Landlord for the First Time? How to Avoid Common Mistakes
Are you thinking about buying a house to rent out? Becoming a landlord is a big step, and there’s no question that it can help you make money. Property has always been a good long-term business, so it makes sense if you are looking for a way to make money back on your investments.
But that doesn’t mean that buying and renting out property is an absolute guarantee to make money. In fact, there are always problems and pitfalls that you need to be aware of and avoid because they can make it very hard for you to make money with buy-to-let property.
So, let’s look at some of the most common problems that first-time landlords run into, figure out why they’re a problem, and learn how to solve them.
Not realising how much effort is needed
If you are a first-time landlord, you might not realise how many obligations you have. This is especially true if you are also working full time. A landlord needs to be ready to answer tenants’ questions, which could come at any time of day or night. So, you should make sure you have enough free time to deal with such questions and problems, or you could hire a letting agent to help you run the house day-to-day.
Don’t forget that it’s your money that’s invested in the property, so you need to treat it like a business. Make sure to give it the attention it needs.
Open a business bank account that is different from your personal account and use that account for all of the rental income and marketing or maintenance costs. You should also use an accounting system and get help from tax experts.
Working within an unrealistic budget
If you want to be a landlord, you need to think carefully about your finances. The return you need to make on this project will also depend on how much you spend on it. When you think about the money side of being a landlord, keep in mind that you need to think about a lot more than just how much the property costs.
Being an owner comes with a number of different costs. There can be a lot to think about, from insurance and upkeep costs to the money you’ll need to keep on hand for a good cash flow. Don’t underestimate possible costs for void periods, replacing furnishing or other unexpected costs. This is why it is important to make a budget that is both realistic and takes into account the chance of problems.
Again, it can be very smart to work with a trusted financial expert in this situation. Specifically, look for a professional who has worked with investments like the ones you want to make.
Slow conveyancing service
When you buy a home for the first time, you are at the hands of the conveyancers as to how quickly the process goes. A slow conveyancing service can throw off your plan and make you angry. When you are just starting out as an owner, this is the last thing you need.
The best way to avoid this trap is to choose a conveyancing service that you know you can trust to get the job done quickly. Since not everyone has a personal suggestion for a conveyancer, it can be helpful to know the little things to look out for when making your choice.
Not checking out your tenants
One of the most common landlord mistakes that some first-time landlords have when renting out a property for the first time is that they trust their renters too much. Most landlords go this path because they want to give their tenants good housing and make a profit on their buy-to-let property at the same time. But trying to do the right thing for the renters can cause problems.
In fact, if you are a first-time landlord, it is very important to follow the correct steps for getting a new renter. For instance, you shouldn’t just “trust your gut” that this tenant is a trustworthy person. Your money is at risk, so you need to know that any potential tenant will be able to pay the rent each month without too much trouble. If you let someone rent a place they can’t really afford, you’re not doing them a favour. Instead, you’re putting both their finances and yours at risk.
Most of the time, experts say that a renter shouldn’t spend more than 30% of their income on rent. If they can’t show that they can do this, they shouldn’t be able to rent from you.
In this case, it might be better for your peace of mind to work with a rental service. If a possible renter has ever rented a place before, Western Lettings Glasgow always carries out background checks including checking their credit and asking for a landlord reference. You can also pay a professional firm to do tenant profiling and other things like rent guarantees.
Not having an inventory at the start of a lease
If you own a property and are getting ready for a tenant to move in, you might feel like you need to get them there as soon as possible. But rushing in to a tenancy without an inventory of the condition of your property and its furnishings can make things worse for you in the long run. For example, you may struggle to prove that a tenant has not maintained the condition of the property or caused actual damage to the property without a full list of the property’s state and its furniture being included in the tenancy agreement. This is called a “schedule of conditions” in the business world.
When reading a document of this size, it can feel like it goes into more depth than is necessary. But an inventory is something that you will need in the future. When a tenant signs and dates an inventory, they agree that it is an accurate list of the property’s state.
At the end of the lease, if the property is damaged or some of the furniture is missing, you can take money from the tenant’s deposit to fix or replace the damage or missing items. With the formal document in place, the tenant can’t argue about the charges.
Normal wear and tear is to be expected to some degree, and you will have your own responsibilities for certain maintenance and repairs, but if there is a major problem, having an inventory agreement in place can give you peace of mind.
A misconception called the constant tenant
When planning for a buy-to-let property, many first-time landlords make the error of assuming they will always have a tenant in place. We already covered the value of developing a strong plan and comprehending the budgetary requirements of being a landlord.
But far too frequently, the fact that tenants are not constantly there is completely disregarded. Even if your business plan centres on long-term tenants, you must acknowledge that there will inevitably be a transitional time when one tenant vacates and another moves in.
The solution to this problem involves two phases. Make sure your approach for finding new tenants is effective in the first place. In some situations, it may be vital to move swiftly to find a new tenant. Keep in mind that you are still responsible for all of the payments for any month the property is vacant.
Consider this issue in the costs involved as the second stage. You need to have some additional money on hand to cover you in the event that a tenant leaves abruptly; don’t assume that someone will be paying the mortgage every month.
Failing to conduct regular inspections
Being a landlord involves a lot of inspections. Some new landlords believe that performing inspections is simply plain nosy and not a necessary or ethical aspect of the business. Inspections are important, though, not just from your point of view but also for the tenant’s welfare.
Keep in mind that it’s normal for tenants to feel that they shouldn’t discuss every issue they discover on the property. They worry that raising complaints could upset their landlord. Unfortunately, if this is not addressed properly, those issues may deteriorate further.
Regular inspections give you the chance to walk around the property and look for damage or other issues that can be fixed.
Summary
Such mistakes can be financially disastrous for first-time landlords and make you lose interest in what you are doing. To help you develop a customised plan to prevent these problems, it can be a wonderful idea to get guidance from a professional with expertise in managing properties. Thankfully, these problems can always be resolved or avoided entirely by taking small measures and paying attention to the details. At Western Lettings Glasgow, our expert team will be happy to assist with any concerns regarding your property. Visit our website and contact us TODAY!
