Being a landlord can be a lucrative business, but it's not without its challenges. From finding the right tenants to managing expenses, there are many pitfalls that landlords can fall into. To help you avoid some of these common mistakes, we've compiled a list of tips based on advice from the private and commercial bank Arbuthnot Latham. Here are the 10 biggest mistakes a landlord could make, and how you can avoid them.
1. Minding Your Own Business
One of the biggest mistakes landlords can make is failing to keep track of their finances. Good record-keeping is essential for tracking income and expenses, renewing insurance, and resolving tenant disputes. Without proper records, landlords can easily lose track of important deadlines and incur unnecessary expenses. Make sure you keep your finances in order by keeping track of your records.
2. Planning for Periods with No Rent
It's important to plan for periods when your property is vacant. This is especially true when transitioning between tenants. While you may be lucky enough to find a new tenant quickly, you can't always rely on this. On average, a house will be vacant for up to four weeks a year. To help you through these periods, you should hold the equivalent of three months' rent as a contingency fund.
3. Thinking Ahead, Allowing for Unforeseen Costs
When it comes to managing a rental property, costs can add up quickly. From maintenance and repairs to insurance and legislation compliance, there are many expenses that landlords must account for. To avoid unexpected costs, it's important to have a contingency fund available. Consider keeping this fund topped up by retaining surplus rent in your bank account.
4. Dealing with the Tenant Deposit Correctly
Landlords must comply with strict legislation when dealing with tenant deposits. Failure to do so can result in fines and legal disputes. To avoid these problems, landlords should make sure they understand the procedures and paperwork required for handling deposits. Make sure to thoroughly check the property before handing it over to your tenant, and provide a detailed inventory to the tenant before they move in.
5. Carrying Out Regular Inspections of the Property
Regular inspections are a crucial part of being a landlord. By conducting regular inspections, landlords can catch issues before they become major problems. These inspections also give landlords the opportunity to check on their tenants and build relationships with them. By finding out about tenants' work situations and future plans, landlords can better prepare for periods of vacancy or unexpected changes.
6. Allowing for Buy to Let Tax Changes
Recent tax changes have made it more difficult for landlords to make a profit. It's important to be aware of these changes and how they might impact your income and ability to raise the level of mortgage you are seeking. Taking advice from a specialist tax accountant can help you understand your allowances and liabilities, as well as decide how to structure your ownership of the property.
7. Low Rental Yields
Rental yield is a percentage figure calculated by taking the annual rental income and dividing it by the amount invested in the property. Before purchasing a property, it's important to research the level of yield you can expect to achieve in the area you're interested in. Consider factors like property type, size, and location, and choose the property that provides the best yield for your investment.
8. Choosing the Right Location
Location is a critical factor in the success of a rental property. Before purchasing a property, it's important to research the area and its reputation. Consider the needs of your future tenants, and make sure the property is a good fit for the area. If you choose an area with poor transport links, you may also find it difficult to attract tenants. This could lead to extended periods of vacancy, which can be financially draining for landlords. Therefore, it is essential to consider the location and the surrounding area before investing in a rental property.
9. Meeting the tenants or vetting them properly
As a landlord, it is important to choose your tenants wisely, as they will be responsible for taking care of your property. To ensure that you find the right tenants, it is important to properly vet them. Start by conducting background checks, such as verifying employment and checking references. Additionally, make sure to meet with potential tenants in person to get a sense of their character and ensure that they are a good fit for your property. When it comes to working with property management companies, be sure to do your research before signing a contract. It is important to choose a reputable company that treats tenants well, as this can impact the way your property is taken care of. A good property management company will also have a thorough vetting process for potential tenants, which can save you time and effort in the long run.
10. Choosing the right insurance cover
As a landlord, it is crucial to have the proper insurance coverage in place to protect your investment. Standard household insurance policies are not designed to cover rental properties, so it is important to obtain landlord-specific insurance coverage. This type of coverage can protect against risks such as damage caused by tenants, periods of vacancy, and natural disasters. It is important to carefully review your insurance policy to ensure that you are fully covered in the event of an incident. Make sure to ask your insurance provider about any specific risks that may apply to your property, such as flooding or earthquake damage. Having the right insurance coverage in place can provide peace of mind and protect your investment for years to come.
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If you're a landlord looking for professional property management services, we invite you to learn more about Prem Property. We specialize in helping landlords and property owners maximize their rental income, minimize their expenses, and streamline their operations. Whether you're a first-time landlord or a seasoned investor with a large portfolio of properties, we have the knowledge, experience, and resources to help you succeed. To learn more about our services and schedule a free consultation with our property management expert.
Essential Strategies for Becoming a Profitable and Successful Landlord
Being a successful landlord requires careful planning, attention to detail, and a willingness to adapt to changing circumstances. By avoiding common mistakes such as poor record-keeping, inadequate preparation for vacancies, and failing to vet tenants properly, you can increase your chances of success in the rental property market. Taking the time to carefully research your location, choose the right insurance coverage, and work with reputable property management companies can also help ensure a profitable and successful venture. With the right strategies in place, you can become a successful and profitable landlord in no time.
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