Last week I was liaising with someone that is in the midst of the beautiful process of purchasing their first Buy-To-Let property. Whilst discussing his acquisition, I was asked, what would be my ONE golden tip for a new landlord.
Good question, although kinda’ impractical.
While I don’t believe there to be a silver bullet tip, I can almost certainly think of a few golden nuggets which I would offer before others. Essentially, one tip alone in this belligerent industry would be futile. But I still indulged him with my ONE tip; the one tip I would offer before any other.
I started writing this blog post with the intention of putting my tip on a pedestal, but the impracticality of it kept playing on my mind. That’s when I had my eureka moment.
I did something that I’ve never done before; I summoned the minds of industry experts (that I’m familiar with) and asked them to contribute. To contribute their ONE golden tip, allowing for a much more informative and useful blog post (hopefully).
I abruptly put together a very small mailing list (apologies if you were missed out, it really was abrupt) and asked the question. The feedback I received was brilliant. Although, some showed an initial enthusiastic burst of energy to contribute, and then never got back to me. Ouch! Dangle a carrot, why don’t you? But what was more surprisingly, a few people didn’t respond to my reach out at all, and up until this day, I’m not entirely sure why, since I’m extremely lovable and respected in this industry.
So without further ado, here’s my ONE golden tip congealed along aside the experts (you may recognise some of them or at least their associated company/website):
Always get a home owning guarantor. This is normally a family member but it doesn’t have to be. I know that many landlords fear about adding a significant time to let a property but I find this to be unfounded. It may add a day or two but nothing more. The amount of rent being charged has far more impact on the length of time a property takes to let.
When a tenant fails to pay the rent or causes damage, there is nothing quite like the ability to go to a third party to claim these amounts. There may well be protests from the guarantor when a demand is made and I don’t purport it to be easy but ultimately the chances of getting paid are greatly increased and because they are a home owner, a charge can be placed against their property.
When taking a guarantor, there are a number of things worthy of note:
- Ensure all adverts contain the requirement and this is clearly visible. This alone stops most rubbish tenants from even enquiring and there are no surprises for genuine tenants.
- Always check on the Land Registry On-line that they are in fact a home owner. This costs ££.00 and is well worth the small fee.
- Make sure the guarantee agreement is properly drafted and amongst many things, ensure it contains a clause that makes the guarantee continue into any periodic tenancy after the fixed term (otherwise it may end with the fixed term).
- Make sure the guarantee agreement is made “as a deed” and is witnessed accordingly.
- The guarantee agreement should always be signed before the tenancy.
From: Royals Of Rent
I recently came across a new interesting service for landlords by a London letting agent (http://www.baseps.co.uk/services/maintenants/) which is providing property specific maintenance tutorials for tenants. The videos take you through the key elements of the rental and teach maintenance skills such as how to bleed radiators, how to use the heating controls, etc.
My advice for landlords – give your tenants a property maintenance guide to help them take better care of your investment. Ideally it would be an online document or a website that contains important information, regular checks to be carried out, tasks and tips.
I wish I had something like this when I moved into my first rental to help me save time and make sure I’m not forgetting something important.
From: Open Rent
I know lots of landlords have trouble with pricing when using Open Rent. Many like to follow the model of an agent and price high, then accept a lower offer when / if it is made. Agents price high because their commission is a % of the rental amount, they have to bid for your property based on yield, and it also results in fewer enquiries for them to deal with. As a private landlord, you can follow that model, but a void period hurts you much more.
We’ve found pricing at your minimum acceptable rent results in more enquiries, which means a better choice of tenant, and if demand is high then tenants bidding against each other will quickly raise the price, or if it’s too high, then on OpenRent you can increase your price in seconds and see the impact. Hence, you get the best choice of tenants, at the best price, and with the least chance of a void. As a landlord going it alone it’s often easy to copy agent practices, but it’s not always the best recipe for success!
From: Letting A Property
When advertising your property, it is often a false economy going for the maximum rental value. In this day and age, everyone is looking on ways to save money.
If your tenant thinks they can pay a cheaper rent for a similar property elsewhere in the neighbourhood, then they will more likely leave you at the end of the fixed term. The landlord may then have the threat of facing the dreaded void period, which can be very costly. By keeping an eye on the rental rates in your area, we would advise marketing your property just under market value i.e. the average for a 3 bed semi is say £1000, market yours at £950. The tenant will feel they are getting a good deal and therefore will stay longer – a tenant that stays longer keeps your overall costs down and your profit steady.
Always buy the worse property in the best area that you can afford. You can always improve a property but you cannot improve an area and this can have a negative impact on your future property value and cause voids.
My best tip for protecting your investments would be. Join www.landlordreferencing.co.uk (LRS) and give every tenant a reference at the end of the tenancy. This will help landlords to avoid taking each others bad tenants and will give good tenants a better chance of finding a nice home in the PRS. To avoid taking the wrong tenant always ask LRS for a full lifestyle and Experian credit reference, they only charge £4.99 plus vat for this unique service and soon landlords will be able to get all that plus 12 months rent guarantee and legal cover for £90.
To be clear I have no commercial connection with LRS I support them because they are helping landlords to protect ourselves at minimum cost.
From: My Property Mentor
Always remember that buying a property or even renting out an existing home is a very small part of being a landlord. It’s really about whether you like and can cope with people and all the minute details such as rules and regulations, repairs and other issues.
Being a landlord is a people business. You’ll be dealing people on a daily business including tradespeople, agents and tenants to name a few. If you don’t like the general public and their attitude towards the property you rent them (which can often be unreasonable) , then it is not a business for you. Tenants don’t understand you are running a business, they just want somewhere affordable to rent that is fit for purpose.
From: What Sam Saw Today
TRUST YOUR INSTINCTS. The property business is a people business and you need to trust in the people who you will be renting to. Credit checks, references and security deposits only give half the story – the rest is down to your judgement.
There have been two occasions in my landlord life where I failed to listen my instincts. On both occasions the applicants had passed all checks and references – but I had a “funny feeling” – instinctively I knew I should not hand the applicants the keys. Within weeks one tenant burnt down my building “accidentally” with 80 tealights, months later the other turned into a paranoid heroin addict who was convinced I was spying on her, trashed the property and left me with a whopping clean up bill.
There will NOT be a third time. From now on, if I get a “feeling” regardless of how stupid it sounds I refund all monies, apologise and cancel the application.
From: Landlord Law
The single most important thing about being a landlord is to choose a good tenant. Ideally this means someone who will be able to pay your rent promptly (or someone with a guarantor who can step in and pay if they don’t) AND someone responsible who has an agreeable personality.
If you have a responsible and agreeable person as a tenant, then even if there are problems you will normally be able to resolve them between you by discussion. However if you have a tenant with a difficult and unpleasant personality then you will probably have problems with them even if they pay their rent regularly.
So this means that you should have an interview with the tenant before accepting them as tenant to see if you like them AND carry out rigorous referencing. There is a shortage of good properties just now so there will normally be no need to accept a tenant who does not meet your standards.
First understand how mortgages work, then understand the different products available, and then get the right mortgage for you.
If sub-prime lending has taught us anything, it’s that mortgages can make or break us. While sub-prime lending fell on it’s knees when the market came tumbling in 2007, there are still products on the market today that can cripple any novice landlord if they’re not in tune with their finances.
Many landlords apply for eye-watering mortgages just so they have the means of getting onto the ladder. Dangerous. Assess your finances, make considerations for contingencies (e.g. vacant periods), and then decide whether a mortgage is practical for you.
If you’re working with a mortgage broker, ensure they’re recommended. Many brokers are just chasing the paper, and will try to flog a dead horse to put food on their table.
Mortgages are like tenants, they can be extremely costly, and if you get it wrong, they can drag you through a world of pain, and then shaking them off can be extremely difficult.
Personally, I go for interest-only mortgages, which allow for penalty-free over-payments, because I find them to be the most flexible option for me. I make over-payments on all my mortgages each month (my personal choice); that means I’m reducing my debt and building equity each month. I could get a “repayment mortgage” to effectively do the same, but they’re less flexible, because you HAVE to make the repayment. So for example, with interest-only mortgages, if my cash-flow is a little tight one month (e.g. a tenant falls into arrears), I can just cancel/postpone the over-payment and instantly reduce my monthly outgoing.
I would also suggest looking into remortgaging every now and then. Many borrowers just stick to the same product because it’s “easy”- but that can also be extremely expensive. Switching lenders can be relatively straightforward, and can save you a bundle in the short and long term. It’s a no-brainer.
From: Property Tribes
The best way to never experience a bad tenant, is never to let one into your property in the first place!
One way to check a prospective tenant is to visit them in their current home. This will give you a good idea of their lifestyle and how they might treat YOUR property. You might also see that they have undeclared pets that have made a mess of their current property!
I would also like to recommend Landlord Referencing’s new £4.99 tenant screening product, that gives a snapshot of the tenant’s financial situation and also a lifestyle reference.
It’s a great tool for screening tenants at a very low cost to the landlord.
I noticed that two of the experts independently recommended landlordreferencing.co.uk. That’s highly encouraging. Something to definitely consider.
I’d just like to thank everyone that contributed to this blog post, I genuinely appreciated it, and I generally appreciate very little in my bitter old age. Extremely useful contributions.
If anyone else would like to contribute their one golden tip, leave a comment, it would also be very much appreciated.