Most new landlords learn on the job, sometimes at a cost
Now you are a landlord, and it has just hit home; being a landlord may not be as easy as it seems.
With the responsibility of being a landlord and the challenges of the letting market, you want to make sure you do everything right and make a profit. It’s just doing things right, you may not know what those things are, but you will learn on the job.
Some you will learn on the job. However, to avoid these mistakes, here is a list of what we consider the “7 deadly sins” of the letting market by new landlords.
Deadly sin 1 – Not become emotionally
Being a residential landlord is about getting your sums right. Do not involve your emotions when searching for property. Look at the figures and the location, so it is easy to reach when managing the property. Very often, the best investment is one that you can never imagine living in yourself.
It may be that the property needs minor work or doesn’t meet your style, but it may be perfect for letting, and the sums add up nicely too.
Some new landlords make the mistake of putting their own stamp on the property.
This might include spectacular colours on the walls and garish flooring. The best rule to follow to maximise your property’s rental and resale appeal is to always go neutral with the décor and, wherever possible, select durable, hard-wearing finishes.
Deadly sin 2 – Min your business
You would never consider throwing half a million pounds into a new business without having a business plan in place, right?
But surprisingly, this is what some new landlords do when they first start.
They jump straight into buying an investment property without first formulating a detailed investment strategy/business. Building a portfolio must be approached as a business endeavour to be successful.
Additionally, just as a new business owner must employ the best team to ensure their company takes off. So new landlords should use experts who can help them make informed decisions, such as accountants and solicitors.
Some new landlords get into property investment as a “hobby” and only ever own one property. They end up to their eyeballs in debt that they struggle to pay back.
Avoid this trap by replacing emotion with some good savvy business principal and a solid plan.
Deadly sin 3 – Keep the property in good repair
The frustrating aspects of property management are dealing with new landlords who think the best way to make money is by not maintaining their investment property. A disrepair claim can be very costly.
All landlords should ensure they know what their legal obligations are when it comes to repairs.
They fail to conduct repairs promptly and can’t see the value in a coat of paint, new air conditioner or dishwasher or a kitchen makeover.
It is not a good idea to provide white goods when letting a property. If they break down, then you must repair them. By providing white goods, you will not increase the rental value.
The fact is, minor renovations can add significant capital value to your investment, but they can increase your rental returns too.
General maintenance is also essential as it will ensure your property’s value holds up and make it easier to re-let as required.
For this reason and to do the right thing for your tenants, it’s essential to attend to repairs in a timely and professional manner.
Deadly sin 4 – Don’t befriend thy tenants
While I advocate landlords being nice to their tenants to conduct maintenance and ensure their property is in good repair. I firmly discourage a cosy, close relationship with your tenant.
It is always best to keep the landlord-tenant relationship professional.
Though landlords sometimes decide to form a relationship with their tenants, and then the problems start.
The tenant thinks that because you’re a friend, you might not mind too much if the rent’s a little late each month.
It’s always best to keep the tenant/landlord relationship on a business level and employ a professional property manager to act as your go-between.
Deadly sin 5 – Use a letting agent
It’s difficult to avoid the above mistake when landlords decide to manage their own property.
Not to mention the fact that property management fees are relatively inexpensive anyway…and tax-deductible!
Letting Agents know how to effectively market your rental premises to prospective tenants to reduce the void period. They collect the rent on your behalf and act as your representative at court should the need ever arise.
They also save valuable time that you could spend searching for your next investment opportunity!
Deadly sin 6 – Reap the best rental rewards
Another vital role of a letting agent is to conduct regular rent reviews to ensure the landlord achieves the best possible returns on their investment.
Often landlords can’t determine the best market rent for their property at any given time, as they have limited access to necessary research.
Letting Agents know the area and have an extensive list of comparable rentals to calculate the best market rent for your property.
This is critical, as your tenants help to repay your loan. By keeping up with rent increases, you can better manage your debt and minimise the gap between your returns and repayments, particularly if interest rates increase.
Deadly sin 7 – Always appreciate depreciation
Having a depreciation schedule may save you tax.
Many landlords think that this is only necessary with a new property and don’t fully appreciate the concept of depreciation.
There are numerous items in a rental property that can allow you to claim a tax deduction.
Avoid committing these seven sins and seek to understand the rules of the property investment game. In that case, your portfolio will generate a healthy return in the long term and put you on a path to successful wealth creation.
The British Landlords Association is a free national landlords association, join us now for free!
Author: Simon Hampton simon@thebla.co.uk
Date: 25th of May 2021
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