Seven deadly pitfalls for landlords to avoid
Seven deadly pitfalls for landlords to avoid
It’s not easy being a landlord. Whether you are looking to join the UK’s estimated 1.8 million private landlords of residential property, you’re an ‘accidental’ landlord with one property to let, or you’re a more seasoned landlord with a growing portfolio; read our no-nonsense guide of seven deadly pitfalls for landlords to avoid.
You could be saving yourself time, money, hassle and risk.
Pitfall 1: Not treating being a landlord as business
Whether you become a landlord ‘accidently’ or by design, we assume you did so with the view to making an income. You’re probably not a millionaire philanthropist running a not-for-profit charity.
Understanding how much money you are making after your costs is vital in both business and your buy-to-let property investment.
The Government have also been acting to professionalise the private rented sector through ever increasing regulation and taxation changes; in part to raise standards for the country’s growing number of tenants (and to appeal to the voters among them).
As a landlord you are subject to severe regulatory risk because you have a health and safety responsibility to your tenants. Local authorities have far-reaching powers to fine landlords who do not supply compliant and safe homes for tenants meaning you could be fined up to £30,000 per offence.
Therefore, as a landlord you have to treat your buy to let property as a business.
Whether or not you currently use a letting agent to take on some of the burden, it’s still very risky if you don’t take some responsibility for understanding your income, outgoings and legal duties.
It’s really important to keep abreast of updates to ensure you’re fulfilling your responsibilities as a landlord while staying on the right side of the law and avoiding any unwanted fines.
Information and guidance is available from the Government website here and associations like the National Landlords Association (NLA), the National Residential Landlords Association (NRLA) and the British Landlords Association (BLA).
In addition, why not download RentiD’s Guide To Being a Good Landlord here and sign-up to our newsletter so you can receive useful articles like this in your inbox monthly?
Pitfall 2: Not minding your own business
If a job’s worth doing, it’s worth doing yourself. How do you know your letting agent is doing everything that is recommended in this article?
While there are a great many professional and diligent letting agents serving landlords in the UK, their services will be costing you dearly – anywhere upwards from 8% of your monthly rental excluding other extra, ‘add-on’ costs.
If you are paying less, then you should be more circumspect of the quality of the service actually being delivered to avoid the pitfalls being raised here.
Self-managing your property might feel a little daunting if you’ve not done it before and it may not be suitable for everyone. However, an estimated 50% of UK landlords already forgo the services of letting agency management according to a 2017 survey by Homelet.
There is a wealth of sound and often free advice out there through landlord associations and forums to guide you.
Plus there is the recent advent of low cost property management software like the Digital Assistant app from RentiD that is suitable for private landlords. Such solutions can help you streamline the jobs you’ll need to stay on top of.
For our article on how long it takes to self-manage rental property and what’s involved click here.
Pitfall 3: Forgetting you are offering a service
In your mind, you might be a teacher, or a solicitor, or a vet – you have another profession or occupation. But if you’re also a landlord you’re now a ‘service provider’ as well.
When buying and setting-up a buy-to-let property, you should do so with the head, not the heart because you are not the person who will live in the property.
Don’t fall into the common trap of buying a place you like but that is entirely unsuitable for the tenants you have in mind. Don’t decorate it to your own esoteric tastes. Think of your future tenants at all times.
We’ve also discussed the need to turn a profit whilst fulfilling your regulatory duties but that doesn’t mean it should be all totally hard-nosed business.
Brands that treat their customers badly lose them. As a landlord a little flexibility like allowing for pets (within reason) and empathy (like agreeing to rent repayment plans for long standing tenants in a bind during the pandemic) can go a long way to saving you time, money, hassle and risk in the long run.
Why is this important with rental demand often outstripping supply?
Well if you’ve got a great tenant already who pays their rent on time, keeps the property clean and tidy and rarely complains, then why go to the trouble and expense of finding a new one?
While short lets may give you more flexibility in taking your property back, long-term letting is the way to go if you want to maximise your rental yield. See our article on how to increase your rental yield here. Keeping tenants around for longer will help you to avoid vacant periods where you aren’t collecting any rent, while reducing the costs and fees associated with finding new ones.
Once you find a tenant that you’re happy with, it’s important that you maintain a direct and responsive relationship with them so that they don’t want to leave when the current term comes to an end.
RentiD can connect you directly to your tenants so you can communicate with them, share documentation and be made aware of any repair and maintenance requests all in one place – the RentiD Digital Assistant app.
Pitfall 4: Not getting “consent to let” from a lender or freeholder
Many accidental landlords let out a property with a residential mortgage on it. It is imperative to contact your lender and get permission to let the property. This may involve a small fee or a change in interest rate. If you do not do this and the lender finds out, you will have breached the terms of your mortgage and the lender can take action.
Also, some leasehold properties have clauses in their leases that state you are not allowed to sub-let at all, or if you do, you have to apply to get a “consent to let” and there will be a charge associated with this.
Pitfall 5: Being under-insured
Standard home insurance is not designed for rental properties. You will need to take out a specialist buy-to-let buildings and contents policy that includes public liability cover, in case a tenant makes a claim against you for an accident they have in your property.
Landlords may also choose to take out rent guarantee insurance to cover unpaid rent if the tenant is still in the property.
During the height of the pandemic, many insurers withdrew such policies and then severely restricted them to cover only the ‘safest’ of tenants with jobs in essential sectors like healthcare and food retail. Thankfully, as our way out of the pandemic is in sight, the availability of rent guarantee insurance is on the rise again and worthy of your consideration.
Pitfall 6: Skimping on referencing and inventories
After finding who you feel is an ideal tenant, one thing you should never rush or skimp on is getting them comprehensively referenced. Gut feel is important but don’t solely rely on this.
Comprehensive tenant referencing will allow you to see the truth about their employment status, financial position and rental history. Plus do they have a Right-to-Rent in the UK?
At RentiD we sell only the highest level of comprehensive referencing that includes seeking out employer and previous landlord references as well as Right-to-Rent checks. We think low cost ‘quickie’ referencing isn’t worth the paper it’s written on. When it comes to making an informed decision on choosing a tenant it’s just an unnecessary risk to go cheap and quick.
Properly validate your gut feel and avoid costly and time consuming evictions down the road or even severe penalties from the authorities.
An inventory is a document that sets out the condition of the property through description, photography and sometimes video at the start of the tenancy. At check-in it is countersigned by the tenant.
When the tenancy ends, the inventory can be used to check the final condition against the starting condition, and therefore prove if there has been any excessive wear and tear or damage that can be evidenced, and therefore deducted from the tenant’s deposit.
If you do not have an inventory done, and the tenant damages your property, the onus is on you to prove the damage – not on the tenant to prove that they didn’t damage the property or remove anything from it.
Not undertaking an inventory is a false economy and one that will surely come back to haunt. So for the sake of a small financial outlay, it’s well worth having one done as part of a professional check-in process.
Pitfall 7: Failing to maintain good communication and a regular schedule of inspection
Unauthorised sub-letting is a big and common problem. You’ll need to keep a close eye on what is going on in your property in terms of who exactly is living there. However this also needs to be balanced with your tenant’s right to peaceful enjoyment of their home without undue interference from you or your agents.
That being said, periodic checks are not only allowed but recommended. They will allow for the identification of small issues such as a leaking pipe becoming a major and costly headache.
Ensuring your property is well maintained is a major part of avoiding pitfalls 1 and 3 above.
It will also be in the terms and conditions of your buy-to-let mortgage agreement that you have to maintain the property, so if you don’t, you will be in breach.
Secondly, if the property’s condition starts to deteriorate, then the tenant may leave at the end of the tenancy or even before, claiming a breach of contract. This will result in an expensive property void and with a poorly maintained property you may struggle to find other tenants who want to rent it from you.
Thirdly, if the condition of your property goes downhill, its asset value may start to decrease. This will adversely affect your property yield and may even make selling it difficult.
As money you spend on maintenance, repairs, and improvements is all tax deductible, you should not baulk at paying for them.
Common sense dictates that regular small upgrades and maintenance is more cost efficient than waiting until things like leaks and damp to have got really bad before undertaking remedial works.
In conclusion – seven deadly pitfalls for landlords to avoid
Pitfalls and cures are always more expensive in property management than avoidance and prevention.
Considering the money invested in your buy-to-let and the penalties for getting things wrong, it’s wise to be aware of your responsibilities, run your tenancies with sound business sense and stay in control throughout.
With RentiD you can save time, money, hassle and risk with our property management software.
Finally, if you need to prepare a property for a new tenancy, selecting high quality tradespeople can be really hit and miss. All in Maintenance are recommended by RentiD whether it’s a quick refurbishment or something more extensive to protect the longer term value of your asset.