There’s never been a better time to be a landlord in London. High demand and strong rental yields make London a lucrative market for landlords. A recent report from Uswitch revealed that, on average, every UK rentable property has around seven tenants interested in it, and demand in the capital is even higher.
This guide provides a comprehensive overview of everything you need to know about becoming a landlord in London. From understanding your responsibilities to finding the ideal buy-to-let property, we've got you covered. You can rest assured that you'll be well-informed and prepared for your journey as a landlord.
Landlord Responsibilities
As a landlord in London, you have certain legal obligations towards your tenants. It's crucial to understand these responsibilities before entering the rental market. Here's a breakdown of some key areas:
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. 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 over 15 years old must also be checked annually.
- 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 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. Typically, 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 that, as a landlord, you have to protect the deposit through a government-initiated scheme. This scheme ensures that the deposit is held securely and that disputes over its return are resolved fairly.
- 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.
Maximising the Rental Yield of HMOs 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. 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 that licence laws vary according to location, so you’ll need to determine the requirements in your area.
When searching for buy-to-let property in London, remember that not all houses are suitable for conversion to HMO. The house must be an appropriate size for the number of tenants you plan to have, and the bedrooms must also adhere to specific size guidelines. As an experienced estate agent, we know the London rental market and can 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 high rental incomes for landlords. According to Zoopla’s April 2024 report, the average monthly rental price for a property in Greater London was £2,121, with houses and apartments in Central London commanding even higher amounts.
However, it’s important to note that London property prices are also increasing. In the last 12 months, the average London property cost over £703,000. Savvy investors tend to seek property in upcoming areas that offer excellent rental income while still remaining appealingly affordable.
London Property Hotspots for Landlords
London generally 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 reasonably rapidly in value.
Here’s a quick run-through of some of the locations you should consider buying a rental property in the capital:
- SE1 postcodes: Areas such as Waterloo, Borough and London Bridge offer a solid rental return. 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. You can expect to generate around £400 a week for a one-bedroom apartment or house, up to around £688 a week for a four-bedroom property.
- East London: East London is becoming increasingly popular with property 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% to landlords, with Redbridge 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 in Rental Property in London
When selecting a buy-to-let property investment, consider the following:
- Regeneration: Many areas of London are currently being regenerated, and prices are expected to rise accordingly. Find out which locations are scheduled for redevelopment and whether property prices have started rising. If they have, this indicates that they may increase further in the future, which promises good capital growth.
- Transport links: Properties near public transport links to the city will always be more popular with commuting 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, choosing a property that will produce solid rental income makes good sense. However, if you’re looking for a longer-term investment, selecting a property that offers solid capital growth is a good idea.
Resources for London Landlords
There are plenty of support networks and free resources for London landlords, including: