Tuesday, 15 April 2014

Landlords : Don't forget your property is a BUSINESS

I'd say probably half new landlords at the moment are 'accidental' - they haven't bought a property to let, but have ended up with a property that needs letting out. Usually because this is because they can't sell it, but sometimes it's a property they have inherited, or maybe they are going abroad for a couple of years. This can affect the way they think about their property - whereas an investor looks at his property as a business and makes decisions with a 'business' hat on, 'accidental' landlords can struggle to get their head round what's actually going on. Twelve months on, it's not unusual for them to get themselves into trouble, have decided that letting is not for them, or have fallen out with their agent and tenant! Here's how to avoid that happening to you.
Emotionally detach yourself. If you love the house you're letting like your own home, don't let it! Sell it, or if it's that great, live in it yourself. The reason for this you're going to be offended by any tenant who has the audacity to move in. They'll do something differently to you do - hang a picture, park the car, fail to weed the flowerbeds, wear their shoes in the house - and because you love the place, this will really irritate you! Renting a property that you're not in love with makes it far easier to look at things objectively.
Budget for maintenance. Even though the property will be tenanted, things will still go wrong with it. The electric shower may break, the boiler may leak, the upvc window handles may come loose, etc. Many landlords are astonished when this proves to be the case as they haven't budgeted for anything going wrong. Clearly this is short sighted - at some point the landlord will want to sell that property for decent money, and if he's allowed it to get into a state of disrepair, that isn't going to help his cause.
Don't make every decision based on cost.  The classic one here is which lettings agent to use! Given that the investment property is likely to be one of the biggest financial commitments you make in your life, why would you put it in the hands of someone who trades on being 'cheap'. However this also extends to whether you should have an inventory and whether you should insure the rent. Whereas successful landlords realise the value of 'doing things properly', an accidental landlord often tries to cut cost at every opportunity. I'm a lettings agent and I still have rent & legal insurance on every one of my own investment properties, which should be an indication that it's worth the premium. 
Should you really self manage? I could probably service my car if I put my mind to it. I'd get away with it for a while, but sooner or later I'd get caught out and a sizeable repair bill would follow. It's the same with playing at property management - type 'landlords forum' into google and you'll find umpteen advice sites for landlords which are littered with questions from people who've got into trouble managing their own property. Most of the issues cover simple things - how to end the tenancy, how to deal with non payment of rent, how to deal with a demanding tenant, etc - but if you don't know the answers, the only real outcome is expensive legal bills. I've took on 4 properties on in 2013 where the landlord had been managing previously, and basically wanted someone to sort out the mess they'd created.
Understand that every business has customers that don't pay. Again, whilst statistically your chances of a fundamentally rogue tenant are low, if you let any property out for a period of years, you're going to have hiccups at some point. This is a business, and sometimes tenants (customers) will cause problems - it's occupational hazard. Accidental landlords sometimes forget this and react with horror when everything doesn't go according to plan. Professional landlords realise that the 2 biggest risks of letting a property (tenant doesn't pay, and tenant damages property) are both insurable. As such the income stream is secured.
Focus on what really matters. Landlords who have bought to let tend to be results focussed. They look at the big picture - keep the property condition up, keep the property tenanted, keep the income coming in. They worry less about the detail - for instance how the property is described on the agent's website. They don't tell the agent how do its job, but they do expect answers if the results aren't delivered - which is perfectly fair. On the other hand, I do have accidental landlords who lecture my staff in the n'th detail on how to let and manage properties, which invariably only serves to make things more complicated. If you don't have faith in your  agent to look after the property, you've chosen the wrong agent(!) And if you desire an agent who simply says yes to every question you raise, you're storing up problems for the future.

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