Most buy to let landlords would wholeheartedly agree that they didn’t realise what it would entail when they started out. It doesn’t matter if you began your life as a landlord accidentally, or after doing months of research. There are always things you wish you’d known at the time or things you would have done differently if you’d had more experience.
This article isn’t about telling you how to get rich quickly through buy to let, because that’s probably not going to happen (no matter who promises it to you). Instead, we’re going to give you some useful and actionable tips that will help you improve your current business or help you decide if being a landlord is for you.
Don’t fall for “get rich quick” schemes
Uncertainty is a huge worry for landlords and aspiring landlords. That’s probably one of the reasons that there are so many successful mentors and influencers in the property arena. Many people make careers out of giving landlords advice on how to “get rich quick” by building a property empire. The fear of getting it wrong, mixed with the enticing possibility of making huge sums of money whilst doing the minimal amount of work, makes it very easy to draw people in.
Buy to let is a real business with risks like any other. You’re investing a large sum of money so it’s natural to feel like you need someone to take you under their wing. The truth is, you don’t. The best thing you can do is listen to as much advice as possible (without buying into it) and really do your research. You can do this yourself without spending hundreds of pounds for someone to guide you through it.
Find a great accountant, financial advisor or property tax expert
The kind of experts it might be worth employing aren’t the ones that will send you monthly newsletters promising how to increase your turnover. If you’re going to invest in anyone, make it a great financial advisor or property tax expert.
Use services that specialise in property investments or property tax. It’s really important you use someone who is completely uptodate on the current laws, rules and regulations because unless they specialise in property, it’s unlikely you’ll be getting the best advice.
If you’re nervous about starting out in buy to let or if you’re thinking of expanding your portfolio, getting sound financial advice can give you the confidence you need to get going, and make the best decisions.
Understanding the local area is incredibly important
Buying property without researching the local area is a huge mistake. It’s important to do your own research.
Here are two essential things you should understand about any area you buy in:
Who’s the local rental market?
Is the area you’re looking to buy in near good schools and popular with families? Or is it close to a university and in a city or town with a large student population? Does the property have great transport links or is it close to an economic hub popular with professionals?
You should have a clear idea of the rental market you want to target before buying property because this will effect your rental income. Renting to families is typically not as profitable as renting to students or young professionals but you can’t rent to a market that doesn’t exist in that area. Everything from rent charges and decorating costs to management and running costs can also depend on your choice of tenant.
What’s the average rental price in the area?
Working out your likely rental yield will help you ensure you will be able to afford the mortgage and any other costs whilst still making a worthwhile profit. This is easy to find out by comparing similar properties in your area on online portals Rightmove, Zoopla and Gumtree.
Charging tenants fees doesn’t make you more profitable
Tenants are increasingly being put off by what they see (rightly so) as unnecessary and high charges typically implemented by estate agents. Renting your property privately, or with a company that doesn’t charge tenants will ensure that your property gets the maximum number of interested potential renters.
Generating as much interest as possible around your property is important. The more people who are interested, the more choice you have when it comes to picking the best renters. Finding reliable tenants that respect you and your property is important to most landlords, putting off great tenants with superfluous charges isn’t a great way to go.
Don’t lose thousands of pounds to estate agents
One reason that people use estate agents is because they lack the confidence or feel they are too inexperienced to rent property themselves, but estate agency isn’t rocket science. There
isn’t really anything you can tap into by using an agent that you couldn’t do at the fraction of the price somewhere else.
As estate agents are paying for full time staff, staff cars, an office and everything that goes in one, they can’t afford to charge you basic rates, even if you can only get hold of them between 95. This is what you’re paying for when you’re using an agent. If you don’t want the hassle of renting out your property by organising everything yourself, there are ways to get around this without creating a significant hole in your rental income.
An example of this new revolution in property management would be Howsy. Everything from viewings, referencing, industry standard credit checks, fully insured contracts and compliance reminders are handled online or via a 24hour call centre. Not only this, but you get a full time 24/7 helpline and access to your own personal property manager. Your properties are also advertised on all the major online portals like Rightmove and Zoopla.
Renting properties to people with dogs gives you an advantage
Many landlords refuse to have dogs in their property, even if the building regulations allow it. This is for many reasons, from a fear the pet will cause damage to a worry that any hairs left will require intensive cleaning before the next tenants move in.
There are thousands of responsible renters in the UK with dogs who find it incredibly difficult to find property to rent. This means that if you do own a dog and you find a great property, you’re much more unlikely to want to let it go than your average renter. You could be missing out on a huge pool of potential reliable, long term, considerate renters by discriminating against pets in your property.
Before you decide against dogs, consider a few points. If you’re worried about damage to the property by a dog then raise the deposit amount of the property. Responsible dog owners will understand, and will be keen to prove their dog will cause the minimal amount of fuss.
If you’re worried about cleaning the property after a dog has lived there, make it one of the conditions of the contract that your tenants get the property professionally cleaned (including carpets and any furnishings) before they move out. If the dog has hypoallergenic hair (if it’s crossed with a poodle) shedding won’t be a problem anyway.
Renting to students isn’t a guaranteed disaster
Renting to students can be more of a risk than renting to professionals, not least because of the expected increased wear and tear expected to the property. Students are also more complicated when it comes to background checks, as many won’t have a credit history. If you
know that there’s a big student market in your buy to let area, there are things you can do to protect yourself and ensure you get the best out of renting to students:
Instead of just doing a background check on your student tenant, make sure you sign their parents up as guarantors and get a credit check done. This means that if the student stops paying the rent, their parent is legally responsible to pay.
Insist on a direct debit or standing order being set up to ensure the rent is paid on time.
Ask for a higher deposit amount than you would if you were renting to professionals.
Don’t include bills
If you’re worried the heating or water bill will be huge, don’t include gas and electric bills in the rent. You can however include for things like internet, which is something that will attract students to your property.
Note: It is important that you explain that they shouldn’t leave the heating off for the entire time they rent the property in a bid to save money. Damage caused by damp and condensation isn’t something you want to deal with, and will cost them more in the long run when it comes to getting back their deposits.
Purchase missed rent insurance
It’s possible to purchase missed rent insurance along with your regular landlord insurance (you can find the best deals on comparison websites). This will give you peace of mind that you won’t suffer loss of income due to any tardy payments.
Get to know them and their parents (if possible)
Students aren’t all bad, and it’s a great idea to try and form a good relationship with anyone renting your property. Small kindnesses will go a long way in warming your tenants attitude to you and any requests you may have during the duration of their tenancy.
Arranging a time where you can meet your tenants and their parents (often on the day they move in) is a great opportunity to get to know who’s moving into your house. Offering to help carry the boxes and making cups of tea whilst welcoming them into your property makes a great first impression and means you’re not just a faceless name.
Being a good landlord can be hard work
If you’re doing everything yourself then being a landlord can be harder work that you expect. Calls in the middle of the night about lost keys, regular property checks and changeovers between tenants take time and dedication.
If you’re not using a platform like Howsy to remind you, you’ll also have to ensure you keep records of any compliance documents or certificates and when they need updating.
Being a good landlord does mean that you’ll get great benefits such as a regular income and a sound investment for the future. It doesn’t mean you’ll get to benefit from just buying a property and expecting to rent it out without putting in any effort at all.