Whilst there is money to be made in buy-to-lets, the truth is it isn’t all plain sailing. Being a successful landlord who turns a profit requires hard work, dedication and even personal sacrifice. Many are tempted to jump in at the deep end with property investment, imagining that the financial gains just come rolling in, but in reality it doesn’t happen like that. To be a successful landlord, you must be a sensible landlord. Any financial investment is a risk but you must take calculated risks and minimise the risk factor by being sensible in your investments and management of them.
Here are some of our top tips on how to be a sensible letting landlord:
Build equity
Build equity by reducing your debt, not just by relying on the housing market to boom. Property prices ebb and flow and if your investment relies solely on price increases then you are putting yourself in a tight spot. Try to pay more than just the interest on your mortgage, even consider making overpayments if you can. A small monthly overpayment can have a huge compound effect. Work to reduce your debt, that is the most sensible way to work in the property investment market.
Don’t Gamble on Tenants
Never take a risk on tenants. Make sure you do thorough checks and take up references. If you are unsure about a tenant, then don’t hand over your financial asset to them! Leaving your property in the hands of unruly tenants can end up being truly detrimental to your finances and to your actual property. If you have to go through an eviction process that will be costly and if your property is damaged, then you will have the hassle and cost of repairs plus a time where the property won’t be available to rent. The sensible option is to provide an application form, consider all suitable possible tenants at interview, take up references and select the best tenant.
Keep Savings
Too many landlords spend all of their capital investing in property, leaving little or nothing behind in savings. This is very risky and means the landlord is relying on the property being occupied at all times by rent paying tenants and that no repairs will be required. Being rich in equity is great until the boiler goes on one of your properties or another costly repair comes in and you need cash at hand to get the problem fixed. A sensible landlord keeps a good amount of cash flow ready in reserve to deal with any eventuality.
Keep Tenants
One of the best ways to save money and protect your investment is to keep good tenants for long term contracts. A low turnover of tenancies is great as it means you have a guarantee on the rental income and save a lot of time and money without having to advertise and search for tenants. To keep tenants just be a decent landlord, offer incentives for them to remain in the property and work quickly when repairs are required. Keeping rent increases low year to year will help you to keep tenants and you will still save money over changing tenants with costly redecorating, void periods and marketing.
Stick to your guns
Whatever you have outlined in your tenancy agreement and contract – stick to it! Many landlords falter at this part when they allow tenants to compromise on parts of the agreement. Overtime you will grow in your personal connection with the tenants but at the end of the day you must remember that property investment is your business, the tenants are not your friends. If they miss payments you must follow due process, if they damage the property or are in breach of the agreement for whatever reason you must stick to the agreement they signed when tenancy began. Too many landlords let tenants get away with missed payments for too long. The longer it goes on for the harder it is to resolve and the riskier it becomes for the landlord. A sensible landlord runs the business with their head and sticks to the tenancy agreement.
For more help and advice consider one of our mentoring packages, you will have access to a vast array of knowledge and experience that Nick Fox and his team bring to the property investment business.
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