The buy-to-let market continues to be one of the hottest investment markets in the UK. People are purchasing properties and building portfolios in anticipation of providing the kind of retirement they would never get from a pension. But as with any other investment, becoming a landlord also means added responsibility. There are mortgages to pay, tenants to deal with, and a myriad of maintenance and upkeep issues. If you don’t know what you’re doing, being a landlord could become a nightmare.
Here are five common mistakes landlords make along with ways to avoid them:
1. Failing to Properly Screen Potential Tenants
Tenants are the lifeblood of any property portfolio. The last thing a landlord needs are tenants who do not pay their rent or who abuse property with very little discretion. A good way to end up with these kinds of tenants is to fail to screen potential candidates correctly. Screening is an absolute must.
One of the best ways to do this is to use a letting agent. Letting agents are experts at tenant screening, and they have access to certain tools that make it easier to discover questionable rental histories and other potential problems. Using a letting agent is well worth the money spent.
2. Failing to Have a Property Inventory in Place
There are companies that provide national property inventory checks for landlords at very reasonable prices. Yet some landlords fail to take advantage of this. By failing to have a property inventory in place, those landlords are taking a big risk in assuming that tenants will take good care of the property throughout their tenancy.
The solution to this mistake is very simple: work with a local or national inventory company to do a complete inventory of your property. Furthermore, utilise a check-in and check-out at both ends of the lease. There are plenty of companies offering landlord’s inventory UK-wide at excellent prices; utilise them.
3. Failing to Keep Tenants Happy
The successful landlord is a landlord able to secure and maintain long-term leases. The longer tenants can be kept in the property, the more financially secure the property becomes. On the other hand, constantly turning over unhappy tenants increases the landlord’s risk of void periods in which the mortgage still has to be paid despite no rental payments coming in. Not keeping tenants happy is a big mistake.
Landlords can avoid this mistake by doing whatever they can to make the tenant experience unforgettably pleasant. For example, you do not have to charge market value rents just because you can. If you can offer a lower rent and still cover your expenses and make a profit, you will have a happy tenant who is less likely to look around for something cheaper near the end of the tenancy.
4. Choosing Properties in the Wrong Location
Residential property is a lot like commercial property in the sense that location is crucial. The most desirable renters tend to want homes in neighbourhoods that are safe and have access to common amenities like public transportation, entertainment options, good schools, and additional opportunities for the family. Choosing properties in bad locations can turn what a landlord hoped to be a great investment into a financial disaster.
The best way to avoid this mistake is to do plenty of research before you purchase. Landlords can work with a specialist property company who deals only in buy-to-let investments; such companies are usually very good at determining which neighbourhoods are desirable and which are not.
5. Failing to Save Money
Owning rental property is essentially a business. And as with any business, there are certain capital expenses that are unavoidable. Landlords who fail to save money for such capital expenses can easily find themselves in financial trouble when things go wrong. If things get too bad, they could jeopardise the business.
Landlords should establish a savings account into which they routinely deposit a portion of every rental payment they receive. The money should not be touched for anything other than making capital improvements or emergency expenses. When money is taken out of the account, it needs to be replaced as quickly as possible.
Being a landlord is a very good way to establish a stable and comfortable income. But it is not without responsibilities. The most successful landlords know what it takes to run a property business and make every effort to avoid the most common mistakes.
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