Top Tips for Landlords.
According to my Google Analytics account, a substantial number of people are actually reading these articles each week. Since I tend to write them in my spare time on a Sunday morning, this makes me very pleased. So until someone offers me a substantial sum of money for my business / large lottery win / I run out of subjects - I’ll keep going.
This week I have been thinking about some of the mistakes that landlords often make and what can be the difference between success or failure. As a portfolio landlord (albeit a modest one) I am lucky enough to see the rental market from the point of view of both Letting Agent and Landlord. Believe me, this really does make a difference.
So, here are our Top Tips for Landlords:-
One: Pick the right property
Avoid the lower end of the market, grubby flats and bedsits. I can pretty much guarantee that you are going to end up with a whole heap of trouble one way or another. Tenant social issues, rent arrears and pressure to improve property standards are all highly likely. The days of the slum landlord are numbered but the cost of improvement is high – let someone else have the hassle.
Avoid the high end properties also. The rental yield on these is nowhere near enough to be worthwhile. Stick to middle of the road sensible properties like 2 / 3 bedroom bungalows, houses and apartments. These are the bread & butter for portfolio building, easier to finance and tend to have more stable longer term tenancies.
Two: Your tenant is your customer
“The times they are a-changin” as Bob once said. People’s standards and expectations are constantly being raised. Don’t think for one minute that a tenant will be happy with second rate. (I recently did a valuation in a house with ancient threadbare carpets – the landlord actually said “it’s ok, there only for tenants!). WRONG! This is not the 1930’s, decent tenants don’t doff their cap in gratitude that they are allowed to rent a house and they certainly will not accept poor quality housing.
A tenant is a paying customer, and these days they expect better. A rental property is no different than any other “product” and must be what the customer wants. They will be happy to walk away and find another property if they are not satisfied.
Three: Charge reasonable rent
As well as the property being of a reasonable standard, the rent has to be right. People are only going to pay the going rate. As a landlord for the best part of fifteen years I have rarely had empty property because I set my own rents at reasonable and affordable levels. Tenants are happy and stay longer, I have regular income and I suffer less hassle. It really is win-win.
It constantly amazes me that some landlords are prepared to leave a property empty for months on end trying to achieve an extra £25 per month. Empty properties are expensive properties which leads me to suspect that these people are stupid. Seriously I am not making this up – there are several properties I see advertised month after month that are still empty because of the price. There is even one vacant more than 18 months after I refused to take it on because the landlord knew better than I did and would not accept my advice on the price. Still it’s something to laugh at.
Four: Letting is a business
Whatever the reason for renting out property, you must treat it like a business. Make sure you do it right. Keep good records, keep all receipts (however small) and ensure you get the tax breaks and reduce the tax bill as much as possible by offsetting all legitimate costs.
As a business you are also expected to know what you are doing. The tenant will be treated as a layman, but a landlord will have to demonstrate knowledge and due diligence in his duties. This is true even if you use an agent. So read up, know your business and keep up to date with any changes.
Five: Be detached
Obviously I don’t mean just stick to detached properties – keep heart and mind apart when it comes to being a landlord. This is especially true of anyone who rents out their own home. As with point 4 above – treat it as a business. This means being more about facts and figures than sentiment.
Once let out, keep away (you have to allow the tenant “quiet enjoyment” in law anyway) and stop worrying about it. All the main risks can be insured (see point 8) and the vast majority of tenancies (99% plus) run smoothly when properly managed.
Six: Keep on top of maintenance
This makes sense for so many reasons. You are not only ensuring the ongoing value of the property and most likely reducing the future repair costs, but also looking after your valuable customer. Again, happy customers stay put, tend to look after the property better and ultimately cost you less in the long run. On top of this you should never forget your legal obligations to maintain and repair along with the possible and highly scary downside of potential legal action against you if you don’t.
Seven: If you can’t do everything - Use a qualified Letting Agent (Not an Estate Agent)
That’ll be REB Letting then! We an ARLA Licensed letting Agent and members of The Property Ombudsman Scheme. This means we adhere to strict codes of conduct, operate separate client accounts (like a Solicitor would), offer a redress scheme should clients be dissatisfied and are well covered with insurance. Not that we really get any major issues as we work hard to make sure things are done correctly.
Eight: Insure, insure, insure
However careful you are, things can always go wrong. This can happen despite the best plans of mice and men.
The key risks will be:-
· Damages to the building
· Damages to contents supplied by the landlord
· Third party liability (including tenants and visitors)
· Provision of alternative accommodation for tenants
· Loss of rent & legal costs
Don’t just opt for the cheapest insurance as you may have a nasty surprise in the event of a claim. You must also make sure that the insurance does cover the property being rented – Don’t rely on your normal house policy.
Unfortunately due to changes in the law regarding Insurance products, it is far too expensive and complicated for us to be able to provide advice on insurance and we are not authorised to do so. You should seek advice from a qualified insurance adviser and satisfy yourself that the insurance you purchase meets your requirements.
Robin Burnage has been a successful portfolio landlord for nearly fifteen years and a Letting Agent since June 2002. He holds an advanced qualification – Certificate in Residential Letting and Property Management – and in recognition of his dedication is a Fellow of the Association of Residential Letting Agents (FARLA). Outside of work he enjoys motorcycling and sailing for which he is an RYA Qualified Yachtmaster.
