Becoming a landlord in Jersey for the first time can have hidden pitfalls. Our Jersey conveyancing lawyers can guide you through the process.
When you choose a house as a rental investment different criteria apply than those you would apply when purchasing a home for yourself. Questions you should ask are:-
- How strong is demand for the particular type of property in Jersey as a rental let? A four or five bedroomed house may be slower to let than a two bedroom apartment.
- How easy is the property to maintain? Large gardens and outbuildings may be tempting but a tenant may be reluctant to take on that responsibility. If so the property will be slow to let or you will be left carrying maintenance costs.
- Should I split my investment? Two properties may well be better than one. Smaller properties will entail less maintenance cost, and you will not be left with a 'rental gap' if one one is vacant at any given time.
The fundamental difference between a buy-to-let loan and a regular mortgage is the way the lender calculates how much you can borrow against the property you want to buy. If you are borrowing to fund a 'buy to let' purchase you will need a specifically tailored mortgage which permits letting of the property. The bank will discuss with you the affordability of the mortgage, taking into account the prospect of no rental income if a tenant leaves and a replacement cannot be found.
A residential mortgage in Jersey is calculated on affordability based on your income and outgoings, but this method wouldn't work for buy-to-let where the property will ordinarily be the second property a person owns. Buy-to-let lenders make decisions to lend based upon consideration of a customer's earnings and the anticipated rent income that will be realised. A valuation of both sale value and rental value of the property will be required.
While the amount you can borrow on a buy-lo-let mortgage will be based on the anticipated rental income, you also need to bear in mind the cost of maintaining the property and covering any void periods where you do not have paying tenants. For this reason lenders will ask that the rent more then covers the monthly mortgage payments - usually by 125 - 135%.
Find an experienced Jersey financial adviser or mortgage broker to help you on your search for the right buy-to-let mortgage. Many buy-to-let products are available from lenders that are not available on the high street and only operate through qualified mortgage intermediaries.
- Getting your property ready to let
The main issues you'll face as a landlord in Jersey are finding and retaining good tenants.
Before you start, make sure your property is ready to let. it should be clean and tidy, and facilities such as the heating and plumbing and white goods should all work properly. Stick to neutral colours and furnish with cheap, functional furniture.
To find out how much rental income you can expect for your property look on the internet or in the JEP to see how much other Jersey landlords are charging for similar properties. Better still seek an opinion from one of our recommended Estate Agents (see useful links below).
- Finding a tenant
You can find a tenant yourself or use an agent who will advertise the property for you. If you're doing it yourself you will save yourself an agent's fee but you will have to be prepared to spend time showing the property to prospective tenants. Check out the tenants before they move in. This will involve doing credit and identity checks. Firms like Cashback can do the checks on prospective Jersey tenants for you.
When renting out a property, it's essential to have a written contract or tenancy agreement between you and your tenants. This should set out both the legal and contractual responsibilities and obligations of the two parties. Benest and Syvret can produce the agreement for you.
- Letting agents
If you sign up with an agent they do some of the work involved in letting a property for you. Depending on what type of agreement you have this could include anything from advertising the property, arranging viewings, checking viewings, checking tenants' references and credit records, drawing up a contract, collecting the deposit and rent and switching over utility bills to the tenant's name.
If you decide to use an agent, shop around - be aware that lettings agents' services come at a cost - normally 10-15% of the monthly rent for the duration of the contract. Some also charge extra for things like inventories or credit checks.
Most Jersey landlords in the private sector ask their tenants for a deposit - normally one month's rent - against possible non payment of rent or damage to the property. When a tenancy comes to an end, the deposit should be returned if all the rent paid and the property undamaged.
Disputes between landlord and tenant, however are common, so ensure that you have a clear statement in your tenancy agreement in relation to deductions that can be made and timescale for inspection and return of monies.
- Lodging houses
If you are letting parts of a single property to separate individuals it may well need to be licensed as a lodging house under the Lodging Houses (Jersey) Law. If there are five or more individuals paying separate rental then registration will be required.
Upon registration there are detailed Fire, Health & Safety regulations to be oberserved as well as rules relating to record keeping. Benest & Syvret are able to advise when registration is required and the rules that apply.