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Becoming A Landlord
4th July 2014
The property you purchase will make a huge difference to your expenditure. While that cheap house at the end of the street may be enticing, and you may think that with a few renovations you can lease it out without a problem--like many landlords you may be in for a surprise. Houses are cheap for a reason. If they are run down, then you'll find that maintenance expenses can be huge. Pipes break, ovens stop working and roofs leak. This will eat into your profits, not to mention your time. So choose your property wisely and make sure you undertake a building inspection.
Consider all of your costs. The mortgage costs and the property management costs (generally at around 8 percent of the rent) are the two major ones. However, you also need to consider insurance, relevant taxes and possibly legal fees. Speak to an expert in property management. They can tell you what costs there are, and you can add them up. Once you know your costs you can use this to help set rent accordingly.
Know the legal requirements of landlords. Depending on where you live in the UK, there will be slightly different legal requirements for landlords. Get to know these well. If ever an issue with a tenant arises, you can quickly assess your options. “Be prepared” is the best motto ever! As a starting point check out Renting out your property (England and Wales).
Don’t rent to family or friends…ever! Yes there are exceptions to this rule - like providing a house for your kids. However, renting your property to family and friends can result in major issues. It’s easier for them to not pay on time, and to effectively squat. This happens more frequently than you would think! Best to rent to someone that you don’t know.
Don’t rent privately. While it may seem that you are saving money by not using a letting agent, the risks increase significantly. All of a sudden you lose property management expertise, while at the same time create a lot more work for yourself. You will quickly realize just how much work the property manager does in dealing with tenants, and in keeping the property maintained. What’s more, if an issue arises you also lose a middle median to help deal with the problem and reach a solution that works for both parties. Much better to pay the small property management fees and make life easier for you…and your tenants.
Contracts and forms are your friends! While it does take time to set up and fill out contracts and forms, they are worth the time. These contracts help should any legal issue arise, and also ensure that the tenant is both adequately protected and also looks after the property. While it is common sense not to enter into a verbal agreement, many people still do. Make sure your contracts are drawn up by professionals and cover everything that they need to.
It pays to be picky. You may want to get your property rented straight away, but you shouldn’t take the first tenant that you see. It pays to look through all tenants and choose the one that seems the most stable and best for the property. Good tenants are worth their weight in gold, and save many headaches and issues for the landlord. It’s worth waiting a few extra weeks. Your property manager will also help with the selection process as well. In summary, being a landlord is great for passive income. However, you need to do your homework and cover yourself should problems occur. Follow the tips above, and you will stay on the right path.
Do you have questions about becoming a landlord? Greens Lettings can help. Give us a ring or send us a message by clicking here.