Landlords – eight common mistakes to avoid in 2021
Thu 18 Mar 2021
Being a landlord can be a complex business and comes with as many potential pitfalls as it does advantages, especially if you are managing your own property portfolio.
Whether you’re about to become a first-time landlord or looking to increase your existing portfolio of rental properties, it pays to have the right plan in place.
With this in mind, we have compiled a list of eight common mistakes you may succumb to and how to mitigate them as we navigate the buy-to-let market during Covid.
Not minding your own business
Many people perceive being a landlord as a pleasant hobby, but you should treat it as you would a business and keep a record of the all-important details.
Good record-keeping not only helps you keep track of your income and outgoings, but it also allows you to stay on top of administrative tasks, such as knowing when insurance renewals are due. This will work in your favour if you face a tenant dispute.
Getting caught out by void periods
It is likely you will experience void periods at some stage and will need to advertise the property for new tenants. If you manage this process well, you may have a new tenant lined up to move in soon after the previous tenant leaves.
However, while the property is vacant, it’s a good idea to hold a contingency sum or retain the surplus rent and other costs in the account to cover you. As a general rule, holding the equivalent of three months’ rent can help you through these situations.
Not knowing the associated costs
It is crucial to know the costs associated with letting a rental property. As well as the mortgage, there is insurance, maintenance and the costs involved with keeping up to date with legislation – such as current energy efficiency requirements and gas safety certification.
Once again, your contingency fund can cover this, and as with void periods, think about keeping it topped up by retaining surplus rent in your bank account.
Dealing with tenant deposits poorly
If you do not deal with the tenant deposit correctly, you could open yourself up to being fined. Legislation around this area is strict, so it’s important you are familiar with the procedures and paperwork you need to provide your tenants.
Make sure you have thoroughly checked the property before handing it over to your new tenant. Draw up a detailed inventory (take photographs) of the property and any contents included in the rental agreement. You will also need to provide a copy to your tenant before they move in.
Failing to carry out regular property inspections
By undertaking a regular inspection, you have the opportunity to check the property to ensure it is being looked after, but this can also give you the opportunity to catch up with your tenant.
Not only does this allow them to draw any issues to your attention, allowing you to deal with them before they become a major problem, but also gives you the chance to check on them. You may come away with a view that they are planning to stay longer term or may be struggling financially.
Ignoring the buy-to-let tax changes
You should be aware of tax changes brought in over the last few years and how this may impact your income or ability to raise the level of mortgage you are seeking.
Taking advice from a specialist tax accountant before you commit to buying a property is crucial. Not only will this help you understand your allowances and liabilities but may also help you decide how you buy the property (in personal names or a limited company vehicle) and any potential implications on your other income.
Forgetting location, location, location
One of the first major considerations of your buy-to-let investment will be the location. Get to know the area and its reputation, think about your future tenant and if the property is right for renting in that area.
Is the property type right for the location? For instance, an HMO in an area with little need for this type of property is less likely to provide you with a good return on your investment than if it were in close proximity to a university.
Skimping on insurance
Insurers look at a buy-to-let property differently to owner-occupied homes. You will need specialist landlord cover, as standard household insurance is unlikely to cover your rental property.
Insurance cover not only considers the building (and contents if you are letting a furnished property) but other risks such as void periods or if serious damage is caused by your tenant. Having the right cover in place now could save you from substantial cost in the future.
Of course, having an experienced and reliable letting agent who will provide you with professional advice and help you to manage your rental properties is the best safeguard you can have as a landlord.
Here at Letting Solutions, West Lothian’s first dedicated lettings agency, we offer just that, helping you through all aspects of the tenancy and beyond. For more information on our current hours of service and ways of working, click here.
Please don’t hesitate to contact us, even if you are not a current client. You can ring us on 01506 496006 where our team are waiting to help. Or you can email us at: firstname.lastname@example.org.