Demand for rental homes rose by around 25% in 2022, and competition among tenants is hotter than ever as potential buyers wait and see what house prices will do.
As rents continue to rise from a shortage of property, more and more young professional adults are looking to share a rental home in Fife to save on costs without living in a tiny space.
Renting your property to sharers can increase your yield by having an income-earning tenant in every bedroom, but there are a few things to get a handle on first, including:
- Setting up the tenancy agreement correctly
- Understanding when a shared home becomes an HMO (House in Multiple Occupation)
- Having the right specification and accommodation
- Managing a property with multiple tenants
- Replacing a sharer if one moves out
With that in mind, this week’s blog has all you need to know about renting to sharers, so you can get everything right the first time around.
SETTING UP THE TENANCY AGREEMENT CORRECTLY
When you rent to sharers, you create a joint tenancy agreement that includes everyone who’ll be living at the property. The contract can be altered whenever one of the sharers is replaced (more on that later), and the following process will help you ensure you have the best tenants living at your property.
- Each sharer should be thoroughly referenced for creditworthiness, employment, earnings, previous landlord and ID – even if you already know them.
- Ensure your tenancy agreement makes the sharers jointly and severally liable for the rent, bills, and any damages. If one tenant doesn’t pay, the others must make up the shortfall.
- Before they move in, each sharer must pay their first month’s rent and share of the security deposit, then sign the tenancy agreement and a detailed inventory.
Don’t skimp on any of this. Thorough referencing is your best safeguard in accepting only the best tenants; a security deposit is essential in case of damage, and you’ll never win a dispute over the condition of your property without a signed and dated inventory.
WHEN DOES A SHARED HOME BECOME AN HMO?
Many landlords are still unclear when a shared home becomes a House in Multiple Occupation (HMO), but knowing the difference and your legal obligations is absolutely essential. Some things to consider include:
- A rental property is classified as an HMO as soon as three or more unrelated adults live in it, but that doesn’t automatically mean you need a licence.
- With five or more unrelated adults in a home with two or more storeys, you need an HMO licence from the local authority.
- Once you get above six occupants, you’ll also need planning permission and may have to install fire doors and lobbies.
Bear in mind that some councils have selected licensing policies to prevent family homes from being turned into HMOs, so check whether your property is affected before doing anything else.
SPECIFICATION AND ACCOMMODATION FOR SHARERS
When multiple adults share a home, the specification needs to be up to the task. Picking the cheapest option is always a false economy, so prioritise years of reliable service to minimise the time and hassle of repairs. Consider the following when preparing your property:
- Most adults want a bedroom with at least enough space for a 140cm wide double bed, a wardrobe and a chest of drawers. That means a room no smaller than 110 sq ft, or 11m2.
- Include a large fridge/freezer with a separate shelf for each sharer, a full-size dishwasher, and a washing machine with an 8kg+ load capacity, all from durable brands like Bosch, Neff and AEG.
- Choose a property with – or find a place for – an additional shower and toilet to avoid morning bathroom battles.
- Use stylish and durable finishes: think engineered hardwood and tiles for floors, and high-quality washable paint to remove inevitable scuffs without redecorating.
- Gardens should be low-maintenance with paving, bricks or decking rather than lawns and beds to tend and weed. Or ask your agent if it’s worth including a gardener in the rent.
Finally, make sure there’s enough cupboard space for things like food, a vacuum cleaner, an ironing board and a clothes airer, then take a look at our blog on attracting professional sharers https://www.fifeproperties.co.uk/blog/fp-tv-ep-75-premium-lettings-how-to-attract-high-earning-professional-tenants/ to appeal to high-quality tenants.
MANAGING A JOINT TENANCY WITH SHARERS
When renting out your property to sharers, life is much easier with an agreed system for communication and management, from how the rent gets paid to dealing with the unexpected.
- One tenant should be the nominated point of contact for things like booking mid-tenancy inspections, carrying out safety checks, and arranging repairs.
- You’ll need to choose whether to accept multiple standing orders for each share of the monthly rent, or a single payment from a lead tenant. Then stay on top of incoming and late payments.
- Collect phone numbers for each tenant, so you can contact any of them whenever you need to in case one of them is late with the rent, or the nominated contact is away.
As with all tenancies, being organised, communicating clearly and keeping on top of maintenance and repairs creates a positive rental experience for everyone, where tenants take better care of your property and stay for longer.
REPLACING SHARERS ON THE SAME TENANCY
In an ideal world, no sharer would ever move out in the middle of a tenancy, but the reality of life is that people move on in all sorts of directions. So expect a few move-ins and move-outs along the way, and use the following pointers to make those transitions as smooth as possible:
- In most cases, your tenants will find a replacement themselves, then hand them over to you or your agent for referencing.
- If the new sharer passes the referencing checks, their name is added to the tenancy agreement, and the outgoing tenant is removed.
- If their references are unsatisfactory, the outgoing tenant stays on the agreement until a replacement is found, even if they move out.
- To ensure the new sharer knows how your property should be returned to you, they need to sign the inventory that was prepared at the start of the tenancy.
By ensuring that everyone who ever lives at your property goes through the same referencing process and signs the same tenancy agreement and inventory, you’ll avoid complications later on in the event of disputes or damages.
Are you thinking of renting to sharers?
Then let’s talk! Having an income earner in every bedroom could increase your income and yield, so if you own a rental property in Fife, call Richard Cook on 07909093141 or message Richard at richard.cook@fifeproperties.co.uk to speak with our expert and friendly team.
Your investment could soon be performing better than ever!
