Top Ten Landlord Mistakes
Landlords are rarely working on their portfolio full time. Most of us have other jobs, families and interests that we need to invest our time into. So it comes as no surprise that many landlords end up making the same mistakes, causing headaches, loss of income and worse.
So have a quick run through my top ten mistakes landlords make – and see where you might need to improve…
1. Not keeping an eye on things.
- You want a hassle-free investment, so you rarely go out to check the property… But sub-letting is a big problem, and drug gangs have been known to present fantastic tenants as a front for growing drugs. These are extreme cases, but even some pets could be causing havoc, so it pays to make regular visits and make sure the property is being used correctly!
2. Not budgeting ahead.
- Even the best properties need maintenance from time to time, but I often see landlords struggle to cope, as they have become reliant on the full income for their day-to-day expenses. Make sure that you budget for the inevitable repairs that any home will need, such as new boilers, plumbing leaks or electrical problems. You should also consider how you would cope if interest rates were to rise, and select a mortgage product to suit. Borrowing the maximum possible amount could increase your profits, but also your risk level.
3. Remember why you’re buying this place.
- You are not buying a home for yourself – you are buying an investment, and you need to keep your intended market in mind. What type of home will a tenant be looking for? Will they be able to afford the rent you’d need to charge to cover the mortgage? Use the old cliché; Location, Location, Location, and remember – if it’s a bargain, there is probably a reason!
4. Remember who you want to live here.
- It bears repeating – you are not buying a home for yourself! Keep décor neutral, make sure carpets are long-lasting, and allow prospective tenants to imagine how they will be able to adapt to living here – their way. You’ll benefit from happier tenants and shorter void periods.
5. Don’t price yourself out of the market.
- Ask around the local agents, do your own research online, and make sure you have a good feel for what a reasonable rent will be. Overpriced properties will have longer void periods, and that quickly erases any profit you might have made over the income from a more reasonable rent.
6. Get the right insurance.
- Landlords should not have standard residential insurance products, as they may not cover you adequately (or at all) in the event of a claim. Landlord insurance polices are readily available, and may also cover other things, such as lost rent in the event your property is temporarily uninhabitable. The better the cover, the easier you can sleep at night.
7. Getting inadequate references.
- If you are letting the property yourself, you’ll need to comply with the Right-to-Rent laws, as well as take references. But how will you know if the tenant has provided you with accurate information? Or do they have bad debts run up against their last address? You need to take both employer and financial references, and ensure that they can afford the rent – no more than 50% of their monthly income is a good guide.
8. Employ the right agent.
- It can be tempting to take care of the property yourself, but be honest about the amount of energy you can devote to it. If things go wrong, will you be happy to take a call at 2am to deal with a water leak? Can you cope with confrontation if the tenant becomes unhappy? Can you stay on top of the ever-shifting legal obligations faced by landlords (over 150 pieces of legislation and counting)? A good agent can keep these worries and many more off your back, and their fees are tax-deductible, making the service much more affordable than the headline values. If you had a £200,000 investment in the stock market, you would probably ask an expert to make sure it was well spent – why look at property differently?
9. Dress to impress!
- Not you – (although it doesn’t hurt to be presentable when showing a property), but the home itself. If you tolerate peeling paint, scuff marks and threadbare carpets, then why should you expect a tenant to take better care of the property than you do? By maintaining a good decorative standard in your properties, and investing in quality fittings such as good carpets or flooring, you will be able to both attract a higher quality of tenant and minimise the likelihood of on-going problems with maintenance.
10. Dealing with trouble alone.
- This last one can be complicated but important. If you should need to end a tenancy when you are in dispute with the tenant on some matter, or evict a tenant if things have gone even further, I implore you to seek specialist advice before you take any steps. The law in this area is very specific on certain points, and a wrong step could cost thousands and mean months of delays and court appearances. It’s a blog in it’s own right, and I’ll be doing that in the near future, but please be careful if you should find yourself here – and get good advice on your individual circumstances from a professional!