching for buy-to-let property in London, remember that not all houses are suitable for conversion to HMO. It must be an appropriate size for the number of tenants you plan to have, and the bedrooms must also adhere to certain size guidelines. Your estate agent will be able to direct you towards suitable properties.
Average Rental Prices in the Capital
London rental prices are renowned for being high – with even small studio apartments commanding serious rental incomes for landlords. As of 2015, the average monthly rental price for a property in Greater London was £2,216, with houses and apartments in Central London commanding even higher amounts.
However, it’s important to note that London property prices are also on the increase. In 2015, the average London property cost over £500,000. Savvy investors tend to seek property in upcoming areas, which offer excellent rental income, whilst still remaining appealingly affordable.
London Property Hotspots for Landlords
In general, London enjoys solid rental returns, with some areas being more lucrative than others. Where the city really excels is in providing landlords with excellent capital growth – as properties across London tend to rise fairly rapidly in value.
Here’s a quick run-through of some of the places you should consider (figures correct at the time of writing):
- SE1 postcodes. Areas such as Waterloo, Borough and London Bridge offer a solid rental return (from 3% to 4.2%). Strong transport links and proximity to local attractions, such as The Globe Theatre and The Old Vic, make this a perennially popular area for renters, particularly young professionals, who make up 77% of the tenant population. You can expect to generate around £400 a week for a one-bedroomed apartment or house, up to around £688 a week for a four-bedroomed property.
- East London. East London is becoming increasingly popular with investors, particularly SE13 postcodes such as Lewisham, which generate as much as 5% - 6% in rental yields; an impressive figure for the capital. After much regeneration, Hackney still continues to be appealing to tenants, offering a good rental yield of around 4.5%, and Redbridge is close behind with average yields of 4.2%.
- SE16 postcodes. SE16 postcode areas, such as Rotherhithe, Surrey Quays, Canada Water and Bermondsey, offer good rental potential – with average yields of around 3.8% to 4.5%. Locations such as Canada Water have enjoyed considerable redevelopment in recent years, which has boosted their tenant appeal considerably. Likewise, amenities like the Surrey Quays shopping centre have increased interest in these areas.
What to Consider When Investing
When selecting a buy-to-let property, take the following into consideration:
- Regeneration. Many areas of London are currently being regenerated, and as a result, prices are expected to rise accordingly. Find out which locations are scheduled for redevelopment, and also, whether property prices have already started to rise. If they have, this indicates that they may rise further in the future, which promises good capital growth.
- Transport links. Properties next to transport links will always be more popular with tenants, particularly if it’s an underground station. Savvy investors are exploring areas near the Crossrail stations, where prices have already started to rise. These locations are likely to be popular with commuting tenants.
- Long-term / short-term investment? Before selecting a property, think about your future plans. If it’s a short-term investment, it makes good sense to choose a property that will produce solid rental income. However, if you’re looking for a longer-term investment, it’s a good idea to select a property that offers solid capital growth.
Resources for London Landlords
There are plenty of support networks and free resources for London landlords, including: