What are the pitfalls of being a private landlord
Being a Landlord can be lucrative, but it’s not easy. Whether your an accidental Landlord with only one property, or a seasoned Landlord with a growing portfolio, this post may help you save time, money and grief.
Always treat being a private Landlord as a business
Whatever way you became a Landlord, it’s generally with a view to making an income or topping up a pension so you need to understand the profit element of your investment.
You have a responsibility of Health & Safety for your Tenants, with severe regulatory risks. Non compliance can result in hefty fines from local authorities with fines of up-to £30,000
Taking on a management agent may negate some of the risk, but you should still know your incoming, outgoing and legal responsibilities. Try to keep on top of updates as a responsible private Landlord.
Always check in with your Management Agent
Do you know if your Letting Agent is acting in your best interests and managing the property correctly. Most agents charge upwards from 8% – if your paying less, are you sure they are providing a quality service and keeping you within the law?
Buy a property to let with your head and not your heart
Always think of the service your providing a prospective tenant. Don’t decorate to your tastes and then get annoyed when a tenant wants to redecorate. You can treat a tenant well with a little flexibility and empathy which can save you time, money and hassle in the long term.
Thinking long term helps to maximise your rental yield. Keeping tenants longer and happy can help avoid void periods. Its costly finding new tenants and the next tenants may turn out to be a nightmare. Maintaining a direct and responsive relationship with the tenant keeps them in the property longer and can aid a successful tenancy.
Freeholder/Lenders consent to let
Many accidental private landlords fall into the trap of letting a property without the necessary permits from their lender or freeholder. It’s imperative that permission is sought before letting. If not, under the terms of your mortgage agreement, a lender can take action if you have breached the term of your mortgage. This may result in them cancelling your mortgage and repossessing the property.
In leasehold properties clauses need checked also, as some will state you are not allowed to sub-let. Again, permission will need to be sought and may be chargeable.
Being under-insured as a private landlord
Ensure you have specialist buy-to-let buildings insurance in place and contents insurance which can provide you some public liability cover in case a tenant makes a claim against you for an accident they have in the property. A standard residential home policy will not cover this and is not designed for private landlord rentals.
Do not skimp on references and inventories
Gut instinct is always good on accepting an tenant, but this should never replace paying for comprehensive referencing which will show you the tenants employment status, financial position and rental history. Referencing can also cover Right to Rent in the UK.
Not getting this process right, can be very time consuming and costly. There’s a chance of possible evictions in or even severe penalties from the authorities.
Always take an inventory on the condition of the property to be let at the start of the tenancy. This should include a thorough description, photography and sometimes even videos. It’s prudent to get these counter-signed by the tenant at check-in.
The inventory is used to check the final condition of the property at the end of the tenancy. This document is used to prove any excessive wear and tear or damage, using quantified evidence to enable you to deduct damages from the deposit. It’s down to the Landlord to prove the tenant has caused damage, not the tenant to prove they didn’t.
Failure to maintain regular inspections and communications with tenants
Always keep a close eye on the property whilst balancing with the tenants right to peaceful enjoyment. Periodic checks should happen on a regular basis. These checks allow you to not only check the condition of the property and for any unauthorised people living there, but may highlight small issues that can be addressed early before it’s a major issue and costly.
Maintaining your property is likely to also be part of your mortgage agreement. If the property starts to deteriorate, the tenants may want to leave claiming a breach of contract. If the property condition worsens, its asset value may decline and it can adversely affect your yield long term. All funds spent on maintenance, repairs and improvements are tax deductible.
Dealing with personal information
Here at PIIM Property, we often get told by Client’s that their last management agent didn’t ask for so much information at the beginning of the process. There’s always a good reason for asking for personal information and we do so with the Client’s best interests. Often, Landlord’s assume all managing agents are the same, but we find this isn’t the case when transferring property portfolios in. A little bit of time and effort can make all the difference to having a profitable and successful business and it’s easy to switch letting agency.