Becoming a landlord isn’t particularly difficult. Any idiot with a semi-functioning brain and a bit of capital can jump onto this bandwagon- and they generally do. I stand before you as living proof. Not proud, just saying.
However, being a “good” landlord isn’t so straight forward. There’s an unenjoyable learning curve to climb and many bullshit experiences to be burnt by before realising what’s actually going on and knowing right from wrong. It’s all a bit of a euphoric blur, because life is just easier when you don’t know the rules. Ignorance is bliss.
Only when you’ve mustered together a bit of experience, learned the ropes, and then broken down each and every step of being a landlord, from start to finish, you realise how many steps there are. The journey isn’t glamorous or enjoyable, it’s much like working in retail- you’re mostly dealing with broken products and unreasonable people with unsavoury odours exiting every orifice. However, by the end of it, there are some positives to takeaway.
From personal experience and development, one of the most notable and positive changes appears on my balance sheet. Overtime my expenditure has drastically declined, and that’s a beautiful thing.
How did I do it? It’s largely due to the fact that I’m less of an idiot. ‘Wiser’, if you will. Whatever the case may be, I’ve learned and become better at cutting the financial fat and realising what actually keeps the costs down. It isn’t always the cheapest products.
A lot of people will be reading this article, salivating by the prospect of being pointed towards the cheapest alternative products on the market. Unfortunately, you people are going to be bitterly disappointed, and left scratching your asses wondering if the title of this post contains several misprints. I assure you, it doesn’t. However, what I do discuss is BETTER; more reliable, and more efficient ways of maximising profits and keeping costs down. But let me make it clear, there is, unfortunately, no special recipe. If there was, I’d be semi-retired, and selling the recipe for a shitload, while drowning in a sea of tits. But I’m not, I’m here, with you, blogging on a Friday night, while my mum is downstairs separating my whites from my colours.
A lot of what I discuss may seem like common sense, and I guess it is, and that’s why much of what I’ve written here is already be covered in my Guide for new Landlords, but that’s the thing, I’ve learnt that most of the best money saving tips is based on general good practice, and nothing else.
1Only use good tenants
Go out of your way to find good tenants, nothing less. It sounds so simple, but in reality it can be one of the toughest aspects of being a landlord, because you never know who you’re dealing with beyond the surface.
People are idiots; they’re unpredictable, they’re selfish, they carry morbidly disgusting habits, and they struggle to value and respect other peoples possessions. It’s a bad combination of attributes for any landlord.
It doesn’t matter how or where you source a tenant, whether it be through an experienced local high-street letting agent or whether you take matters into your own (un)experienced hands, landlords are ALWAYS prone to falling victim to rogue tenants.
Good tenants will pay rent on time, they will take care of your property by treating it like their home, and they will keep on top of repairs and maintenance. They WILL make you money. Bad tenants, on the other hand, will suck you dry (not in a good way), and make you want to curl up into a ball and contemplate pulling the trigger.
Besides from your property, your tenant is your most valuable asset. They hold the keys, they are the gatekeeper to your success (or utter misery). I’ve witnessed tenants effortlessly take down empires like they were knocking down Lego skyscrapers. How many landlords with small portfolios (which is the majority) can comfortably survive if a tenant falls 4-8 months in arrears and refuses to vacate the property? Not many.
Finding good tenants is by far the best way to maximising your profits, and minimising your costs. There is no silver-bullet solution to finding impeccable tenants, and it doesn’t help that bad tenants are distinctively getting better at masquerading as good tenants. It’s truly a minefield out there. However, the best we can do as landlords is minimize our risk of bagging ourselves a disaster by thorough tenant referencing.
2Don’t be an asshole
90% of landlords fall victim to this. They’re just absolute money-grabbing dip-shits.
Most landlords are oblivious to the fact they’re obligated to provide their tenants with a certain level of service. That includes, fulfilling legal obligations, attending to maintenance and repairs in a timely fashion, and providing safe living conditions. Sounds simple and obvious. It is. But apparently it’s too much to ask for.
Now, if your conscience allows you to conduct business like that, it may seem like a real money-saver. Neglecting repairs is money in the bank, right?
I would happily neglect maintenance issues and provide poor living conditions if I thought it made financial sense. But it doesn’t. Being a cheap and neglectful landlord is a false economy.
Generally, what kind of person would continue renting off a landlord that provides a poor service? Simply, poor quality tenants, and they’re the most expensive kind of tenants. They’ll treat the property recklessly and continue to drain the funds. And those tenants that have a shred of self-respect and intelligence will vacate and take matters further, and that will lead to prosecutions, a high tenant turnover rate and frequent vacate periods, which of course is all expensive.
Whichever way you look at it, being an asshole landlord is a losing battle and stressful on the piggy-bank.
Value your tenants, recognise their importance for your own success.
3Online letting agents
Seriously, just try it. The average online agent charges £50 to find tenants, so it’s worth a punt if you’re not convinced.
These days, the most reputable online letting agents offer the same core services high-street agencies do, and that includes rent collection and management, but more importantly, they also market properties on the biggest property portals like Rightmove and Zoopla (where almost all agents, whether online or highstreet, generate most of their enquiries). The only noteable differences between the two options, as far as I’m concerned, is;
- 1) Online agents don’t have a shop-front where you can walk into. They operate out of an office.
- 2) Online agents don’t take the viewings, that’s left down to the landlord. But I don’t see that as a bad thing, and it’s definitely not a reason to shy away from the idea, because I believe it’s actually better for the landlord to take viewings, as it allows for a more thoroughly and personal screening process.
Follow your gut instincts and the golden rules of tenant referencing, and you’ll be just as good, if not better, than any agent that’s taking the viewing.
- 3) They’re considerably cheaper than high-street agents because they don’t have the same overheads to cover, so simply, they can be.
Online agents work on a fixed cost price plan, and there are no hidden costs, or horrendous ‘admin/application fees’ or ‘tenancy renewal fees’ that seem to mysteriously get riddled into the high-street agents pricing structure and small print. If an online agent say they’re going to market your property for £50 and generate enquiries, that’s exactly how much you’ll pay- not a penny more.
Want a real life experience of a cost comparison? I used a high-street agent to find me tenants, their fee was £700, plus additional tenancy renewal and admin fees. Later that year, after I learned about online agents, I received the same service for £50, with no hidden/additional fees. I paid over 170% less with an online agent.
Regularly assess your BTL mortgage policy and determine whether there’s a better deal for you out there. This is something many landlords don’t even contemplate doing, but it’s one of the easiest and effective ways of saving a tonne. In real terms, it could be the difference between having extra disposable income to enjoy regular nights of passion filled frolics with the local cum-dumpster or… not.
Mortgages are typically the biggest expense for landlords, so even if you can find a deal that offers a marginally smaller interest rate, you could stand to make a killer saving, and the savings could be instant.
Talk to your bank, talk to local/recommend mortgage brokers, look on comparison websites, and see if your mortgage can be bettered.
Reduce mortgage / make overpayments
Got some spare cash lying around? Then make an overpayment and watch the amount of interest you pay reduce massively. It’s a no-brainer in this current climate.
With the current UK base rate at an all time low of 0.5%, it’s practically pointless “saving”- the return is minimal. In the longrun, your money would be far better spent reducing debt.
Many landlords allow their BTL building insurance policy to expire (it’s usually required to get a mortgage), and that’s probably one of the most foolish, dumb-founded mistakes possible to make. I can’t emphasise it enough.
It doesn’t make sense to live life without building insurance. The maths is simple: pay approximately £150 a year for insurance, or stand to lose your entire investment by an accidental fire. Not to mention, you’ll still be liable to pay the mortgage- imagine how demoralising that would be, paying off debt for a pile of rubble? Always have building insurance in place, it could save you from financial ruin and suicide. Literally.
Regularly look for better deals before renewing your existing policy (if you have one), whether it’s time to renew or not (if not, you’ll know to renew when it’s time). It takes 10-20mins and you can save a bundle. Last time I saved approximately £260 when renewing my insurance policy just by using a price comparison tool and it took all of 20mins to set everything up.
Landlord Rent Guarantee Insurance (RGI)
Landlord Rent Guarantee insurance is an extremely valuable service, and particularly good for stress relief- the policy covers landlords against loss of rent (e.g. tenant falls into arrears). Very useful, yet still overlooked far too quickly by too many landlords.
What landlord doesn’t want the satisfaction of knowing their rent is insured? Exactly.
I always recommend landlords to get the policy when dealing with the new tenants that have yet to earn their trust. Once a healthy and reliable working relationship is established, it makes more sense to allow the policy to expire. Until then, no. Just no.
One of the biggest problems landlords face, especially in today’s climate, is dealing with tenant rent arrears. So this particular type of landlord insurance can be a very nice way of potentially saving a small fortune. It’s a pretty inexpensive policy too, all things considered.
6Refurbishments & Decorations
- Council Tax Exception: if you’re renovating/decorating in between tenancies (i.e. the property is unoccupied), you might be able to apply for council tax exception.
- Avoid cheap crap: cheap shit seems appealing, we all love it, especially when we’re buying it for someone else’s pleasure. But it’s a false economy, because you’ll be forever replacing the flimsy, ‘Pound Store’ fittings, and by the time you realise what’s happening, you would have spent more than double the amount than if you had used quality products in the first place.
Buy-to-let properties take a beating, it’s the nature of the beast, so it’s crucial to use durable products that can withstand pain and abuse. You’ll end up saving money in the long run. Here’s a more detailed article on how to make your BTL more durable when decorating
- Choose your battles wisely: the idea of rolling up your sleeves and doing all the dirty work can be liberating and financially savvy. But that’s the thing, are you actually saving money? Some times it’s actually cheaper to call in the professionals, because they’ll grind through the work in the fraction of the time it will take you. I value my time, make sure you value yours.
- Call in the professionals when required: if a task is out of your skill-set, then get someone qualified in. It will usually work out cheaper than rectifying your bodge-job.
- Only provide/do what is required: Keep it simple. Don’t get carried away when you’re decorating. Only supply the essentials, and nothing else. The more you provide with the property, the more it will cost you in every sense, especially maintenance.
- Avoid light colours: I’ve learnt this painfully expensive lesson all too well, and I dread to think how much money I’ve squandered because of it. I used to be one of those poncy idiots that would kit out properties like they were dental practises; white walls and magnolia carpets. Looked amazing. Unbelievably impractical. Complete money sink.
It’s extremely difficult to keep light walls and carpets clean, and generally speaking, it’s work that most tenants won’t do. After every tenant vacated, I would be pouring money into replacing the carpets and repainting the walls.
I find that mid-toned browns and greys are most practical/durable. They don’t cast too much of a shadow (especially in rooms with access to natural lighting) and they’re neutral so they go with most other colours.
- Get quotes: Obvious one. Always get quotes from reputable labourers for any work you need assistance with. It’s amazing how much money can be saved by this simple, yet amazingly effective practise. I’ve saved thousands just by getting 3 quotes for each job.
- Laminate flooring Vs Carpets: I find laminate flooring to way more durable and cost-effective than carpet. It’s been a big money-saver for me. Here’s a more indepth discussion on Carpet Vs Laminate Flooring In Rental Properties. Exciting.
- Kitchen refurbs: Kitchens and bathrooms are the real sellers in rental properties. In fact, any home. It’s where most of the money should be spent, and usually is.
I recently had to refurb an entire kitchen, and the escalating costs were shit-my-pants scary. I didn’t think there was any way of avoiding it. But then someone pointed me in the direction of ‘Replacement Kitchen Door’ websites. Seems so obvious, but it wasn’t at the time. I used a website called Hot Doors (I have no affiliation with this website) and just ordered new kitchen doors/drawers and hinges, which cost a few hundred pounds. I fitted the doors myself (used the existing carcases), laid down some new laminate flooring, and painted the walls, and the entire kitchen was transformed for practically nothing. Most people just venture down to their local B&Q and walk out with a new asshole after being sold a completely new kitchen that set them back a few G’s.
7Maintenance & Repairs
Landlords LOVE either neglecting or delaying maintenance jobs, because in their puny little mind, they think it’s a good way of avoiding costs. On the contrary, it’s actually a pretty reliable and solid money-pitt. There’s no prospect for financial gain in delaying maintenance and repairs, because in most cases, it’s something that will eventually have to be dealt with and the longer it remains ignored, the more likelihood of costs escalating.
The major problem with leaving maintenance issues unattended is that they can quickly manifest into more serious problems. For example, a simple loose tap could lead to corrosion and damp issues. So instead of simply tightening a bolt in the first place, you could end up spending hundreds of pounds, to replace ruined kitchen unit carcasses and addressing mold related issues.
Personally assess all reported problems
This is crucial, trust me. I’ve learned this from personal experience.
Personally assess all reported maintenance issues before deciding what to do and seeking professional help. In many cases, the issues can be easily resolved without a professional.
Always assume your tenant is an incompetent and lazy idiot. In reality, tenants are lazy, and it’s far easier for them to report a problem than trying to resolve it themselves, despite how rudimentary it is. You don’t want to spend money on calling a professional out when you don’t need to!
Avoid letting agent to take control of repairs
Don’t allow your letting agent/tenant to take responsibility for fixing problems with the convenience of being billed later. That’s usually the most impractical and expensive way of dealing with maintenance problems. This is tricky for overseas landlords, and landlords that don’t live with in a reasonable distance from the property.
Similarly to what I already discussed in the decoration section, always get quotes from reputable labourers for any work you need assistance with. I’ve saved thousands just by getting 3 quotes for each job.
Call in the professionals when required
If a task is out of your skill-set, then get someone qualified in. It will usually work out cheaper than rectifying your monkey bodge-job.
All gas work must be undertaken by a “Gas Safe” registered engineer- this is a required qualification. You definitely don’t want to be caught in a legal battle for negligence when it comes to safety! You WILL get taken to the cleaners.
Choose your battles wisely
Again, a point I already brushed over in the decoration section.
Before spending days upon days trying to resolve a problem, determine whether or not you’re actually saving money doing it yourself over a professional. Some times it’s actually cheaper to call in the professionals, because they’ll grind through the work in the fraction of the time it will take you. I value my time, make sure you value yours.
8Letting Agent Fees
They’re notoriously good at squeezing every last penny out of landlords/tenants by promising them the world, and riddling hidden and unjustifiable fees into their pricing structures. They’ve got so good at it that they don’t even realise they’re doing it. It’s truly an art form. Well, just as much as creating sculptures out of dogshit. Nevertheless, arguably art.
So, if you’re going to go down the route of using a traditional high-street letting agent, you need to be in top form and have your wits about you before signing any contracts. Here are a few of my tips:
- Options: research all your local options. Don’t just go with the agent closest to your doorstep.
- Be wary of hidden costs: a good agent will be completely transparent with their pricing structure, and that’s precisely why there are so few of them.
Always confirm and reconfirm with them what their costs are and then get it in writing- it will usually be covered in the contract. Read it with immense care! Pay special attention to any penalty fees because they’re usually extortionate.
- Tenancy renewal fees: One of the more notorious “unfair” costs that many letting agents apply is the “tenancy renewal fee”. A good agent will NOT force this charge because it’s ridiculous (in my personal opinion), and it’s a good indication of when to walk away and look for a reasonable alternative.
I recently received an email from someone that had to pay £700 just to keep hold of their tenant, one which they already paid for. That’s £700 per year!
Read more about tenancy renewal fees and why I think they’re criminal
- Regulated agencies: any agent that’s worth a damn will be registered with an approved redress scheme. Agent members of a scheme are required to abide by a code of conduct; failing to do so can have the consequences of financial compensation to the consumer. Here’s an article on how to tell if a letting agent is a member of a regulatory scheme
- Don’t blindly sign contracts: one of the most tragic mistakes landlords make, and it’s such a stupid one, too.
No one likes reading contracts, there’s no fun it. However, the alternative is needlessly pissing your profits away. Put 30mins aside and just do it.
Read every last word, especially the small-print, and make sure everything is as expected. If you’re unsure, don’t feel pressured to sign there and then, take a copy and ask someone more qualified to look over it.
Generally, if a clause related to fees sounds dubious and convoluted, you’re probably being riddled out of money in some shape or form. Make you sure you clearly understand each and every clause.
- Reoccurring costs: ensure there are NO unnecessary reoccurring costs, and if there are, find out exactly what and why they exist. The tenancy renewal fee falls into this bracket, but there are always plenty of other imaginative ways they manage to sneak in their fees.
- Extra services: one of the most lucrative ways for letting agents to make an easy buck is by selling extra services, most noteably the one’s that are sold on the basis of being required legally. Things like Gas Safety Certificates and EPC’s.
Agents generally get third party contractors to handle the services, but they apply a hefty mark-up on the prices, making them pretty inflated. Of course, I don’t blame them, they just want a piece of the pie. However, it’s generally a lot cheaper to gracefully decline their expensive offers, and to directly approach contractors yourself.
- Fair for tenants: don’t just focus on what you’ll be paying, think of your prospective tenants. Find out what fees they pass onto tenants, because you might be amazed and appalled by how they’re charging both parties for the same services. It’s not unheard of.
- What happens when the contract expires? letting agents like to sink their teeth in, deeply. Once they’ve sourced you a tenant, many of them consider the tenant their property, and not yours, despite the fact you paid for the privilege. So what happens when the contract expires and you wish to keep the tenant? That’s a good question, so make sure you find out.
Ideally, the agent won’t hold onto the tenant and won’t pass on extra fees for you to retain the tenant.
I’m going to keep this short and sweet. Always take a deposit.
It’s not unheard of for crazy crack-head landlords to neglect this step. No idea why and I don’t particular care. But take one. It will save you time and money if your tenant vacates while leaving behind a decaying pile of shit that’s clogged up your pipes.
Tenancy deposit scheme
If a deposit is taken, it’s the landlord’s legal obligation to secure it into a tenancy deposit scheme. There are a few options available, but I use the free one, offered by DPS.
Before any tenant moves in, you should conduct an inventory. An inventory is a listing of all the contents of a property and a record of the condition of the property and the items, which is usually supported by images.
Inventories are particularly useful for when the tenant vacates, as it will allow landlords and tenants to assess if any damage has been caused during the tenancy (which doesn’t constitute as wear & tear) and then deduct costs from the deposit appropriately.
You can compile the inventory yourself with the assistance of your tenant. However, there is also the option of getting an independent and impartial inventory company to compile the report for you, but obviously that comes at a cost (approx £80). However, it might be worthwhile if you’re providing a furnished property.
You can find out more about landlord inventories and download a landlord inventory form. Here’s also further advice on how to properly compile a landlord inventory.
If I had a penny for every time a landlord said, “Oh, I wish I did an inventory, I would have saved a tonne on repairs” I’d truly only have a few pennies. But that’s the problem, most landlords are oblivious.
10EPC (Energy Performance Certificates)
Energy Performance Certificates are one of those bullshit legal obligations that we can all do without, and quite frankly, no one gives a shit about them. They’re meant to benefit tenants, but from my experience, 99% aren’t even aware of their existence or purpose. But I guess that’s not the point.
In any case, the only saving grace behind this nonsense is that they’re relatively cheap, but only when sourced from the right places.
To get the best rates, don’t use letting agents to source your EPC. They’ll mark that shit up until it constitutes as daylight robbery. Search for “Landlord EPC Certificates” on Google, and you’ll find independent suppliers offering the same service for £35. I’ve seen agent’s charge £100+. Ouch!
11Tenancy Agreements & Documents
Tenancy agreements and other documents, like Guarantor forms are widely available (you can even pick them up from WH Smiths). Some are good, some are bad. But in all cases, they’re relatively cheap, if not free.
If you’ve been lead to believe that you need to get one drafted by a letting agent or a specialised solicitor in order for it to be legally binding, you’ve been mislead. Although, if your tenancy compromises odd circumstances, it might be worth talking to a solicitor and/or contract specialist. However, in most cases, that’s not necessary.
I’ve spoken to a few donkey letting agents that like to take advantage of the naive by implying that tenancy agreements need to be sourced and drafted by a legal entity (they’re usually pointing at themselves at this point), but it’s nonsense. They just want £100 to photocopy a contract. Don’t fall victim! Just say NO!
Keep tenancy agreements as short as possible, which is 6 months, allowing for maximum flexibility if shit hits the fan e.g. tenants fall into arrears and become rogue.
Many landlords make the mistake of providing 1 year or even 2 year contracts (this is especially dangerous with new tenants). While it may seem like good practice, to secure tenants, it’s an extremely flamboyant move, because you’re betting on the tenant’s circumstances to remain consistent. That’s the riskiest bet you can make in Vegas- the odds are NOT in the landlord’s favour!
Keep the tenancies short and allow them to roll into a periodic tenancy. That will keep you in a position where you can terminate the tenancy as quickly as possible if you need to.
The amount of times I’ve heard landlords being unable to repossess their properties because they’re locked into long tenancies is scary. You never know what tomorrow will bring. It’s usually bad news and lousy tenants.
Always have a Guarantor in place so the chances of claiming against any rental loss and damages incurred by your tenant is maximised.
It costs nothing to setup, all you need is the Guarantor contract. It’s a no-brainer.
12Comply with the law
The problem with complying with the law is that it usually costs money and takes effort, and that’s precisely why it’s often ignored. The costs all adds up; meeting safety obligations, evicting tenants the proper way, and paying heart-sinking taxes. And let’s face it, it’s one of the most inconveniently boring parts of the job (granted, it’s all relatively inconvenient and boring), so there’s no obvious appeal.
While avoiding the legal obligations may seem like a winning money-saving step, in reality, you’re actually creating a ticking time bomb for yourself.
The problem is, you never know who you’re dealing with and what people know, or may learn. All it takes is for a tenant to receive a simple piece of advice, which gives them motivation and grounds to prosecute, and boom… it begins! Let me assure you, getting caught and prosecuted is rarely cheap, and it’s definitely cheaper and easier to comply with the law.
Want to save your livelihood, your family and your wealth? Then do the right thing, even if it’s wrong. Simple.
If you’re ever in between tenancies (e.g. the property is vacant) or you’re going through a refurb which makes the property inhabitable, you might be able to qualify for Council Tax Exemption. It’s an easy way to potentially save a couple of hundred pounds. Welcome to the good life.
14Energy Saving Allowance
- cavity wall and loft insulation
- solid wall insulation
- hot water system insulation
- floor insulation
15Current rent rates
As it’s becoming more of a renters market, rental rates have been spiraling out of a control (whether that’s a good or bad thing is another debate all together), so there’s a steady increase, which means you could pleasantly find yourself significantly undercharging.
It’s always worth investigating the current market rates. Scour through websites like Rightmove and see how much other landlords are demanding in the same area for a similar property. Also, look through your local papers in the lettings section. It might also be worth talking to a few letting agents.
If you’re significantly undercharging, it might be worth increasing your tenants rent (if you’re able to do so legally). Approach this issue with caution though, and find a good balance between fair and competitive, otherwise you could be doing more harm than good.
Always be fair, never selfish.
I personally don’t provide furnished properties because I find it’s more hassle than it’s worth. If interested, you can read an entire rant on why I don’t provide furniture in my BTLs. To summerise, I believe the extra you can achieve in rent doesn’t compensate for the maintenance/replacement of the furnishings. This is especially true since the 10% Wear & Tear tax relief landlords were entitled to was abolished on the 6th April 2016.
Not to mention the element of added stress and time, when it comes to replacing any broken furnishings and/or fittings. If the tenant is responsible for damage (which they often are), it’s always a difficult issue to tackle.
This also goes back to the premise of providing only what is necessary, no more.
When a cashier offers the extended warranty policy on a newly purchased product, it’s usually a condescending, “don’t be ridiculous” moment. They get declined so often that you can tell they hate asking the question, but it’s obvious they’re made to push the sale. Poor things.
However, they can often be worth it, especially for landlords. Assuming that the price is right, I usually obtain the 3-5 year extended warranty when I purchase white goods for my BTL’s. I recently purchased a cooker for £320, and I think I paid £45 extra for a 5 year extended warranty. That warranty guarantees a product replacement service if any faults occur. Worth it.
So before you raise your bushy eyebrows in disgust and snub away the offer, consider that you could be passing up on a money saving opportunity.
An accountant once told me (my accountant actually- go figure), that a good accountant will save you more money than their fee. That’s proven to be true for me.
A good accountant will know all kinds of tax exceptions/breaks that landlords can qualify for. If you have multiple properties, it might even be beneficial to start a limited company and gain particular tax breaks/advantages.
Talk to an accountant and see what they can do for you. Mine charges something like £400 per year. I simply pile together all my receipts and throw a spreadsheet together with all my income, and let him do the rest.
Needless to say, at the very least, a good way of saving money is by off-setting as much of your expenses against your tax bill. Any receipts/invoices associated with the property, including any work spent on repairs and decorating should be kept for record in order to achieve.
What did I miss? Got your own tips? Leave a comment…